kathyc2

I wasn't talking about software.  I was asking if it was allowed under law to opt to have W2 dependent care taxable in order to take advantage of 2441 credits.

Just putting it out there in case it can be done, and others didn't think of it.  Could be a big difference from some....

I don't have one of these right now, so haven't done any research on it.  Just curious.

With the 2441 credits being significantly higher for 2021, a lot of people will come out better to take the credit than employer dependent care allowance.  Is there a way to make the W2 amount taxable and then take the credit?

Am I understanding you to say that before the IRS accepts the efile, they check to see if any SSN's on return have been issued a 1095A?

I'd just add that if the excess was in the account long enough to earn interest, the interest is taxable. 

I'm curious about something.  I operate as a non LLC sole-proprietor.  Several years ago I got an EIN so as not to have my social on client computers.  The 1099's issued to this number do not show on my wage and income transcript.  Clients don't get a mismatch report for using the EIN and my name. 

Do IRS computers match these up anywhere?  If not it seems like an easy way for crooks to commit fraud.  

Chit happens.

If MN starts with AGI, then no.  On 2020 federal  returns the deduction was before AGI.  On 2021 it's after AGI.

You don't have to disclose any financial info to let someone know.  If you have a relationship with children or someone else close to them, it can be as simple as saying something like "I noticed your Mom isn't as organized with her information as she used to be."

I believe that only applies to self prepared returns.

I vaguely remember eons ago, we had to enter that. But, pros haven't needed to do so for at least a decade. 

I included the IRS definition of virtual currency straight from the 1040 instructions with my letter.  That puts onus on client that they need to tell me to check box or not.  

https://www.irs.gov/instructions/i1040gi#en_US_2021_publink100061442

How about calculating pro forma returns?  Two for each; one where they claim child and one where they don't.   Hopefully, they can then agree which return should have the child on it.

20 hours ago, cbslee said:

Interesting since this only applies to IRA Contributions. If you are still working and participating in a SIMPLE Plan or 401 k, maxing out the annual contribution limit,

there is no restriction or limitation. Not a very equitable application of tax law.

 

QCD's are only available from Traditional IRA's, so in that respect it makes sense.  Between IRA's, 401k, 403b, etc there are probably a dozen different ones.  All similar but each with it's own quirks.  It's been a pet peeve of mine for quite some time.  If they want to simplify taxes, I wish they would start here and stop messing with changing where things are at on forms.  

3 hours ago, mcbreck said:

50% of Americans retire with about $250k in retirement assets or less. They would be better off with a traditional IRA because most likely their IRA distributions (if timed properly) would achieve $0 in taxes or very little.

It depends.  Use the 250K amount in traditional IRA's.  Say it's in good mutual funds earning 7% on average.  The RMD percentage does not reach 7% withdrawal requirement until age 87.  That means if the person only takes RMD, the IRA will keep growing until age 87, which using these numbers will be in the 342K vicinity.  If the owner dies without a spouse at age 87, thanks to SECURE eliminating stretch rules, the beneficiary will be taxed on this entire amount over a 5 year period.  Doubtful that will still be $0 tax.

24 minutes ago, Lion EA said:

Thanx, Kathy.

Well, I may have misspoke.  I remember after SECURE act came out, there was talk of this.  https://www.kiplinger.com/article/retirement/t054-c000-s004-secure-act-changes-squeeze-qcds.html

However, when I test it in my software, it excludes the full 25K and then deducts 7K for IRA.  Also, I'm not finding any mention of it in 590B.  

So, who knows! 

4 minutes ago, Lion EA said:

But if I contribute $7,000 to my Traditional IRA this year and do the above, I will exclude only $18,000 from my income and show $7,000 taxable income from my RMD.

Correct.  However, the 7,000 taxable income will be offset by the 7,000 traditional deduction.

5 minutes ago, Lion EA said:

What happens if I contribute $7,000 to my Roth IRA instead? Do I exclude the full $25,000 I had sent to charities from my Traditional IRA?

Yes.

2 hours ago, Gail in Virginia said:

Depending on overall situation, have you considered Roth IRA contributions?   

Roth's are awesome.  Rarely does it make sense for someone in a 12% marginal bracket to contribute to a Traditional.  Distributions will likely make more SS taxable, so a 12% marginal rate in retirement years will have an effective rate of 22.2% (12 x 1.85)

1 hour ago, BulldogTom said:

If your taxpayer is charitable, and uses the standard deduction, have the RMD go to charity as a QCD.

