Terry D EA

Margaret, in the past you have prepared a CRUT or two. Wondering if you are still doing so. I am using Drake and found out yesterday the form 5227 has not been approved and has an anticipated date of approval of April 8th. Not sure which software program you are using but wondering if you are seeing the same thing. I love Drake, and hate to say this, but it looks like they've got this form screwed up. The K-1 for the trustee in this case, was not generating, and one of the distribution screens had to be filled out to get the program to do so. There is currently no place to enter the trust expenses. Items like accounting, legal or account maintenance fees. It is working entirely different than last year. Kinda scares me a bit. Judy, I thought you prepared some CRUTs as well and you may already know this but thought I would include you anyway as I know you use Drake.

Taxpayer is in a rehab in their home state. Taxpayer's spouse moved to another state a significant distance away. They are not separated nor are they intending on doing so and are MFJ. Can the spouse sign the return for the taxpayer? Would the spouse need to have a POA in order to do so. I've known these folks for 20 years and have prepared their returns all of those 20 years. Don't know if that even matters.

I am dealing with this very thing for real. Well, sort of. I am not well versed on gambling taxation. My client has 1099G gross winnings totaling 42K. He has receipts for buy-in wagers for 43K. Can he deduct the 42K on Sch A? This client states they are a professional gambler. However, the IRS would disagree because he has another job that nets him 200K each year and doesn't spend the 40hrs per week. So, I am taking the position he is an amateur. I'm just confused on the deduction above as is seems to easy.

Found my answer. SC is not required as the estate is a non-resident estate from NC and had no income from any SC sources. I'm using Drake and the instructions for the federal 1041 are pretty clear at using the fiduciaries address. You can tell the program the estate is a non-resident estate but, in this situation, that does not apply. After removing the data from the SC screens, the SC 1041 is gone. I am not sure at this time if the estate has been closed to mark the 1041 as final. Personally, I wouldn't see why it wouldn't be as the only asset was the residence and it has been sold. No income from anywhere.

The blurb below answers my position regarding a capital expense for the septic system. Only thing I found different is the possibility of 20 year life for septic tanks. The proposed regulations require capitalization of amounts paid to acquire, produce, or improve tangible real and personal property, including amounts paid to facilitate (closing costs) the acquisition of tangible property. Amounts paid to repair and main property and equipment are deductible if those amounts are not required to be capitalized under §1.263(a)-3, which states in part that any amounts paid for permanent improvements or betterments made to increase the value of such property must be capitalized. Under the proposed regulations these improvement standards are applied to the building itself and individually to its structural components such as heating and ventilation, plumbing, electrical, fire protection and security systems and escalators and elevators. Also the new regulations will allow the dispositions of component parts of a building resulting in the recognition of a gain or loss upon the retirement of such component.

My client is the administrator of their mother's estate. Client's residence is in SC. The decedent's residence was in NC. When completing the 1041, (sale of the house only), the program is generating a NC 407 and SC 1041. The sale took place in NC so I get that. Is the SC 1041 required as well? Just want to confirm as I think so due to having to indicate whether it is a resident or non-resident estate for SC.

I agree but isn't it still considered a capital expense that requires depreciation?

Thanks everyone for the replies. I will pass this by the client but am kinda stuck on the 27.5 life. Client doesn't really need the bonus depreciation either. This must have been a small system as the receipt is for $3200.00. I though it should be way more than that but then again, I have always been on a city system.

Client replaced the septic tank at one of his rental properties. Because this is betterment or extends the life of the property, does it have to be assigned a 27.5 year life using SL?

As far as I know, AI cannot filter and verify client documents uploaded. A 1099 or W-2 yes but business information? I use Grun Wrox and am not sure but I thought it was only an optical scanner that organized data and created a .csv file or other file that is needed to populate the software. I always choose the option of human review. Can AI but the IRS police and ask all the questions and get an honest answer?

Absolutely correct. I worked as a Master Auto Technician for years. Tools are ridiculously expensive and have always fallen under the 2% rule.

I agree. Be careful with the Medicaid rules. Because the TP is a family member, Medicaid may call this an improper transaction and disallow coverage. I'm not sure on this but after caring for my mother for a few years and dealing with Medicaid, I wouldn't take any chances. The folks I dealt with in Ohio couldn't even add and could never get my patient responsibility correct. Very simple math, mom gets x dollars and you're allow to keep 50 dollars for personal care. Maybe it was because I was using normal math and they were using common core??? I was threatened with fines for failure to properly pay and accused of improper transactions because I did the spend down exactly as they directed me to. After one year and a couple of months they finally figured it out. Great!!!. Not so fast, somehow I overpaid. I paid the same amount every month for three years. The nursing home bookkeeper couldn't figure anything out and told me to quit asking cause she had no answers. It really became a joke after a while. That overpayment was applied to her funeral as Medicaid insisted it was right. My best suggestion to your client is keep every document from Medicaid and don't discard anything. Keeping the docs was my saving grace.

