David1980

David1980, if you go back and look at pikester's first post, #15 in this topic at 4:54pm, he's asking about withdrawals for medical expenses and not a home purchase.

My mistake. Unlike the exception for a home purchase, the medical exception does not include "individual retirement account" so should work just fine for a 401k. I agree with KC on that one.

I wouldn't want to speak for other folks, but I believe the talk earlier in the thread regarding IRA vs 401k was in response to the OP and the home buyer exception. You kind of have to look at the exceptions individually. Some apply to qualified plans in general, some to IRA specifically, and at least one to qualified distributions not including IRA's.

My apologies the question was somewhat incomplete.

Client withdrew from a 401k, not from an IRA as previously discussed by other members. When I'm looking at the code it states "Early withdrawals from a qualified retirement plan, SIMPLE plan, or IRA result in an additional tax."

Question being, in others piers experience are we noticing 401k retirement not being considered a "qualified retirement plan" for early withdrawals penalties and exceptions?

The exception for a first time homebuyer states "individual retirement plan" not "a qualified retirement plan".

http://www.law.cornell.edu/uscode/text/26/72

(F) Distributions from certain plans for first home purchases

Just did one of these the other day. The employees portion is included under the DD code. It is necessary to ask and verify if the amounts the employee paid are pre-taxed or not. If it is, then no deduction.

I think if I asked the taxpayer, the taxpayer would be sure those were paid after tax and should be deducted. Just like when they get a 1099-R and know it's not supposed to be taxable because they already paid the tax. I don't put much faith in the taxpayer. I could try asking the employers but most of them are either big enough to make that painful or too small to know what the heck they reported - they let the tax person do it.

For a small extra fee

the masseuse will come in after 6:30 so it won't interrupt the work day too much

I think lines 4, 5, 18, and 19 of the 2441 will be where the interesting numbers are.

On a quick test return I did in Tax Act, whichever spouse I issue the 1099-misc to is showing $0 on that line which is preventing any credit or exclusion of DCB from calculating. So Tax Act is adding in the DCB to line 7 and I'm also not getting a credit. Tax Act has a box "Earned income adjustment for student or disabled status" and if I enter an amount there for the spouse with no earned income it carries to both 4/18 or 5/19 (again, depending which spouse has no earned income).

My program is adding the $5000 back to the wife's W-2 because it seems that "other income" doesn't qualify as "working".....although he's probably finding a cure for cancer as I write this.

The data entry is fine.

Is the program not ATX? What program?

I know it is not all returns for deceased. I don't know what the determining factor is/what causes social security to lock it.

The IRS has finally figured out how to stop so many fraudulent returns by requiring that prior year AGI be reported as part of the efile signature. They used to require this info but stopped when they were trying to encourage efiling and thought this was a deterrent. They just made it too easy for the crooks. Once they got your name and SS number, they could easily find your birthdate and file away. Now they have to have your last year's tax return. I hope fraud will be stopped in its tracks with this requirement.

This would stop a lot of the identity theft returns, but they aren't doing it. As was indicated ERO method and you don't need it. Which is kind of sad - require just the taxpayer's date of birth match and a lot of identity theft goes away. Right now all they have to match is the SSN and 4 characters of the name.

Of course, there's a lot of fraud out there that isn't identity theft as well. Preparers that specialize in that kind of tax return where the taxpayer willingly uses them. Perhaps the taxpayer doesn't realize what the preparer is actually doing to get the large refunds but I don't really feel like the taxpayer is that much a victim when they're intentionally going to someone who gets much larger refunds than other preparers. And when they get the IRS letter, well, they probably just claim identity theft too. Not sure what the fix on that is.

Not on list maybe?

https://faq.ssa.gov/link/portal/34011/34019/Article/1995/-ow%20do%20I%20change%20the%20name%20on%C2%A0a%20Social%20Security%20card?

Name changes are handled through SSA so I doubt you'll find anything on the IRS website. RINGERS is correct, in the interim just use whatever the old one is.

