jklcpa

I'm pretty sure that the information causing the reject is contained on the "EF Info" form. Delete that form, save, close, reopen, re-add that form, recreate the e-file and try again.

Right, and if ATX is calculating this automatically, chances are that Crank's client didn't qualify for the forgiveness unless he deleted the form, and there are other additions that must be considered that aren't included in PA taxable income that could cause the client to exceed the threshold. I know you would know this being a PA CPA, but stating the obvious for other readers. I think Crank's course of action should be to complete the Rev-1630 using exception #2 that annualizes the uneven income that should limit the penalty to the fourth quarter and request that the penalty assessed be based on these revised calculations, if this will help his client. Read the snippet below though for more information. No, from the PA Dept of Revenue site regarding underpayments, this page includes this:

Well, now I have more questions. Does this person have any compensation on a W-2 from the S corp at all? Who issued the 1099-misc? Each year this happens, have you advised him on the ramifications of tax avoidance by circumventing tax and payroll laws? Does he have other employees misclassified as 1099-misc contractors? This may be a good read for you and as a starting point for a discussion with this client: https://bradfordtaxinstitute.com/Content/Do-Not-Defeat-Your-S-Corporation-by-Paying-Yourself-on-a-1099.aspx

Edsel, I'll cut to the chase. In at least 2 posts you've indicated a potential action of "creating a payroll in December," and in your latest post you made the decision by "weighing upsides and downsides." If by "creating" you mean to backdate a check to December to make that payroll, that would be illegal and unethical. Don't do it. I would view this action as fraudulent and unethical; a sham no different than manipulations to maximize the earned income credit. We can correct errors in classifying existing transactions that actually occurred during the year, but we shouldn't be creating transactions after the fact to arrive at a more favorable result. If by "weighing" you mean to consider an action based on the benefit to the client over the legality or ethical practices as a preparer. First and foremost, your decision should be based on law and ethics, and only when what you are considering falls within that scope should the benefit to the client be considered.

@Yardley CPA Doesn't your software automatically try to calculate this? Drake does, and as far as I remember, ATX did too during the years I used it. The person that started this topic is an ATX user, or at least he was using it last year for the 2018 season.

You can use the exception #2 on Rev-1630 when taxable income is uneven throughout year. This would be beneficial and help to limit the penalty since most of the income causing the underpayment was in the last quarter of the year.

Tom, no problem here and agree completely with your sentiment. I've made similar statements over the years about some in our profession by saying "prostituting themselves". Same thing.

We've gone totally off-topic here, and hope that the OP will have resolved his error. I have a question on the above combo for grabbing a partial window snip. I still have the old snipping tool and that does work that I use occasionally. When I launch that it also has a popup that mentions the Win+Shift+S shortcut. At your mention I tried this shortcut today and had a free form cutout, but my window was greyed out and no tools or new window appeared that would allow me to save, modify, or paste it into another document. Instead, it totally disabled all functions on my machine. I couldn't exit my browser with the red "X", couldn't close any windows by right-clicking on the task bar's icons, clicking on the Win logo was disabled. I tried to open the task manager with Alt-Ctrl-Del and it was hidden behind the greyed out browser window and couldn't access that either. The only way to get out of this mess was Alt-Ctrl-Del and at the blue screen before launching task manager again, I used the power "button" to do a complete restart. Any ideas why this happened? I'm running v 1909 without any other issues so far. I was hoping this would be an easy and quick snip, but was a total fail here. I don't think I'll be trying it any time soon again. I find screenshots much easier on my tablet, much easier than anything I have through Win10.

David, you are on the right track. The LLC is a disregarded entity and so this is treated as a sec 351 transfer where assets and liabilities are exhanged for the corporate stock. You will need to determine the ending balance sheet at 12/31/18 to do that. This article from The Tax Advisor explains the process more fully, and has cites if you want them: https://www.thetaxadviser.com/issues/2013/dec/casestudy-dec2013.html

See table below. Fourth and fifth year percentages are the same, straight from the table and the reason Drake is calc'g 2019 as $1,349. Your expense for that vehicle is below the luxury auto limitls for 2015, so that isn't the problem, and it's not a switch to SL at all either. Still doesn't explain ATX and why the limitation. There must be some input or something limiting this particular auto and its expense.

NO. For the distribution to be considered a QCD, the trustee must pay it directly to the charity.

No, I really meant the 2018 expense that is the fourth year being depreciated. I was showing the 2018 calculation using Macrs DDB-HY and that it is exact EQUAL to the SL calc for that fourth year. Then for 2019, that would be the fifth year of expense, the SL rate is higher than the MACRS. I was trying to prove out all the numbers used to date for that vehicle since that one's calculation is problematic. I inserted the year end accum deprec each year in my post above, and I tried to clarify the fourth and fifth years' descriptions with bold formatting for clarity.

That is the accum deprec through 2017 that is used to calc the adjusted basis at 12/31/17 because the adjusted basis at that date is used to calc the 2018 expense. Sorry if that was confusing. When I saw that the 2018 and 2019 expense amounts were the same, I figured it might be a switch to SL and thought I'd explain how the 2018 calc was arrived at. Sorry if that was confusing. Just relating it to the example from Pub 946. That still doesn't explain what's going on with ATX and which is correct, and why.

Even though your depreciation schedule shows 100% business use, are there entries elsewhere in the input for mileage or usage that may be affecting the final calculation for the 2015 vehicle?