That doesn't work too well for those still wanting to make contributions after 70 1/2. The QCD is limited to the excess of amount contributed after 70 1/2.  If someone puts 7K in a traditional, only the QCD over 7K qualifies for exclusion. 

11 minutes ago, cbslee said:

My son in law is a Mechanical Engineer who works for Freightliner. Self Driving Trucks are rapidly nearing the point where we will seeing them on freeways.

We're not there yet and a shortage of drivers contributed to all kinds of supply chain problems.

2 hours ago, cbslee said:

I keep reading where we are going to be replaced by bots?

 

Well, for years I've been hearing the OTR drivers will not be needed and be extinct....

It took me much more than 30% longer in 2018 to figure out where things went on the stupid "postcard" return.

Five years ago if asked when I would retire the answer was probably never.  So much of what has happened, that is no longer true.  It's just not fun anymore. Luckily for me I'm at an age and financial position that I don't have to put up with the problem clients.  

I feel I should keep doing returns for long term clients, friends and relatives as long as I can.  It's sad, but when us old timers are gone, people will be in a bind.  So much of what I see from the younger crowd is they rely 1000% on their tax software and can't seem to think beyond it.  If you are only doing compliance, I guess that's okay.  However, unless they understand how it all comes together they are at a loss of making recommendations. 

27 minutes ago, mcb39 said:

Yes, it is a tie-breaker rule because the child is the qualifying child of both parents.   However Tie-breaker rule #5 for Unmarried parents clearly states that Mom, Dad and child live together.  Child is the qualifying child of Dad because he has the greater AGI and Dad gets every Credit available to him if his income isn't too high. (for example: EIC)

The tie-breaker rules only come into play when 2 people try to claim the child and the IRS needs to make a determination as to which one gets it.  If the parents agree which will claim, then tie-breaker rules do not apply.

2 hours ago, mcb39 said:

I looked at that.  It's not a very good example as their incomes are both so close.  I am talking about a father's income of $40,000 and a mother's income of $18,000.  I have always gone by the higher income rule.  It doesn't seem right for the father to allow the mother to reap all the benefits of EIC, etc; when he is obviously contributing the most to support.  Fortunately, the couple I have in mind got married this year, had another child and there are no questions.  Was this another case where the IRS failed to close all of the loopholes?  I have been highlighting that higher income rule in Quickfinder year after year.  I agree with Kathyc2

I think you are conflating issues.  The higher income only comes into play as a tie breaker when both parents try to claim the child.  If both parents and one child all live together, then they need to decide which parent will take the child for CTC, HOH, EIC and dependent care.  No splitting the benefits in this case. However, if the parents live separately, then the CTC can be broken off and go to the non-custodial parent.  Also, if parents are unmarried but living together, and have more than one child, then each parent can claim one child for all the benefits if they wish.  

If the father (40K) claims then he could file HOH and all other benefits.

It would be hard to justify mother (18K) as qualifying as HOH, so if she claims child, then both would file Single.  The much higher EIC for 18K would more than offset the tax savings for father claiming HOH in this example by a couple thousand. 

I don't get Quickfinder, but are you sure it's not talking about tie-breaker rules in regard to higher income?

I was thinking more of unmarried parents who do not live together in my OP.  I try not to prepare returns for both parents in divorce situations.

Have the employer contact Paychex to void the W2's they produced.   

1 hour ago, Patrick Michael said:

 Nothing illegal, but is that really what EITC and the CTC was intended for?

Even with EIC and CTC seems like in total they would be paying more this way  than if they were married and filed MFJ.

In this case there would not be a repayment of CTC, as her income is below 40K.  

https://www.irs.gov/credits-deductions/2021-child-tax-credit-and-advance-child-tax-credit-payments-topic-h-reconciling-your-advance-child-tax-credit-payments-on-your-2021-tax-return

This is a hypothetical case.  Years ago I would have had several clients that this would pertain to, but it seems as I've aged, so have my clients. 

I'm not sure I'll even run across a situation like this. If client was aware of this and wanted to change claiming of kids, I'd be okay with it as long as either qualify.  I just don't think I'd feel comfortable going the extra step and suggesting it, but I'm curious as to other pros thoughts regarding it.