Pacun

Are you doing her taxes? If a client presents you a 1099-C, your client had cancellation of debt and you have to deal with it on their taxes.

Once they issue you a 1099C, you were forgiven a debt, period. If it was their primary residence, they will not have to pay taxes but it needs reporting.

It is there. It is hard to find.

Form 8948

Yes, enter the amount received and she will qualified for reduced amount or nothing. This is not new.

It seems OK, since the IRS doesn't keep track of what was withheld for the states. You have to file the corrected W-2 with the state too.

You have a choice. The same way you do for itemized deductions. Think of State taxes paid as the standard deduction but consider that each person's standard deduction is different based on the information on the W-2. Think of sales taxes paid as itemized dedutions and follow the same rules (need receipts).

Now I understand how the IRS ends up with multiple copies of the same 1099 (not proven by a possibility). Be careful when you do this type of correction. Let's say I efiled 3 1099 with 1096 totaling 15K (5K each 1099). After I have efiled, client tells me that he forgot to include 2 more 1099s for 10K each. What do I do? Do I print out all the forms and then delete all 1099s and enter the two missing and transmit another 1096 for $20K? Or do I rollever the client again and enter the 2 1099 missing and efile from the second rollever? This will include ONLY 2 1099 and a 1096 for $20K.

I know Jainin has reasons why it should not be efiled. If you know that the person cannot sign and the return will be signed by the person with the power of attorney, from the preparer's angle, what difference does it make if it is paper filed or efiled?

I think you are the perfect candidate to answer my question... Let me ask you this: when you present the return for signature, how many times have you heard something like... "I babysat for my sister last year and she paid me $30". What do you do? Take all the papers to the shredder and add those $30 to the return, recreate the e-file, reprint, recreate the e-file and done? How about when you took someone to the airport and he gave you $30 for "gas"? Did you report those $30?

It is trying to match departing from a return filed, not the other way around. Have you seen tax payers with 1099 who have not filed for years and not received any letter?

I have a distant cousin who lives in another state. I have my brother who gets a bunch of 1099s-misc. I prepare my bother's returns and a couple of years he left one 1099 out and the IRS send him a $1,000 bill, which he paid at once. My distant cousin, has been working for 10 years using his correct social security number and getting a 1099 for about 50K a year. He has never filed and he has never received a letter from the IRS. It seems that the IRS is hunting the honest people who by mistake leaves one 1099 out. Since I do understand how computers work, I understand their problem. I believe that computers are relying on matching. What do you need for matching? You need two items, if one of them is missing, there is no matching event. Very smart, correct?

I agree 100% with this. This is beyond the scope of our services. They will go somewhere else and get exactly the way they wanted simply because it depends on the fact shown to the other preparer. If we, as an industry, do not evolved, people will go from preparer to preparer with different stories and getting it their way. A lot of times I do not give much information to the tax payer because they will use my knowledge to convince the other preparer. Most of the time, I tell them... "I have analyzed your situation and applied the rules. This is what can be done and if you want me to do their taxes, you have to trust me and allow me to prepare your return correctly. If you don't believe what I am saying, you have the right to a second opinion and more opinions." Let me ask you this: when you present the return for signature, how many times have you heard something like... "I babysat for my sister last year and she paid me $30". What do you do? Take all the papers to the shredder and add those $30 to the return, recreate the e-file, reprint, recreate the e-file and done. You don’t have to answer that.

I can see how anyone could ALMOST accept that since they didn't live together for the last 6 months of the year and their home was the main home for each set of children. When I get similar answers (they didn't live together for the last 6 months of the year), I asked, when was the last time you cohabited? If they don't understand that, I use the 3 letter word or the 4 letter word. This is what I was falling for. Visitor/potential client came and showed me a 34K 1099-misc. I made a quick calculation and he explained his expenses and I told him, he was going to owe. I asked him, if he had another income for 2010 and he said NO. Which was true. He had a child and he was HH. I was going to do his taxes and I checked his 2009 return. He got a refund. I was surprised why he didn't ask me... "Why I have to pay now if last year I got a refund". As I was looking at the return, even though he didn't ask, I tried to give him a logical explanation of the difference. I said: "Last year your EIC was bigger because you made only 17K in 1099." He said yes, it is my mistake because normally I change social security numbers in the middle year and I only report income on my own SS#. I didn't commented that statement and went back you his 1099-misc, put it together and handed his papers and said... I cannot do your taxes... what you are doing is illegal and the consequences are going to harsh on you because that's called fraud. I called my next client. I know 2010 was OK (maybe), BUT I do not want that kind of clients.

