kathyc2

Please tell me I'm not the only accountant geeky enough to plan out the meal prep timing on Excel!

Actually, my question was not if it is taxable or not. The question was what is the nature of the paperwork that preparers who have had this situation received from clients.

Client has been awarded a very large settlement for death of spouse in vehicle accident. Of course I get a call asking if it's going to be taxable. My response was it depends on how the settlement is worded, as to what payments were for. I've never had this before and curious as to what paperwork client will receive. Anything in addition to copy of court settlement? Tax forms? Statement from atty as to parts that are/may be taxable?

If I'm following this correctly, his basis at this point is 112K which is 33K from inherited and 79K from purchase. You will want to make sure depreciation was not taken in the 11 years since he inherited. That works out to a loss of 10K. However, it sounds like he expects to be refunded part of the 79K? If so, that would reduce his basis.

Unless there was tax withheld, I'd just take the 2021 amount times 1.059. It might be a couple dollars off due to rounding.

I was comparing fraud to those that currently use TT type products rather than preparers. I don't see any reason why it would be more subject to fraud than other software. I know of local preparers that play very loosely with rules. I'm sure we all are aware of preparers like that. IMO tax fraud is part of our declining values in society. I'm always amazed at how acquaintances and people on social platforms openly talk about how they work for cash. It used to be there was shame attached to cheating and people would hide it rather than flaunting.

Healthcare.gov was a disaster the first year. Since then it runs very smoothly. It looks like IRS learned from that and is limiting use to work out the bugs.

Why do people think this will be more prone to fraud than the plethora of online software already available??

The official release from IRS gives a lot more detail: https://www.irs.gov/newsroom/irs-advances-innovative-direct-file-project-for-2024-tax-season-free-irs-run-pilot-option-projected-to-be-available-for-eligible-taxpayers-in-13-states Very limited for first year. I don't see why determining EIC would be any different than Turbo Tax type software determining eligibility. I do wonder how they will handle items on W2 that instigate additional forms such as HSA and dependent care benefits. I'm guessing people with these items on W2 will be told they aren't eligible after starting filing.

It's also a matter of degree how they substitute. If chained were used, 2022 COLA would have been 4.9% instead of 5.9%. 2023 would have been 8% rather than 8.7%. 2024 can't be calculated as the chained numbers are not final until a year later. No matter what gauge is used, people will complain. I'm guessing there are some that do so, but I've never personally seen a true pension that increases year after year. Which is better? A 3.2% increase or no increase?

Explain that there are 2 separate penalties, 1 for late filing and 1 for late payment.

Base went up $9.80 from 164.90 to 174.70.

There has been talk of moving COLA to chained cpi, but it hasn't passed. SS COLA is change of CPI-W (wage and clerical workers) from 3rd quarter prior year to 3rd quarter current year. The main difference between CPI-U and CPI-W is the weighted importance given to each category. For example W weighs food and energy higher than U and services (including medical) less than U.

Sounds like he had a great life and brought joy to many. Blessings.

I don't see how you can retroactively dissolve the S when presumably payments for services in 2023 when to corporate bank account.

As long as you have verified that no difference in tax, I wouldn't. I haven't kept up with the late S election criteria, but since they were treating the business as a S, I wonder if that may be a possibility?

Unfortunately, that is quite often true. I've also had the flip side. I've had people that are miserable in their job. I tell them let's look at the numbers to see how far away you are from replacing your current income. Sometimes we find that they would be fine to retire. Others are maybe a year or 2 away with a few tweaks. Just knowing the numbers about when and how much they will have can make a huge difference in their outlook.

Well, I learned something new today!

So CE is what it's called for enrolled agents? If something qualifies for CPE is doesn't automatically count for EA's?

Definitely. Mine was wrong for 1986. Since I have all my tax returns, sent them a copy of W2 and it was quickly corrected. Have you gotten into the indexing factors and bend points? If so, you can easily create a spreadsheet to come up with a close estimate of what changes higher earnings will make.

Neither do I. I got a good chuckle from that comment. Surgent has several. I think webinars led by Bob Lickwar are quite good. You can buy an unlimited package that is good for 12 months for $560.

Like I said, if you choose to not talk about SS with clients, that's fine. However, telling someone that chooses differently to "stay in your lane" is quite rude in my opinion.

He may be great, but I personally don't put much stock in people using scare tactics to drum up business. "Over 90% of recipients get less money than they are entitled to." LOL! Took me less than a minute to google that 10% wait until age 70. Are 90% of people wrong by starting benefits before 70? Nope. Like I said, it's about maximizing wealth, not SS benefits. Do I think the gov't can handle my money better than me? Again, nope. None of us knows when we will die nor do we know what Congress will do when the Trust Fund is depleted. It's estimated that around 70% of benefits could be paid by current tax inflows. I wouldn't be all that surprised if high income/high retirement account people have their benefits reduced in the future. Just like defer, defer, defer mantra for retirement accounts isn't always the correct answer, neither is deferring SS as long as possible the correct answer for a lot of people. I am curious about a couple of things. Does he have a list of the 567 filing options? And how much does he charge to advise on SS benefits?

The goal should not be maximizing SS benefits, but rather maximizing wealth. Simple scenario: Benefits at age 67 are 25K. I'm assuming a 2.5% annual COLA. Waiting until age 70 and the combo of 8% a year bump and COLA and first year benefits are 33,914. If the person lives past age 80, they will receive more in benefits by not claiming until 70. If they die before 80 they will have received less benefits. By age 90, the projected benefit total is 809K for starting at 67 and 922K by starting at age 70. Looking only at the benefits, it looks like it's better to delay, correct? Instead, how about starting at 67 and investing the benefits for the first 3 years? I used 80% of benefits at account for any tax on amount to invest and used an annual return rate of 7%. Compounding the returns and the amount in this account is 272K at age 90. The non invested SS benefit amount is 732K, for a total of 1,004K. In this case, you end up with 82K more, plus the 272K can be passed on to heirs. Now, which one sound better?

Wow! Nothing wrong with us increasing knowledge on issues such as how SS works. Many times I've been able to inform clients on items they aren't aware of. Of course I always say "this is my understanding" and encourage them to contact SS for verification. If preparers don't want to get involved in such issues as SS, that's fine. On the flip, if preparers want to educate themselves and share the knowledge with clients, that is also fine. To each their own. My "lane" is trying to help clients that aren't well versed on various financial matter to the best of my ability.