Thanks Judy, I have already done what you are suggesting. I suggested the extension on day 1. The way everything looks the client has to pay the tax. They are working with the custodian again in an attempt to get this figured out. My next conversation with them I will be pushing for either option. They are really nice folks and have just made a mistake somewhere.

Here is a new twist. The phone meeting with the custodian went absolutely nowhere. The custodian did state these folks sold the asset to themselves. Okay great, the 1099R is checked as an IRA SEP. So, how did that happen? How do you sell yourself an IRA??? We're back at square one because the previous rep for the custodian failed to follow thru and update the contact phone number and the rep today couldn't verify identity because the client couldn't receive a verification on a phone they no longer have.

Judy, In my OP I did state the client requested the custodian to close the account and did provide the routing number and bank account number to deposit the funds in. I don't remember saying the distribution was non-cash. Here is section from the IRS code chart from the 1099R instructions. This whole mess is still confusing and we have another meeting Monday with a supervisor of the custodian who supposedly can tell us what is really going on. "Use Code K to report distributions of IRA assets not having a readily available FMV." Does this mean non-cash? Use Code K to report distributions of IRA assets not having a readily available FMV. These assets may include: • Stock, other ownership interest in a corporation, short- or long-term debt obligations, not readily tradable on an established securities market; • Ownership interest in a limited liability company (LLC), partnership, trust, or similar entity (unless the interest is traded on an established securities market); • Real estate; • Option contracts or similar products not offered for trade on an established option exchange; or • Other asset that does not have a readily available FMV.

Wanted to give an update on this topic. After working with the client and custodian, the client did request the account in question be closed. While the client still maintains he never received the funds, the custodian did give the date and account the funds were wired to. The funds were wired April 13, 2023 and still do not show in the client's bank account. I recommended an extension and partial payment as it may take a while to get this figured out. Another twist, the custodian stated the client requested 10% federal tax withholding. That amount does not show on the 1099R. Now I don't know if the IRS cares where the funds went or not or if they were ever received. My take is the client is on the hook for the taxes as a distribution to him has taken place.

Yes, the student can claim the credit. The exceptions for the refundable portion is below. Of course, this is for the AOC. if you are looking at the Lifetime Learning credit, if the student is not a dependent, they can claim the credit without restrictions. Refundable portion. 40% of the American Opportunity Credit is refundable for most taxpayers. Exception: Taxpayers under age 24 cannot claim any part of the credit as refundable if all three of the following conditions apply. 1) The taxpayer is: • Under age 18 at the end of the tax year, • Age 18 at the end of the tax year with earned income of less than one-half of his or her support, or • A full-time student over age 18 and under age 24 at the end of the tax year with earned income of less than one-half of his or her support, 2) At least one of the taxpayer’s parents was alive at the end of the tax year, and 3) The taxpayer is filing as Single, Head of Household, Qualifying Surviving Spouse, or Married Filing Separately for the tax year.

Update, checking the box in Drake " no Distribution Received" doesn't remove the 1099+r from taxable income. In my dummy return I had a bunch of kids as dependents that was reducing the tax to zero. Needless to say, I looked at this too fast. Haven't spoken with the client yet but wanted to post this so I didn't give any false information.

I don't know. As soon as the client calls the custodian, they will three-way me in to get to get the details

Maybe. The box is checked for a IRA/SEP. I think I remember reading that you are using Drake. I have a dummy client (my own and not a test return) and I have entered the 1099R and as I expected the full amount is taxable. But there is a box to check "No distribution received (ignore screen)" on the 1099R input screen, and checking this removes the 1099R from income. Nothing flows to the state either after the box is checked. My concern here is what gets transmitted to the IRS? How will they know that no distribution was received and not issue a CP2000. Maybe a call to Drake to find out what transmits. I'm in SC and they begin calculating the tax at the federal taxable income. So no concerns there.

That is the 65k question. I hope this company (Equity Trust Company) is cooperative and will quickly issue a corrected 1099-R

Thanks Lee for the detail. I was already aware of what you are saying. Box 2a of the 1099R shows the total distribution as taxable with the box checked taxable amount not determined. Box 16 also shows the state distribution. the 1099R certainly looks like a distribution took place. The client wants to three-way me in when they call again.

Client received a 1099R with K7 in box 7. I understand this is a code indicating a distribution of an IRA etc that doesn't have a FMV. However, the client never received any distribution. The called the broker and were told nothing was distributed. I haven't tried but I am nearly 100% positive if I input this 1099R, it will be included in taxable income. Any suggestions?

I remember reading something from the IRS or maybe in a webinar that we were cautioned to not accept any documents with sensitive information via email or text due o both being unsecure. There was a push for a method of securing your email but I forgot what that was and have advised all of my clients to upload to my portal. There is an app to convert HEIC files to jpg or Png. I sent my clients a QR code link to Adobe Scan for their phones that work on both iPhone and androids. I agree pictures are garbage and hard to view. Be careful with cam scanner. Cam Scanner for iPhone is good. However, the cam scanner for androids has been eliminated due to being really unsafe to use.

I think it would greatly depend on whether an EIN was obtained or not. If an EIN was obtained, then a zero return marked as final should be filed.