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artp

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  1. Client got 1099-R box 7 Code J For $33,000 indicating penalty applies. He has had Roth since 2008 and is age 48. Amount contributed + earnings is $31,000 so only $2000 should be taxable and subject to 10% penalty. Correct? Should I put $31,000 in box 5 and let it go at that or include an attachment to explain this?
  2. Pastor who does foreign missionary work is not reimbursed for meals and incidentals while traveling in Africa. For tax purposes he is a dual-status taxpayer-employee for income tax purposes but not for Social Security & Medicare tax. His air fare and lodging are paid by the church, but not meals & incidentals. Question: Can he use the foreign ME&I rate (as listed by US State Department) for expense deduction for determining his income subject to SE Tax? Is he limited to actual expense if less?
  3. Yes we have to file Sch C with income reported on 1099-MISC box 7 and contract he signed.
  4. That is difficult to say definitely. He has lived in IL all his life. After he completed his medical residency in IL in 2017 he entered into this contractual agreement working in LIberia from Jan-Jun each year and in CA from Jul-Dec. He still maintains his house in IL, pays his mortgage there and still maintains IL drivers license, but has not spent hardly any time there. He has split his time between CA and Liberia. If we treat his tax home as IL, then we have no IL source income to report since he worked in CA for part of the year and in Liberia for the other half, but if we report him with CA tax home, then no expense deduction for living accommodations while working temporarily?? in CA??. Otherwise he has virtually no expenses to offset the income he has to report on Sch C for this contract work.
  5. Yes. His income is below threshold. Related questions: Can he deduct travel expense for periodic trips from CA to his home in IL? What about rent payments for temporary living accommodations while working in CA?
  6. Taxpayer (Medical doctor) has worked as an independent contractor in CA for Echo Locum Tenens (a staffing provider) since July 2017. He received a 1099-MISC with the income reported in box 7- non-employee compensation. The contract requires his services for 6-month stints from July-Dec for 2017 and 2018 to perform services at a hospital I CA. For the remaining 6 months each year he was required to work overseas at a hospital in Libera under the HEAL UCSF Global Health Fellowship. For this work he received a W-2 from UCFS. When he returns from Liberia in July 2019, he will finish his last 6-month requirement for Echo Locum Tenens under the current contract and be paid on the 1099-MISC. He expects to continue this working relationship going forward. Question: Does his work as an independent contractor qualify for QBI?
  7. Did some digging into the trust document and got copies of the last 3 years of trust returns and the income beneficiary’s returns. 1. The only governing provision states “ The Trustee shall distribute so much of the net income of the trust as the trustee believes desirable for the support, comfort, companionship, enjoyment, and medical care of both of us or for any other purpose the Trustee considers to be for our best interest, adding to principal any net income not applied for such purposes. Except as provided otherwise herein, the Trustee shall have no authority to use any portion of the principal of the trust for the benefit of either of us.” 2. Looking at the prior returns virtually all of the ordinary dividends, interest, capital gain dividends and capital gains were allocated to the beneficiaries and included on the K-1’s for each year. They included the full amount on their individual tax returns. The Trustee only distributed cash out to the income beneficiaries as they requested for their needs, but not the full amount of DNI deduction as shown on the returns. The beneficiaries (Trustee’s elderly parents) live very frugally, did not really need or want the full cash distributions, and paid no tax on the capital gain income and relatively little tax on the dividend and interest income based on their tax bracket. Looking at the returns I saw, most years the capital gains were under $15,000 and the regular dividends and interest about $10,000. Trustee stated that both the income beneficiaries (parents) and the residual beneficiaries (children) were completely in agreement with this. I confirmed this with a discussion with the parents. I am at a loss as to what to do about the prior year’s returns, if anything. Going forward can the trust document be amended to allow capital gains to be distributed to the income beneficiaries? The past practice has been to do so, though not correctly. Then, actually pay the cash out in full and on time. I understand their tax motive to save taxes by paying at the lower effective rate on the individual return, but I have a real mess here. These are good people but need to get this situation straightened out. Any advice will be most appreciated.
  8. Bulldog Tom I thought about filing as a full year CA resident but he does not have a valid CA address so I thought about using C/O address for his parents who live near me since he gets his mail forwarded there anyway while he is overseas that way the Peoria address would not appear anywhere on the returns. The Sch C would look a little odd with the C/O address in IL and the income being reported in CA. This is just a very crazy situation. AND.... Full shaker of salt, yes, but preferably salt on the rim of a margaretta...a very large one! Thanks for the suggestions and advice..