Also, I read several days ago that:

1. The IRS will start processing 1099s on February 3rd

2. The SSA will start processing W -2s thru Accuwage on February 11th.

I didn't doublecheck the dates, so I'm relying on my questionable memory. LOL

Who cares when they start processing 1099s or W-2's though? If doing the taxes for the company issuing those forms you just want to make sure you submit them on time. It's not like the IRS does any matching between the 1040 and 1099's/W-2s at time of filing.

Will you agree with this?

Let's that this person play the whole night and each of the nights he won $200,000 dollars in little jackpots without requiring the casino to issue a W-2G.

On night one, he started with $500 and he had $800 withheld and then he went to sleep with $1,000 after loosing $203,700. The other night that he played, he started with $1,000 and he won 222,000 and they withheld $4,000 and he went to sleep with 0 after loosing $223,000. What amount goes on line 22? The same $4,300.

What's matters here is the beginning inventory, what you used for your personal use and the ending inventory. In this case, he had a beginning inventory, he didn't used any for his personal use, and we had the ending inventory.

Yes, I suppose this is true as the original post does indicate the two days were the only gambling during the year.

My gambling taxpayers don't always win enough to get W-2G every time they gamble so I was thinking there may have been other winnings outside the two dates, but it's quite clear in the scenario that it's only the two dates.

Should more than $27,000 be reported as income on the tax return? He had a couple nice jackpots. He probably had a few under $1,200 as well. He might have tried some table games too.

This is just the begining of the nightmare. I am sure there will be some lawsuits!

All the more reason for us to encrypt our computers. Truecrypt is an opensource encryption software.

Definitely. I could see taxpayers suing the preparer for letting the data get stolen. Much how we're going to see class action lawsuits against Target over their breach.

Even someone who does choose to prepare EIC returns is going to end up turning away some taxpayers. If you suspect things are fishy and the taxpayer isn't willing or isn't able to provide anything to remove those suspicions you wouldn't very well be able to do the return. And really, that's the intent. Don't do the return.

>> Two Instant Tax that were my biggest problems are now out of business but may open under differen names.They did pay stub returns for years.

http://www.abc2news.com/dpp/news/local_news/investigations/no-more-tax-prep-for-instant-tax-service-after-fed-ruling

If they open up under a different name but same players you would think IRS would investigate them? Also their clients may be on the IRS radar for audits?

I suspect until real punishment exists there will always be that sort of office. Whether it's the same people or not. How many years did it take for the IRS to take them down after they started working on it? And the punishment is what, they can't do taxes anymore? So, make big profits for many years filing fraudulent returns and then get punished by not being allowed to prepare returns? Like they would have been preparing returns if they couldn't do it fraudulently anyway?

Whether the IRS audits clients of fraudulent preparers is a good question. Does the IRS notice when one ERO is submitting a bunch of bad returns and flag all the returns for review, or does it look at the taxpayers individually and they have no higher audit risk? I'd hope the former, but I fear not.

Personally, I'd probably file a return claiming a qualifying child other than son/daughter without seeing or keeping a copy of the birth certificate. If the taxpayer's explanation makes sense when I ask why they're claiming the kid and not the parent and things don't feel sketchy I'd go with it. Guess if I go through an EIC due diligence compliance audit I might get hit with $500 on that. Or not. Doubt I'll ever find out, I would hope the minority of my clients with EIC is small enough that they'd never waste their time auditing it.

Do the per-taxpayer requirements change depending on what percentage of returns are affected? Say I file 500 returns and 5 of them include EIC and qualifying children other than son/daughter. Someone down the street does 500 returns and 400 of them include EIC and qualifying children other than son/daughter. Knowing nothing else, I'd assume the person down the street coached the taxpayers or sold them SSNs to use for dependents. Auditing the preparer for due diligence I would hope to see more than "I asked taxpayer why they are claiming the dependent instead of the parent and they said the dependent lives with them" in the notes for each of the 400 returns. If I were auditing the preparer, I would require higher due diligence of the one doing 400 returns in order to overcome my assumptions. I don't know if auditors are allowed to do that.

If that's who the IRS is going after, I don't have my sympathy for them. I do wish the IRS would go for criminal charges of some kind instead of a $500/return penalty though. After all, the easy way to stay profitable with $500/return penalty is to charge more than $500/return.

I expect a lot of people will confuse the 8885 as something to do with ACA.

also the 8885 form (feds too).

