artp

Client has 2 children in college with 3 1099-Qs. Daughter's 1099-Q under her SSN has $19,149 in box 1 distribution code 1 Coverdell ESA with zero balance left in the account. Qualified education expenses $28,650 scholarship$16,239. So hers seems straight forward max AOC and nothing to be reported from the 1099-Q. The son has 1099-Q in his SSN also Coverdell ESA box 1 $12,624, box 2 7024 box 3 $5600. Father has 1099-Q under his SSN Box 1 $9892, box 2 $3192, box 3 $6700 also Coverdell ESA. Qualified education expenses $12,056 scholarship 8190. I think that son has $3866 of qualifying expenses for AOC. Based on the above I think we have earnings that have to be reported and 10% penalty apply. Question: How to calculate the amount of income to include? Can this all be reported on the parent's return or separate reporting for Dad and for son? From what I have read in Pub 970 you have to reduce the qualified education expenses for scholarship and the amount used to calculate AOC to get to AQEE, right? Would appreciate input on this. Thanks

Finally got the escrow settlement statement on the partition sale $ 79,00 for back taxes. There were legal fees on the settlement which I am deducting from the proceeds and showing the resulting disallowed losses for each of the brothers. When brother A subsequently sold the property to an unrelated buyer I added the disallowed basis to his purchase price at the partition sale and calculated a capital loss per the attached spreadsheet. Is this the correct reporting based on the previous discussion above? Want to get this right so I really would appreciate any feedback form more experienced tax preparers.TAX CALCULATION Sale of Property 11102023.xlsxTAX CALCULATION Sale of Property 11102023.xlsx

It turns out he had 2 Roth accounts with total contributions of $1950. He received 2 1099-Rs. The one for $1000 as originally stated and a 2nd 1099-R for $1766 marked total distribution. So for the 1st one nothing should be taxable, no penalty and for the 2nd $816 of income + penalty, right? For $1000 Form 8606 line 19 $1000 with Roth basis $1000; for $1766 Form 8606 $1766 line 19 with Roth basis $950. Software will take the $819 to 5329 and calculate 10% penalty.

Taxpayer received 1099-R with Box 1 $1000, box 2 blank, box 2b checked and box 7 code J penalty applies, no known exception. $1000 in just part of original investment-no earning included. Best way to input this in software to show this to try to avoid IRS inquiry when not includable in come and not subject to early withdrawl penalty?

I guess I am getting old..missed that. Thanks

Client (husband) passed away in Dec 2023. He received 2 SSA-1099s. One showed $1919 in box 4 (benefits repaid) and $23,087.80 in box 5.The 2nd one showed $25,006.80 nothing in box 4. I am assuming that the correct amount to report is the net amount as shown on the first one, $23,087.80. But I am concerned how the IRS is going to handled this. I do not see anywhere in my tax software (Drake) to enter the amount in box 4. Am I missing something here?

I may be "old school" but I find it difficult to assist clients with questions concerning how to fill out this form and more importantly how to know in advance how much tax will actually be withheld before they submit it. With the old W-2 form and exemption tables it was fairly straight-forward. Now, unless you have a payroll tax software in house that will accept the new W-4 tax form inputs you are guessing what the result will be. I find many company's payroll processing is not done in-house so it is difficult to run what-if options. For example, if a significant bonus is to be included in their next pay check how do you calculate the withholding and make adjustments before it is processed? I find most HR personnel are not very helpful and the IRS instructions are not much better. Anyone have practical suggestions?

My client is a pastor (dual status taxpayer) meaning his wages are reported on W-2 but he is treated an self-employed for SE tax. He contributed $7,000 pre-tax to 401-K. Box 1 Wages $45,000, nothing else on W-2 except box 12a code D for $14,000. Does he have to gross up his SE wages to include the $14,000? For a regular statuary employee his FICA wages would be grossed up and shown in boxes 3 and 4 , but I could not find anything definitely for a pastor. Various articles suggest than no gross up is requited. Looing for help on this. Thanks

As anyone used ENCYRO for sending/receiving secure emails to/from clients with tax sensitive personal data? Thanks Art

Thanks for all of your feedback. Decided to go with Tech 4 to get this done correctly.

Someone mentioned Tech 4 Accountants. Anyone used them? Reliable? Cost effective?

I took the sample plan outline from the IRS website and tried to tailor it for my small one man tax operation (no employees) but not comfortable with what I have. Does anyone have an IT support person who works with smaller clients who could set up the WISP for me? Thanks for any suggestions. Art

To clarify the medical insurance deduction is limited one line 17 is limited to the 25% not reimbursed by the former employee. Correct? It is my understanding that the 75% reimbursement is under Sec 105 plan of the former employer so it should not be reportable or taxable to the retired employee. Correct? If the employer would issue a 1099 for the 75% reimbursement, how should that be handled on taxpayer's return? What about the deductibility of LTC premiums?