  9. Catherine, Clarification--Assuming corpus distributions are allowed, are you saying that we could handle a future annuity transaction as I indicated above? For now, aren't we stuck with the result I outlined above for the transaction already completed? There is no way to unwind what they are already done? The other thing I saw on the instructions for the 1041 is that withholding taxes on the annuity could not be passed thru to the beneficiary. Have you run across this ?
  10. Thanks for the heads-up Bulldog Tom. I am especially concerned since client is now planning to go back to CA when they return to the US in June and selling the house in IL. They have just signed a 9 month (July 2019-March 2020) lease on a place in CA. May need to bite the bullet and report all of the CA W-2 wages to CA as a PY CA, PY IL resident and try to get a partial tax credit on IL. Any further thoughts?
  11. Client transferred an insurance annuity contract to his irrevocable trust many years ago. He originally purchased the annuity for lump sum payment of $40,000. In May 2018 the accumulation phase of the contract ended, and he and the trust administrator made the election to take out the value ($95,000) as a single payment with $15,000 of federal tax withheld. Since this asset was held in the trust, it appears the entire gain of $55,000 must be taxed to the trust at trust income tax rates and the $15,000 withholding applied to the trust tax. Client was wanting to have the “income” passed thru to him to be paid on his personal return and take the $15,000 tax payment against that income. The trustee stated that the proceeds were reinvested in an existing trustee brokerage account. I am not a trust expert, but I do not see any way to avoid paying the higher tax at the trust level. Comments? Question: If they had not cashed out the annuity while it was in the trust, could they have pulled it back out of the trust to the taxpayer and then had him cash it out personally to get the tax result he was looking for? I am concerned that there may be another annuity in the trust and we could be back in the same boat again.
  12. Thanks for all of the feedback. I have requested a complete time line for all of the family from 2017-forward as well as taxpayer's plan for working and living going forward. He still does maintain his IL home, has IL driver's license and car is still licensed there. Have more digging to do. If he could give me a clear intention of moving back to CA when he returns to the US and selling his house in IL, I would be inclined to do a PY IL for Jan-Jun and PY CA from Jul-Dec. The remaining sticky issue would be income on the CA W-2. It really should not be considered CA taxable (being earned while his is an IL resident), but with the employer withholding CA taxes, I could see both states taxing the same income, but my client getting at best a partial state income tax credit to ease the blow. The real tax bite is the SE tax on the $78,000 and no estimated taxes paid during the year. Ouch!
  13. Client has for many years maintained his tax home in IL with his wife and children--house, registered to vote, driver's license, car in license, etc.. In 2018 he contracted with a medical staffing company from CA that contracts thru UCSF for client to work as a medical staffing professional in a hospital in Liberia from Jan 11-Jun 10, 2018. His income $58,000 was reported on W-2 from UCSF with CA withholding and using his IL address for reporting purposes. His wife and children lived in IL Jan 2018-June 2018 until they moved to rented housing in CA in Jul and the children attended school in CA from Aug-Dec. From June 29-Dec 31 the husband worked as an independent medical services contractor for Echo Locum Tenens for work in CA with earnings of $78,000 reported on 1099-MISC box 7 still using his IL address for reporting purposes. In early Jan 2019 the entire family moved to Liberia for husband to fulfill his contractual obligation to work there until June 30, 2019. Presumedly, this will also be reported on a W-2 with CA withholding. They are undecided where he will work or where they will live after June of this year. Given the above facts, how should he report his income for state purposes? PY CA PY IL? Ignore the fact that the wife and kids lived in IL for part of year and report everything as CA source and a full year resident? I understand that CA is very aggressive to treat anyone who has a connection with CA as a resident for state tax reporting. Is there a significant difference in CA treatment for full year resident vs PY? I really need some CA expert advice on this one! Thanks
  14. Thanks Gail. Yes, he will still have a loss on the 2nd contract for deed so I am reporting the sales proceeds since it was reported on 1099-S just to have it on record, but no recognized loss for tax purposes since it is still a personal residence. Art
  15. Gail are saying that there is a loss to be recognized for tax purposes on the repossession? The type of property is still considered personal residence? The 2nd contract for sale price is still less than his original cost basis so this would be a sale of personal residence at a loss, so not recognized for tax purposes? Art
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