jklcpa

If the medicare wages on the W-2 are reported correctly, then the withholding is the correct amount. Yardley didn't tell us what else is on the return that might be causing the 8959 to be included, so it's a guessing game at this point with the information that we were provided.

Any SE income of the taxpayer or spouse, tips, or spouse's tips or medicare wages when combined with taxpayer exceed the limit?

I would never take this client back if she asked you to file a return under false pretenses. She'd likely lie again in future if she saw benefit from it. This dude should have the person in PA prep and sign that return!

From this new information, I'd guess that maybe the parents and daughter worked out a price they were both happy with. To summarize what I'm hearing: Parents show the 205K sale, give away 41K, net of 164K before selling expenses, pay off their mortgage of 120K and end up with some cash to pay the tax effect and have some in their pocket. Daughter gets a house with a mortgage that she can afford and has the cash for fixing up. The problems I see are the gifting for less than fair value, and the sale to a related party for less than fair value. With the latter, the parents lose the benefit of capital gain rates on this sale. Whatever gain they are reporting will be at ordinary rates.

I don't understand your differences from the appraisal to amounts at settlement either, and I think you should find out why there is this large difference between the appraisal and the selling price. It doesn't make sense to me or follow the pattern of ones I've had experience with. The ones I've seen reported the exact appraised value as the selling price and the gift of equity was exactly 20% of that. Then the sale price from the settlement sheet is used on the taxpayer's return just like it was any other sale of property to an outsider. If going by the settlement sheet, the sale price you would report is the $205K, and the gift of equity is 20% of that, the $41K. The gift of equity is considered a downpayment so that the daughter could use that to qualify for the mortgage and to avoid having to pay PMI. She might also have been able to avoid having to escrow amounts for r.e. taxes and insurance. Then, the gift tax return(s) would report the gift given of $41K, apply the annual exclusion to that, calculate the potential tax, and offset the tax by using the unified credit so that the gift tax to be paid is zero. I pulled up the file for the last one I did from 2012 where the appraisal and selling price on the settlement sheet were both reported as 210K, and taxpayer and spouse each gifted 10% of value to the son for a total of 42K, and the $42K was reported on the settlement sheet as the gift of equity. TP and SP split the gift and each filed a gift return reporting a taxable gift of $8K ($21K less the exclusion of $13K), then used the unified credit to zero out the tax on the 709s so that no gift tax was paid.

Yes, of course. I was just trying to say that 100% of the scholarship might not go on line 7, not the part actually for the tuition.

^ that, but if the student is a degree candidate, only include the amount on line 7 that is for other than tuition and course-related expenses.

No. The relationships that are considered a "child" and allowed under the "qualifying child" rules includes the son, daughter, stepchildren, foster children, stepbrother or stepsister, half brother or half sister, and lineal descendants of any of those. If any of those meets all of the rules to be a qualifying child AND are also under 19, or under 24 AND a F/T student, then they can make more than $4K and still be a qualifying child for the dependency exemption. There is also the exception to gross income to be considered if any of those are permanently and totally disabled where certain income can be excluded when determining whether or not the "child" meets the gross income test. The relationships allowed under the "qualifying relative" rules are broader that I won't go into for this discussion, but those are limited to under $4K of income, unless the person meets the test of permanently and totally disabled and falls within that exception to exclude income from sheltered workshop from gross income.

^ this, and it will have to be filed on paper with SSA. As Jack says, she will have to claim the payments on her return to have the withholding refunded to her.

There may be scams related to the program, and there are companies asking for upfront fees too, but the program itself is real. The link here is directly to the White House website, indicating that this program was part of the Health Care and Education Reconciliation Act sign into law in 2010.

KC, thanks for sharing your story. Your father sounds like an amazing man. Randall didn't say where the client's adoption is, whether KY or a neighboring state, but KY is his home state and the reason I chose that.

I started a new topic so to not derail this one further with my questions about the flash drives and providing the client copies.

Quotes from the other topic that got me thinking about how I could change things:

OK, I started this topic to continue a discuss about printing that one of my questions had the potential to derail. Highlights: I'm paperless but still review the paper returns with the clients from their client copy, then I get the e-file authorizations signed. Comments about providing client copies on flash drives was made and I asked how those review the returns with the clients, on a computer screen? I'd like to continue the discussion here, and I'd like to hear about others of you handle your meetings and finished products. I'd still like to review aspects of the return with the clients. I've mostly been using the 3-year comparison because it is a great summary of the return all on one page, and the clients seem to like that. I do show them the state return because many of my clients are older and are receiving benefits of DE's additional exclusions for those over 60 and 65.