The information is for 2023. Sch C net income is projected at $20,000. The wife is 66 retired and on Social Security. The taxpayer was employed in 2022 and always had a Sch C side business.

Married taxpayer (age 75) retired in Dec 2022 from his employer who provided 75% health insurance (medical and drug) coverage as a tax-free benefit-employee paid 25% through payroll deduction. For retirees the company will reimburse him 75% for Medicare part B and D premiums for taxpayer and wife. Taxpayer has always operated SchC business (no employees). He also has supplemental medical insurance for dental and vision and tax qualified LTC for himself. Question 1. Is 25% portion for health insurance deductible (line 17) on 1040? Queston 2. Are the supplement insurance premiums also deductible (line 17)? Question 3. Does he have to have a written plan in place under 105b) or 106(a) to take the supplemental medical and/or LTC deductions? Question 4. If his wife gets a LTC policy can he deduct those premiums?

He paid his 1/3 share of the real estate taxes each year. This was shown on Sch A, but he did not itemize for any of the years in question.

DANRVAN, So in your reply you are saying that the step-up basis of the other brothers is added to the oldest brother' basis since the July purchase via court partition sale is considered a related party transaction. Correct? In reply to your second thought above there were no expenses listed as part of the July court partition sale, but when the escrow money is finally paid out we are expecting that the oldest brother will receive an adjustment for the unpaid taxes by the other brothers. Would that be considered a basis adjustment? expense? I assume the back taxes will be taken out of the escrow so will that be a basis adjustment? expense?

Just to clarify The Nov sale was to an unrelated party. The July purchase was the result of a partition sale ordered by the circuit court in which the oldest brother gained sole title to the property. After reading the posts here is my summary: Oldest brother's tax basis: 33,000 from 1/3 share per mother's estate 52,667 From 2/3 share via purchase in July 85,667 Total Total LT ST Sales Price 102,000 34,000 68,000 Basis 85,667 33,000 52,667 Gain 16,233 1,000 15,333 The above ignores any final adjustment from the escrow. Agree? Questions: 1. If the oldest brother would receive, say 5000 as reimbursement for the taxes he paid out of the escrow funds this would not be taxable to him, correct? 2. Any legal fees he incurred with respect the above transactions would be taken either as an adjustment of the sales price or added to cost basis and allocated 1/3 LT; 2/3 ST unless they could be specifically identified.

Yes, we are waiting for the escrow settlement to be finalized to determine how much he will receive out of the $79,000. Thank you for your reply. Art

Sorry for the long background. This is a rather complex situation and I need help. My taxpayer (oldest of 3 brothers) and their father operated a towing service for many years as a C Corp with all four owning equal shares in the business. The mother was the sole owner of the land and the building on which the towing service operated as well a separate parcel for the family home. Over the years there arose a heated dispute regarding the towing business and the 2 oldest brothers withdrew participation after the father passed away. When the mother passed away in July 2012 the ownership of both parcels passed by the provisions in the will to the sons as tenants in common 1/3 each. After the mother’s death the business (now operated by the youngest son) fell off and the properties fell into disrepair and property taxes fell in arrears. The youngest son had pulled out all of the equipment out of the building and moved to a different location. During all of this the 2 oldest sons were trying to sell all of the properties and get the whole situation settled, but the youngest son refused to sell. In July 2023 the parcels were sold for back taxes and the oldest son purchased the parcels for $79,000. The funds are currently held in escrow pending legal squabble over how much should each son get. My client paid for his share of the taxes each year, but the other sons did not pay their share. The estimated FMV at the time of the mother’s death was $99.000. To further complicate matters the oldest son sold the properties for $102,00 on November 10, 2023. Questions: Assuming the other sons’ share would be adjusted to reflect their share of the unpaid taxes, what would be the cost basis to determine gain or loss? FMV at mother’s date of death? Holding period over 1 year so capital gain or loss? How to calculate the oldest son’s gain or loss? Would his basis include any amount from what he had to pay to acquire the property at the tax sale ($79,000)? If the escrow is not released before year end, what to report on 2023 tax return? Any suggestions from more experienced preparers most welcome.

Thanks for the feedback and heads up on the Cinven connection. I in the process of demoing TaxAct since I am basically concentrating on individual returns. So far the cost savings may not justify the lost of features in Drake and the effort to learn a new software system in this stage of my career.

Does anyone have experience using Tax Act? I am considering other tax preparation software for my small tax practice and would welcome your feedback.

Thanks everyone for your suggestions...much appreciated

Bulldog Tom, Thanks for your suggestion. I just tried Genius Scan and it looks good.

I have many clients that do not have access to stand alone scanners so they take a picture with their phone and I get a jpeg image that is almost unreadable mainly because the image is way too small. I could get a photoshop type software and try to get a workable image, but that is a lot of extra work. Does anyone have a good alternative?