David1980

Well the whole point in using 982 is so that you don't have to report the $87k of COD in income. You would be looking at just the gain. (Which if you end up qualifying on insolvency will be loss instead of gain.) The selling price of $92,000 plus the 1099-C results in $179,881. It appears they owed approx 180k? But the basis before depreciation is only 150k? Did they refinance and pull money out? Or maybe used an equity loan to improve the home? Maybe that 30k increases basis or helps in some other way?

Usually the basis reduction would occur at the start of the following year. For example with insolvency. However, the qualified real property business indebtedness exclusion is a little different. From pub 4681: "The basis reduction is made at the beginning of 2014. However, if you dispose of your depreciable real property before the beginning of 2014, you must reduce its basis (but not below zero) immediately before the disposition."

The $1,800 limit applies for a household employee that makes under $1,800 and thus isn't required to receive a W-2. So, hypothetically it may be possible they were an employee at ten different households and received $17k. Not likely... The household help on line 7 thing is popular among a certain kind of preparer. Counts as earned income for EIC. Doesn't have SE tax. If your goal is to create the largest fraudulent refund it's a useful tool. If you're honest, not so useful.

The language the IRS uses is: If a reasonable and well-informed tax return preparer knowledgeable in the law would conclude that any information the taxpayer has given you appears to be incorrect, incomplete, or inconsistent with the taxpayer's eligibility to claim the EIC, you must ask the taxpayer reasonable questions to get information that is correct, consistent, and complete. You must document the questions you asked and the answers you received. This is how you meet your knowledge requirement. I suppose the information could be considered inconsistent - the father's name on the medical records and school records. Therefore, you must ask the taxpayer reasonable questions. Sounds like you did. Father's name on medical records as the child is on dad's insurance. Father's address for school so child can continue attending existing school. To me, it seems the requirements are met with the questions you asked. Can you guarantee 100% that the child does live with mother and not father for the greater number of nights? Probably not. I think in order to do that you would need to ask or require unreasonable information.

Student loans perhaps.

Which test does the daughter fail to qualify for earned income credit? Relationship, age, joint return, or residency?

"the" return and "which one" seem a little bit ... Is there more than one dependent on this return? Did you prepare tax returns for all the dependents?

For EIC, there isn't a support test. So assuming all the other tests are met, you're fine on EIC. (You didn't say whether they were a student - if not, then age test will fail.) http://www.irs.gov/publications/p596/ar02.html#en_US_2013_publink1000297724 Head of household relies on qualifying child or qualifying relative rules for which support does matter. If the daughter provides over half her own support she is not a qualifying child or qualifying relative of the taxpayer and won't be a qualifying person for HOH.

That falls into the exception "(1) you have one or more regular work locations away from your residence". Difference is whether there is a regular work location. Construction worker with no regular work location doesn't get that exception.

You don't even need to attach the PDF file in that scenario. Sch D lines 1a/8a, exception #3 on the 8949 instructions. Attaching the PDF is necessary when you have a statement showing all the necessary information in a similar format and they don't qualify for exception #3 (for example, basis is not reported to the IRS.) Exception #1 on the 8949 instructions. You can use both. "If you qualify to use Exception 3 and also qualify to use Exception 1 or Exception 2, you can use both (Exception 3 plus either Exception 1 or Exception 2). Report the transactions that qualify for Exception 3 directly on either line 1a or 8a of Schedule D, whichever applies. Report the rest of your transactions as explained in Exception 1 or Exception 2, whichever applies."

The IRS matching only looks at the first 4 characters of the last name. So it probably doesn't matter. But I'd also enter the first name as it is on the social security card.

I don't think I'm overthinking it. Seems simple. Dad cannot claim HOH if mom claims dependent. http://www.irs.gov/Individuals/Qualifying-Child-of-More-Than-One-Person At least, since they redid the dependent rules ~2004?

That is because of the special rules for divorced/separated parents. In this case, it sounds like the parents are still happily living together and not separated. If I add just a little bit more from pub 17 to my previous quote:

Support test for a qualifying child is that the child can't provide over half their own support. The taxpayer need not pay a single penny on the child. So as to who can claim the child, either the father or mother can. They can decide who will claim the child. If the mother claims the child and does not provide more than half the cost of keeping up the home for the tax year she can't claim head of household. I think the likely result is going to be single filing status for both mom and dad.