A healthy, single, 30 something with that income probably spends a few 100 at most on medical a year, and thinks it is smarter to just pay their medical bills out of pocket rather than buy insurance. And they are correct. Which is why the ACA needs them in the exchange, so that their excess payments can go to others. And whether you think they are dumb to make that choice, it still will be a shock to them, with all the news stories talking about $95 penalty, to learn that they will be hit for $2000.

True for most in most years. The only expense they have is maybe a checkup. I'd worry about the unexpected though. Severe auto accident for example with $200,000 in medical bills could wipe out a lot of savings. The folks making $30k probably wouldn't care so much, bankruptcy being an option to avoid paying. Someone making $200k would hopefully have a lot more to lose in savings and not want the bankruptcy option. Personally, I don't advise my clients whether or not to purchase health insurance. The tax/consequence sure. But I'm not their financial adviser, I don't do financial work (as I always remind them when asked finance questions.)

These 11 States now have More People on Welfare than they do Employed!

AL, CA, HI, IL, KY, ME, MS, NM, NY, OH, SC

Last month, the Senate Budget Committee reports that in fiscal year 2011, between food stamps, housing support, child care, Medicaid and other benefits, the average U.S. household below the poverty line received $168.00 a day in government support. What’s the problem with that much support? Well, the median household income in America is just over $50,000, which averages out to $137.13 a day. To put it another way, being on welfare now pays the equivalent of $30.00 an hour for a 40-hour week, while the average job pays $20.00 an hour.

Assuming all government employees count as welfare recipients for the 11 states, and assuming all welfare goes to households below the poverty line for the $168 value. Numbers that try to match the benefits to the number of people who actually receive them are lower per household on welfare received (because it spreads out to more households than just those in poverty).

Taxed, would you not call that kind of spending a bloated lifestyle? There are many, many people in this country that don't save, or don't save nearly enough, that lead these bloated lifestyles and have lots of these things that I consider luxuries. So yeah, I'd say that many Americans live bloated lifestyles.

Well, with a population of 300+ million I'd expect there to be "many" people in this country with yearly vacations to luxurious resorts and locations, houses 6-8,000 sqft, new cars, new cars for kids, lots of electronics, etc... My guess is in percentages it's a pretty small minority that lives in these 6-8,000 sqft houses with new cars and vacations. You can't exactly afford that on the median income even if you put $0 into savings. Those that make large incomes and don't save and then end up on social welfare programs, yeah... that could and probably should be avoided. I don't think it's very typical of the unemployed though. My guess is your average unemployed person not only doesn't live in a 6-8,000 sqft house but never has in their life and never will.

As you and I both know the # of unemployed or underemployed is many 100 times more than the # of open positions.

I don't blame the employer if they are looking for an EXACT match for the position. That is their choice. If you were hiring for an open position in your office I am sure you would do the same. Why would you want to hire someone that sort of knows the job vs. one that knows it exactly and will get running on day 1 without re training.

That is why we need serious retraining of the unemployed folks whose skills may not be quite applicable to the jobs of today and tomorrow.

I have a client who was a chemical mixer in a paint factory. When that shop closed he lost his job, got unemployment but also signed up for retraining with the state workforce office. They paid the tuition to go to a tech community college and he got his plumber's license last year and is working now. BTW they also paid 50% of his family's health insurance premiums.

What do you think a 45 year old man with no marketable skills and a family to feed is going to do after benefit runs out??

I'm not sure retraining is really the answer. Obviously if we want the unemployed folks to get jobs we need them to have skills that employers want. But like you said, the # of unemployed can be 100s of the # of open positions. If it's 100 people unemployed for every position and we retrain all 100 of those people to qualify for the job, we now have 100 qualified people to fill 1 job.

A return to the Constitution would be a very good place to start fixing those broken areas.

Yeah but getting the constitution updated has it's own problems.

Wouldn't that be a property tax, not an income tax? There's going to be a lot of people who pay more "tax" than their income. Consider any taxpayer that's had a NOL. That year they incurred the NOL they are still paying sales tax, property tax, etc... So their taxes would exceed their income and if you viewed it as an income tax would be greater than 100%.

Form 8606 is required for the 2nd half of the conversion?