Charley in Ohio

The Ohio exemptions are based on your Federal exemptions. However, if you are filing as a part-year or non-residient, I'm not sure how the system factors them in. I've never done an Ohio return from that standpoint (all our clients are Ohio residents since we're in Ohio). Have you filled out the income allocation form (I think it is the IT-2023). It may not calculate the credit if you aren't allocating any income to Ohio (if you are filing a non-resident return). Try that and see if that helps. Charley

According to ATX, extensions are processed by the IRS only on certain days of the week this time of year. I think they are M, W and F according to my wife (who got an email from someone at ATX and is also a CPA). Therefore, wait a few days and then check. Charley

The settlement was a class action that the taxpayer says is a result of how long he was at the employer (like discrimination). I haven't read sec. 62(a)(20), but I'll take a look and see. Thanks!!! Charley

I have a client that received a settlement in 2008 that includes attorneys fees paid. The amount reported on Box 3 is flowing correctly to Line 10 on the 1040. However, I am not sure how to get the amount in Box 14a to flow anywhere. I enter the full amount in Box 14 and the taxable about in 14a. When I try to pull a form on the drop down menu, I don't get anything. If I have an amount in 14a and no drop down, I get a red warning when running the check return. I've looked around and cannot find out to get something to populate in the drop down box for line 14b on the 1099-MISC worksheet. I am checking with the client to make sure the attorneys fees are taxable (since I don't know the circumstances of the settlement), but was trying to figure out how to report it in any event. Any suggestions on what I'm missing?? Thanks for any help! Charley

I think I figured it out by staring that the Line 9 worksheet under Form 8615 again... I wasn't entering the qualified dividends from the mom's return in the worksheet. I believe the capital loss on the mom's return is irrelevant since it is offsetting ordinary income and her only Sch D income is qualifying dividends. Once I enter that in, I think I get to the correct answer.

I have a client whose son has a net capital gain for 2008 (a miracle as all of the other clients so far have net losses). Anyway, the son is a FT college student and has more than 1800 of investment income (due to the gain and other dividends/interest) that he will need to calculate his tax using form 8615. The mother (who claims him and is divorced) has a net capital loss, but otherwise substantial enough income to throw him into a high bracket. I've been reading the instructions to form 8615 and pub 926 to make sure the system is calculating his tax correctly. It seems to be, but since she has a capital loss and there is no way to reflect that in the worksheets, I am not positive. The mother cannot elect to tax his income on her return (and offset her loss against his gains) since he has earned income. Therefore, I think the son is stuck paying a higher amount of tax (the tax before considering the 8615 computation was 14 and now is over 1,000). Does this sound correct?? Charley

Thanks for the input!!! Charley

We have a client who transferred LLC units from himself to his wife during 2008 for a few of his businesses (for reasons other than tax). These transfers meet the technical termination definition under Sec. 708 - (greater than 50% of profits and capital). Therefore, the LLC should end on the date of transfer and I'll have two short years in 2008. My problem is that whether I file I return with the proper pro-rata allocation of the income (based on the varied interests during the year which I would do if I didn't have the termination) or file two returns, the income would be reflected the same on the 1040s. My only issue I can see of not filing two returns is that the LLC would be not be able to elect any basis step-up under Sec 754 (which they wouldn't want to do as there are no significant assets) and wouldn't lose the right to make new elections (which I don't forsee as an issue either). Anyone have any comments on whether filing one return or two?? Thanks. Charley

When did the taxpayer purchase the house? If it was in 2008, I don't think the new rules apply (meaning that it won't need to be paid back). The modifications apply to houses purchases on or after 1/1/09. Therefore, taxpayers purchasing in 2008 only have the credit/repayment option. I confirmed this via a CCH briefing on the tax provisions of the stimulus legislation Charley

I have a client that is a full-time college student and has a capital loss carryforward from prior years (the only investment income) and some earned income. The carryforward is more than the amount to offset ordinary income ($3,000) and will have some add'l carryforward to 2009. When running the return check, ATX gave me a warning about the kiddie tax applying if there is more than $1,800 of income. When reading the instructions to the Kiddie Tax form (8615), there is no mention about a capital losses (only income). Therefore, I don't think the kiddie tax will apply. Anyone else run into this situation? Thanks. Charley

Thanks. I'll try that and see what happens.

I am entering in some mutual sale transactions into ATX and on some of them, a portion of the loss was disallowed as a wash sale (per the mutual fund company). Since the entire loss wasn't disallowed, I am not sure how to enter it so I don't get a warning. What I did was enter the actual transaction in and then on another line entered a negative amount to my cost basis so it would show a gain and then selected the wash sale code (4). However, I get an error code when I do this. I will probably paper file this return anyway, but was wondering if anyone had run into this and had another way to enter it. Thanks!

I had the same thing happen to me today. I would shut down the browser and restart it (meaning the browser). It worked fine for me once I did it. Probably has something to do with the security they have on the website.

I have the same situation this year (selling an LLC, but with Fixed Assets, not Inventory, which can also be "hot assets" due to depreciation recapture). Fortunately for me, we had assigned values to the fixed assets and they are not sold at a gain so no ordinary income. Be aware that you may have ordinary income from depreciation recapture to consider in calculating the 751(a) amount. Otherwise, I was going to report the ordinary income on F4797 P2 as well. One other comment, I would think that you could allocate the basis in your partnership interest between the hot assets and everything else to compute the final gain. Just another thing to consider.

My wife and I have been using PayCycle for several years and haven't had any big problems (to my knowledge, but she is the one that uses it most of the time). The only issue I've noticed is that when creating the W-2s for clients with Dependent Care Accounts, you have to manually enter the amount to place in Box 10. The wage amounts are correct, but there is no number in Box 10. Luckily, we prepare the tax return for the only person that receives dependant care benefits for that client, so we just fix it on her personal return. We charge a flat amount for access to the service (basically what PayCycle charges us) and then an hourly fee for the processing. Hope that helps. Charley