Also, HOH may go to noone. If mother claims child and didn't provide more than half the support for the household she can't claim HOH and neither can father.

You need more information than what is on the forms themselves. Because form 1098 doesn't include mortgage payments applied to principal you can't just subtract 1098-MA from 1098. The 1098 shows $10,701 of mortgage interest. Say the 1098-MA shows $5,000 payments. Does that mean that only $5,701 of mortgage interest was paid by the taxpayer? No, probably not, because there's probably some of the payments (both taxpayer and gov) applied to principal as well. The total payments could have been $15,701 instead of $10,701 in which case the taxpayer could deduct the full $10,701 of mortgage interest assuming they paid $10,701 and the government paid $5,000 of their payments. If you look at Terry D's link, what you need to find out is item #3 "Homeowner Mortgage Payments".What the homeowner actually paid. You could ask the taxpayer how much they actually paid, look at cancelled checks or bank statements, etc... but you need something that isn't reported on 1098 or 1098-MA.

Assuming $6,000 is the amount of payments the taxpayer actually made at least. I used $500/month = $6000 a year in my example. Obviously if they made a different payment amount or didn't make a payment in all months they'll end up with a different amount.

Ultimately what the safe harbor provision for 1098-MA comes down to, is you can't deduct more than you paid. If I make mortgage payments of $500/month and at the end of the year receive a 1098 showing $10,000 of mortgage interest and also a 1098-MA showing $7,000 the safe harbor provision permits me to deduct $6,000 of mortgage interest (and taxes and ... limit $6,000 total for everything). The total of the payments I actually made. Without the safe harbor provision you would probably have to figure out of the $6,000 paid by the taxpayer how much actually was applied to principal vs. interest and deduct a smaller number. So the safe harbor provision lets you apply all of the taxpayer's payments to mortgage interest and none to principal and deduct the smaller of what the taxpayer payments are or the amount showing on 1098.

You can efile if the taxpayer has an ITIN. If you're applying for an ITIN, that's when it has to be paper filed. If they then get a legitimate SSN that permits them to work they can claim EIC, assuming all other requirements are also met. I've actually amended returns where the original was filed with an ITIN and the taxpayer then obtained an SSN. Only real issue I've had when they obtain a SSN is if they have a W-2 showing the old stolen SSN they were using. ERO responsibilities are to enter the W-2 as received including matching the SSN to that on the W-2. When the taxpayer has an ITIN the IRS will accept it even if it doesn't match. When the taxpayer has a SSN though, the return will reject. I know some people leave the SSN as the new one when entering the W-2. Personally I paper file when I encounter that scenario.

Is the second job a temporary assignment?

Well, an employer can provide up to $245/month (2013) of parking as a tax free fringe benefit. But that's different than taking a deduction on 2106 for parking at your regular work place.

For the miles, 400 miles. 20 days * 20 miles. I'd go with $0 for tolls. I'm not sure on the parking.I suspect it's $0 there too, but parking costs at a second job location in the same day? I'm not sure.

So the next step is for congress to grant the IRS the necessary authority.

"the bank agreed in the negotiation not to issue a 1099C" That's the same logic behind cash income not being taxable, right? If I convince my employer to not issue a W-2, my wages are not taxable? Of course that's ludicrous. Doesn't matter what forms the taxpayer receives. Matters what actually happened. Could be the taxpayer heard what he wanted to hear rather than what the attorney said. Or it could be there is a reason the COD is not taxable. Does taxpayer qualify for insolvency? The loss on sale of rental offset the COD?

They don't do the W-2 matching until much later in the year. Even if they did, I don't think it'd make much of a difference in identity theft. Forms 4136, 8863, schedule c, household wages on line 7 of 1040 (I love that one - earned income for EIC without the SE tax!), 8812 with a bunch of nephews/nieces. Lots of way to get big refunds without using withholding from a W-2.