JohnH

Hi Katherine: Just to be clear on what you are saying. I assume you are pointing out that the ONLY exceptions to the 10% penalty for a taxpayer who is under 59 would be either 1) disability as defined; or 2) a qualifying SEPP. Any other use would be subject to the 10% penalty. Right?

This thread brings back fond memories of a client from the early 1980's. He was partially disabled, but a very proud, independent type. He owned a large truck from his working days and to earn a little extra money he would haul livestock to market for local farmers. Never earned very much profit but he wanted to "pay his fair share" because he was receiving a small disability payment. I admired his integrity. Each year he brought me his records - a calendar kept in his truck for writing down his mileage and hauling fees. Needless to say, after a year of being carried in the cab as he loaded, hauled, and unloaded animals, the calendar was something that needed to be handled "with care". Especially since it might have occasionally fallen on the floor. (Don't ask me how I know that)

Thanks to both of you for the replies. Guess I'm just trying to "torture the text" to get a desired outcome.. This helps me to go ahead and wrap this one up. I appreciate the confirmation.

Still researching this, but I'm unable to find anything that definitely says "yes", therefore I'm leaning toward "no" as I have been since the outset. I had the client pay the full amount of the penalty tax with their extension, explaining that we could claim a refund of the education-related portion of the penalty if we found that it was excludable. But looks like I'm not going to be able to deliver good news on this.

Client is under 59-1/2 and cashed in a whole life policy. Insurer said it's a Modified Endowment Contract and issued a 1099-R with Code 1. Early withdrawal penalty tax applies. Taxpayer also paid education expenses for their dependent child. The penalty exception would apply for the amount of education expense paid if this were an IRA, but I'm uncertain whether this exception works with the MEC withdrawal. Can anyone offer any guidance on this?

I tell clients to drop off their info or mail it to me and I'll get back to them if I need anything else. But years ago when I would have a sit-down with them to go over everything in my office, I always enjoyed stuffing the boilerplate and the mailing envelopes into the shredder as we were talking. Sometimes, while that thing was grinding away, the expression on their faces would be priceless.

I found the 2802C to be the most humorous. After all, how can they know there's a withholding problem if they haven't processed a return? Seems to me the only time this notice would go out is after a return has been processed and the under withholding is known, so why suspend it?

Another interesting twist to this issue of 2020 returns still being processed. Within the past 3 days, 2 clients who filed by paper have given me CP80 letters from IRS. Each letter cites a payment that was made for 2020 (balance due on the return and a check processed), but no return filed. The letter warns of potentially losing the credit and has an instruction to send a newly-signed copy of the return to Kansas City. So naturally that scares the client and they want to do something. It's clear to me that the ACS system is working fine, but nobody has bothered to interrupt the process in light of the fact that IRS is still sitting on millions of unprocessed returns. While they tell us to be patient and not file another return, the boiler plate on the CP80 gives exactly opposite instructions. I know IRS has a huge task on their hands, but they're creating another level of confusion by allowing the automated process to grind away without regard for the realities.

Congratulations to Andrew, and also to you.

Looks like an invitation to send paper W3/W2 Copy A via Certified Mail with Return Receipt. If SSA wants to complicate things, let them be responsible for working it out.

I would not send back. I would tell the client that IRS also makes mistakes, and Congress handed them an impossible task with the restrictions and exceptions on the stimulus payments. And it may take IRS months or even years to sort this all out. So they should be prepared to repay the “excess” payment, with interest, at some unknown point in the future. if that happens, they have been forewarned. If it doesn’t happen, then they won’t remember.

Sorry, I wasn’t clear about that. It was Max W who posed the question. I was making a loose connection between the two having the same name.

My high school football coach was a survivor of the Bataan Death March. Ironically, his name was Max Beam. Coach Beam didn’t have any patience with slackers, and he always said we were too soft & had no idea what hardship was. Wonder what he’d say about today’s generation?

Old accountants never retire. They just become unbalanced.

I did not know, but I'm sure Drake will know when they send out 2021 s/w.

You could also set up a personal EFTPS account. I think it’s an excellent way to handle tax payments, estimated tax, extension payments, etc.

I'm seeing this played out, as a half-dozen of my clients are dealing with unpaid refunds or penalty notices due to IRS not having processed their 2nd quarter 941 prior to processing their 3rd quarter 941. (or a smilar scenario with other back-to-back quarters) Therefore, their overpayment from the 2nd quarter was not applied to their 3rd quarter 941 and a notice for failure to deposit has been generated. The largest one was hit with a $900 P&I assessment, which I told him to pay in order to avoid a levy, and to not expect it to be refunded for 6 months or more. The upside is that he wil be paid interest at a rate better than anything he can get right now. (Fortunately he can afford to wait and he likes the idea of the iRS paying him interest.)

Isn't it possible that the executor might be liable if the heirs stonewall on paying the taxes? Sounds like the executor did a distribution to heirs before settling all the outstanding debts (including taxes).

You make a great point. Personally there's no way I'd stand that close to a mother bear and her cubs. If one of the cubs begins to make its way in their direction, the mother bear may spring into action in an instant. Then you'll hear someone screaming "You can't outrun that BEAR!" And the response will be "I'm just trying to outrun YOU!"

Oh, I can't bear to think of what direction these comments may take.

Glad to help a little. Hope this works out for her.

She could go online and request a 120-day extension of time to pay without setting up a formal Installment Agreement. That gives her 4 months of breathing room. Then if the adjustment has not been made by the end of that period, she could try calling and requesting an additional extension of 60 more days. If she can't get through, then setting up a formal I/A with the minimum payment might an additional option. For some people, the fee for setting up the I/A might be a small price to pay to retain access to her $900. (She might even qualify for waiver of the fee, depending upon her income)

Wouldn’t that be “Knights of the Tax Table” ?

They might change the taxation of winnings vs losses at some point to allow netting out , but I wouldn’t bet on it.

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