Withdraw the money at once. Pay 6% penalty (I believe) and taxes on earnings. Yes, you can reclassify it as savings by opening a savings account.

You do not qualify for a refund if 1(a, b, or c), 2, and 3 below apply to you. 1. You were: a. Under age 18 at the end of 2010, or b. Age 18 at the end of 2010 and your earned income(defined below) was less than one-half of your support (defined later), or c. A full-time student over age 18 and under age 24 at the end of 2010 and your earned income (defined below) was less than one-half of your support (defined later). 2. At least one of your parents was alive at the end of 2010. 3. You are not filing a joint return for 2010. So, you have someone who is 22 and supported himself more than 50%... he qualifies for the credit because number 1 doesn't apply to him. So, number 1a... doesn't apply because he is 22. 1b doesn't not apply because he supported himself. He is 18 at the end of the year but the AND makes it false. (In this context, he is not 18 at the end of the year and he supported himself more than 50%, so it doesn't apply to him at all.) 1c. He is within that age but AND safes him. Once you know that 1 doesn't apply for him... he qualifies because he will be eliminated ONLY if all (1, 2, AND 3 apply). I wonder why 1b exists if it could easily be incorporated to 1c. Another point, an orphan qualifies easily. The same is true for MFJ people, they qualify almost by default.

Absolutely. That brings a very interesting question. House is repossesed by bank. While tax payer was the owner of the house, real estate taxes accumulated and 3 years later the state charge them. They owned real estate 3 years ago and they pay the tax, can they deduct it in the year paid if no longer own any property? Amount was 12K.

Have partner A issue a 1099-misc to partner B and final de la conversacion.

Client was 55 in September 2010. In October, she got fired and in November pull out all her retirement. She got 4 1099-Rs. To make it simple, 10K, 15K, 5K, 8K. All of them had distribution code 2, except for the bigger one (15K) which had code 1. She had 3 different accounts. I asked her if she had a loan and she said no. I asked her if she got money before she got fired and she said no. Anyways, we called the issuer and they agree that they should changed the 1099-R to code 2. Today we got the correction for 25K. I immediately got on the phone with them and asked them to correct ONLY the incorrect 1099-R. They informed me that because it was on the same account, as soon as they changed the code, both of them became one and that's why I was getting it that way. They said that everything was OK, but I insist that there will be a letter from the IRS in about a year. What do you think? I efiled her taxes today and warn the tax payer but she needs the money badly. She is getting more that 5K. She was smart enough to have money withheld for both state and fed.

If they owned and lived in the house for the last 2 years, you report it as a principal residence and the gain will not be taxable. If there is a loss, just report the proceeds as personal and the loss will be disallowed. You should report it for record keeping.

I found this: (It seems that there is no penalty and you should use code 2 maybe) A distribution that is part of a series of substantially equal periodic payments as described in section 72(q), (t), or (v). Any other distributions subject to an exception under section 72(q), (t), or (v) that isn't required to be reported using Code 1, 3, or 4. You should ask your client. If you are able to do so, you will know that number 2 below doesn't apply Use Code T for a distribution from a Roth IRA if you don't know if the 5-year holding period has been met and the participant: 1.- has reached age 59 1/2 2.- died 3.- is disabled. If any other code, such as 8 or P applies, use Code J.

Form 1120 line 26 Other deductions, enter 10K (click on the tab). Form 4562 will automatically calculate $51 per month and it will be transferred to line 26 also. In addition, you must attach your Section 195 election to your tax return.

Some banks will show the money the following day. Ask her to check tomorrow. The money will be there. If you verified the routing number and account, the money should be there tomorrow. When people ask me "When will I get the money?" I reply, "when the IRS deposits it to your account. Please give me a call when they do that". I go on and tell them, "I am joking, you don't have to call me".

Excellent!

I always resave so they get rejected. I don't look at the rejection code because it reads "rejected" ONLY. So no need to check for rejection codes. It is a good practice to have returns rejected. In the past, I have efiled returns when I am waiting for routing and account numbers. After I send them, I realize that the client wanted direct deposit... but it is too late. Most of the time, I pray for a rejection, but it never works. ALL the time they are accepted and I get rejections on other returns. There are three rejections: "rejected" (Return never left your computer) "Rejected by ATX" Return needs to have a form updated "Rejected by Agency" You really need to see the rejection codes because it could be anything.