It can't be because of mid-quarter at all, not the way it appears to be entered. Also, mid-quarter wouldn't make that much of a difference considering the Ford Focus was put in service on 7/1/15. I can manually calculate the exact amount of depreciation for each of the prior years that comprise the accumulated amount for the 2015 asset: 2015: 8,000 bonus +2,343. Total depreciation 1st year = 10343. 2016: 3,748 2nd year expense. Total accum deprec at 12/31/16 = 14,091. 2017: 2,248 3rd year expense. Total accum deprec at 12/31/17 = 16,339. 2018: 1,349 4th year expense. Total accum deprec at 12/31/18 = 17,688. I think the cause is an interplay with the special allowance and don't know why ATX is coming up with $1,206 either. I plugged in all the assets with the exact conventions AND with the special allowance in the proper spot, and Drake comes up with all of the exact depreciation expense for all but the 2015 asset. Drake is slightly higher and shows a depreciation percentage of 11.52% from the depreciation table being used. Edit post to include this part (in blue): The 2018 expense of $1,349 is calc'd as (19712 - a/d 16339) / 5 * 2 = 1,349. This is exactly the same as the SL rate applied to the adjusted basis. SL in fourth year, the 2018 tax year, (for a five-year asset) is at a rate of 40% of the remaining adjusted basis, that rate calc'd by dividing 1 / 2.5. It appears that Drake is calculating 2019, the fifth year, as being switched to SL because it is higher than HY-DDB. Fifth year SL depreciation of a 5-year asset is at 66.6667% of remaining adjusted basis, that rate calc'd by dividing 1 / 1.5. It still doesn't explain ATX figures though. FWIW, this explanation was taken from an example of a 5-yr asset using MACRS w/ switch to SL as shown in Pub 946. Drake calcs from a practice return:

Hey, they must be friends or relatives of my clients...or use the same barber.

Even if it was held for investment purposes, say for it's potential to appreciate in value, unless it had some income-producing component such as a rental, then there would be no depreciation allowed. The classification really boils down to intent. I'm curious how carrying costs on the property handled? If capital property, was the election made to capitalize the carrying charges, and were the elections to do so included with the 2017 and 2018 returns? Were those carrying charges expensed?

I, too, remember an issue with a .netframework issue with ATX, but that was prior to 2012, maybe even 10 years ago. I don't think that is a reason to delay installing this update. A lot has changed since then. The net framework helps the applications run on the Windows platform and also plays a part in managing resources and memory usage. I think you should update to the latest version, because in addition to what it does do, continuing to use outdated software when a newer version is available may create a vulnerability that hackers can exploit.

As Lion said, in general it is possible to pay tax on the 529 distribution and then it *may* be possible to claim education expenses if all other tests are met. In Christian's client's case, running a support test calculation is needed to determine whether the 23-year-old is a dependent of the parents. The parents would have to spend or provide support in excess of whatever the student provided on her own, including whatever portion of the $30K in earnings she spent plus (I think) the amount spent on the tuition from the 529 plan. I haven't researched this, but I seem to recall that even though the 529 funds may have come from the parents or someone other than the student, the contribution into the plan is considered a completed gift to the student. If that is the case then, and because the 1099Q is issued in the student's name, and the student would have to report any taxable portion, then the tuition paid for by those 529 funds would be considered funds paid by the student toward her own support. It may be a moot point though if there is no tax benefit if the student is not a dependent of the parents and if the education costs were all paid by 529 funds and the choice is made to not include those distributions as taxable income.

I read it over too, and I don't think anyone knows yet what the indexed amount will be for 2021. Not sure when that is announced but from cbslee's post, I'd assume sometime toward the end of the year.

That does make sense, and it seems that little by little you are getting all the pieces to the puzzle...finally.

You should make sure that the s/t transaction is for the shares that were exercised and included on the 2019 W-2. Unless the s/t transaction occurred on the last day of the year, there is still a chance that the "purchase" via exercise could have occurred (within the 12 months, obviously) but be from an exercise in 2018. Did this person's 2018 W-2 also include code v? In other words, the shares sold may or may not come from the same lot as the current year's exercise of the option to acquire because the transactions aren't always simultaneous. I hope that makes sense.

^ that's correct and Gail already has that info in her post for 2020. With the premiums based on a 2-year lookback and her asking about her client's 2019 income level being slightly over the threshold in that chart, I think she is asking what the premiums might be for 2021.

Found this article published in Nov 2019: https://www.investmentnews.com/medicare-premium-increase-and-irmaa-surcharges-announced-for-2020-170646 Some excerpts include these quotes: "High-income surcharges will be adjusted for inflation for the first time in a decade." "For the first time in a decade, the income brackets used to determine those surcharges will be indexed to inflation starting Jan. 1. As a result, some high-income retirees may experience a reduction in their Medicare costs in 2020 compared to this year. Medicare premium surcharges for 2020 will be based on income reported on 2018 federal tax returns." "Currently, there are six income tiers that determine high-income surcharges for both Part B and Medicare D prescription drugs plans. The income thresholds that determine who pays the Medicare surcharges have been fixed at their current levels since 2011." "Income thresholds will be indexed to inflation in future years starting in 2021, except for the top-level income thresholds of $500,000 for individuals and $750,000 for married couples filing jointly, which were added in 2019. Those top tiers will be indexed to inflation starting in 2028." ETA - Was posting at same time. It seems I found a similar article from that same publication as cbslee with some information less specific, some more specific as to when indexing will occur but with no figures as to the actual effect on 2021 except to know that it will be indexed for all but those in the highest tier.

"Placed in service" means available for rent which includes the period it is advertised for rent but before actually collecting rental income.