Jack or Abby, how to do review the returns with the clients. Is that on a computer screen? I'm paperless at this point for my storage but am still providing paper copies to the clients. I'm overdo to redesign my workspace and overhaul work flow and finished product choices.

Long time business client didn't tell me she closed up shop in mid-Dec even when she dropped off her payroll records for the 4th quarter and year-end filings. Her records are a total mess and she always complained about something (I took too long, my fees are expensive, etc). She got a buh-bye letter this evening. I am relieved that I don't have to look at that mess any longer.

I agree with KC that the clients should contact the lawyer. Have them ask specifically if the judgement has been entered and the date of that entry. Snippets from KY adoption law: 199.515 Hearing -- Notice. 199.520 Judgment -- Prerequisites -- Orders -- Name and legal status of child -- Health history and other nonidentifying information of biological parents and relatives to be given to adoptive parents. (1) After hearing the case, the court shall enter a judgment of adoption, if it finds that the facts stated in the petition were established; that all legal requirements, including jurisdiction, relating to the adoption have been complied with; that the petitioners are of good moral character, of reputable standing in the community and of ability to properly maintain and educate the child; and that the best interest of the child will be promoted by the adoption and that the child is suitable for adoption. In the judgment, the name of the child shall be changed to conform with the prayer of the petition. The judgment and all orders required to be entered and recorded in the order book, including the caption, shall contain only the names of the petitioners and the proposed adopted name of the child, without any reference to its former name or the names of its birth parents. (2) Upon entry of the judgment of adoption, from and after the date of the filing of the petition, the child shall be deemed the child of petitioners and shall be considered for purposes of inheritance and succession and for all other legal considerations, the natural child of the parents adopting it the same as if born of their bodies. Upon granting an adoption, all legal relationship between the adopted child and the biological parents shall be terminated except the relationship of a biological parent who is the spouse of an adoptive parent. (3) The clerk of the court shall notify the cabinet of any action of the court with respect to entering a judgment granting an adoption, the amendment of an adoption, or the denial or dismissal of a petition for adoption.

It might make sense. It is based on MAGI, not taxable income. They may have included only the taxable portion of the SS benes when applying or possibly underestimated the pension income, for example, if they took extra out of an IRA. Is they income consist with the 2014 year? You should also check to make sure that the numbers being reported on the 1095-A are correct. I've seen one that was in error so far and waiting on a corrected form. At the level of income you indicated, I'm getting a calculation that their monthly contribution toward the premiums is just over $300 (form 8962, line 8b). The calculation also depends on the premiums for the plan they chose and the second lowest silver premium. On an annual basis, what are those figures?

I don't use SFP either, but I'm glad to hear that you are experiencing the increased efficiency of Drake.

I reread your posts about this client, and from what you've posted here, you don't have anything to worry about. He may try to blame you, but his next victim preparer will figure him out soon enough. He may bad mouth you around your area, and this should be the worst of it. That will die down and people should see him for the complainer he is. Don't lose sleep over this guy because clients like him are nothing but a time suck to the detriment of your other existing clients or your ability to fill that time with other new, good ones. You'll be better off financially in the end because you won't have to answer his dozens of questions that he chooses to not want to understand anyway.

^ that is all correct. I didn't feel it was necessary to provide that level of information in the answer since I've never seen points that didn't meet the criteria either, and also because this was a home being purchased, not a refinance where the points would be amortized over the life of the loan, and not a rental property either.

Yes, but in either the qualifying child or qualifying relative criteria, the person claiming the dependent still must provide over 1/2 the support.

True, but subsidy wasn't mentioned, only the SRP. In these cases, it's best to test both filing statuses.

The 22-year-old son could possibly be a dependent under the qualifying relative rules. He meets the relationship, income, and member of household tests. SSI isn't included for purposes of the gross income test. The final test is whether or not mom provided more than 1/2 of his support. You'll have to find out how much of his earnings and SSI he spent on himself vs how much she provided.

Back on the soap box - maybe we should file like the Canadians where MFJ isn't permissible and each person files a return with his or her own income. Stepping off now.