peggysioux5

I use Drake and have the same issue. Peggy Sioux

Taxpayer received advanced payments of premium tax credit for 2021 (and has for several years). Taxpayer stated she provided all information to the Marketplace stating that she told Marketplace representative that she was eligible for health insurance through employer that met MIC when she first enrolled in Covered CA. She is not asked, nor does she provide, the cost of the employer-provided insurance to the Marketplace each year. The instructions state: If taxpayer provided accurate information about his employer’s coverage to Marketplace, and the Marketplace determined that the offer of coverage was not affordable, taxpayer is eligible for APTC. The Marketplace determined she was eligible for APTC several years ago and just renews every year without determining affordability based on cost of employer-provided coverage. So my question is this: Is she eligible for the Premium Tax Credit? Do I mark that she is ineligible for PTC being employer-provided coverage is below 9.83% of income or being the Marketplace “determined” her eligible, she is not liable for payback of the APTC? Input is very much appreciated. Peggy Sioux

CA states: If you are classified as an independent contractor at the federal level but classified as an employee for California, you may have received different types of income reporting forms for federal and California purposes. If an individual falls into that category, does the "employer/payee" complete the W2 showing wages for CA only being a 1099 is being filed federally? Do wages only show in the state portion of the W-2?

I should have been more specific in my post as my question only pertains to the handling of expenses paid with PPP proceeds for the CA individual income tax return. I am talking about their first PPP loan and the handling of the expenses paid with PPP proceeds for CA being taxpayer did not have a reduction of 2020 gross income by 25% compared to 2019. For the CA tax return, if taxpayer is a sole proprietor with employees, would the portion of payroll that was paid with PPP loan proceeds for sole proprietor be excluded from the reduction of expenses and only the portion of PPP loan proceeds that were used to pay employees' payroll be included on CA tax return as a reduction of expenses? Or being the sole proprietor has employees, all expenses paid with PPP loan proceeds are required to be included on CA tax return as a reduction of expenses? Peggy Sioux

If Schedule C taxpayer with employees received a PPP loan but did not have a decrease in gross income of 25% in 2020 compared to 2019, would $20,833 of the loan amount be exempt from reduction of expenses being that portion of the loan would be considered his net income from Schedule C and the balance of the loan which was used for employees’ payroll be required as a reduction of expenses. Example – Schedule C employer with over $100,000 Schedule C net income obtained a PPP loan of $50,000. Would $29,167 of payroll expenses be required as a reduction of expenses or would the full $50,000 be required as a reduction of expenses? Peggy Sioux

I feel rather ignorant asking this question, but here goes…..I have not set up the process to receive electronic signatures from my clients as of yet; however, I have a client asking me if I will accept an electronic signature through Docusign. Do I need to initiate the software that processes the electronic signatures so that verification standards are met for tax purposes or does Docusign process all signatures through a verification process no matter who initiates? Peggy Sioux

The deceased spouse died over five years ago and estate closed several years ago. So, does another estate return need to be filed? Peggy Sioux

Taxpayer does not want to request correction of deceased husband's W-2 even though W-2 was issued incorrectly with federal and state withholdings rather than correctly reporting on 1099 under taxpayer's social security #. She said she did not want to go through the hassle and didn't care about getting corrected......so, should I include the the W2 income on taxpayer's tax return as "other income"??? Peggy Sioux

Taxpayer’s mother had a revocable trust and passed away in 2019. No estate/trust income in 2019. Personal residence with mortgage was in trust. Attorney obtained an EIN for trust in January of 2020 and attorney had taxpayer obtain a loan under trust’s EIN in January of 2020. Loan was only in existence for two months (high interest loan) and then taxpayer (trustee and beneficiary of trust) refi’d in taxpayer’s name to buy brother out. Taxpayer made the payments from her personal funds on the high-interest loan for those two months (interest and points over $11,000). Would the taxpayer be considered an equitable owner being she was a beneficiary and mother had passed; and therefore, able to claim the interest on her individual tax return? I found the following in the 1041 instructions: Qualified residence interest. Interest paid or incurred by an estate or trust on indebtedness secured by a qualified residence of a beneficiary of an estate or trust is treated as qualified residence interest if the residence would be a qualified residence (that is, the principal residence or the secondary residence selected by the beneficiary) if owned by the beneficiary. The beneficiary must have a present interest in the estate or trust or an interest in the residuary of the estate or trust. See Pub. 936, Home Mortgage Interest Deduction, for an explanation of the general rules for deducting home mortgage interest. Peggy Sioux

Thank you so much for providing the above link. Very informative and helpful. Peggy Sioux

How are other tax preparers handling taxpayers who state they did not receive their economic impact payments in 2020 and early part of 2021? Are you inputting zero economic impact payments received; therefore creating a credit on tax return? Or are you asking taxpayers to set up account with IRS to confirm they did not receive their payments before inputting info on tax return? I have a client that adamantly states he did not receive the first stimulus payment, but received the second stimulus payment in full. Payments would have not been directly deposited because taxpayer has never provided banking info to taxing agencies. I would think that if taxpayer received second payment in full, he would have also received first payment, but he is telling us that he did not receive. He also is not too big on using computers so he does not want to set up an account. Just checking to see how others are handling. It amazes me how many people don’t remember receiving or how much they received……that means their economic situation was not dire…..when you are in a situation where every penny counts; you know how many pennies you received! Peggy Sioux

Previous tax return shows no amortization or ABP adjustment and taxpayer isn't aware of amortization in prior years. Excuse my ignorance, but why would a taxpayer not want to reduce the annual interest each year by amortizing? If there is no amortization each year, is there an adjustment at maturity being taxpayer did not amortize?

Taxpayer has interest on Treasury obligations reported in box 3 of 1099-INT. No entry in box 12, bond premium on treasury obligations. However, in details of the 1099 Consolidated, financial institution shows “noncovered bond premium on treasury obligations” with a note that “these amounts are not reported to IRS but may affect your tax return.” I know that covered bond premiums listed in box 12 will reduce the interest noted in box 3. How does noncovered bond premiums of treasury obligations come into play? Peggy Sioux

Would hotel and meals also be included in travel expenses while he was working at temporary location?

If self-employed taxpayer has no employees and has workman's comp insurance covering himself, would the expense be deductible business expense on Schedule C? Or would it not be deductible being the workman's comp benefit would not be taxable? Taxpayer is a sub-contractor and is required to carry workman's comp insurance by general contractor. Peggy Sioux

Student going to school for one semester in 2020 who is 19 years of age. He was NOT a full-time student, but a part-time student at 11 credits (college taxpayer attended shows full-time status at 12 units), and he made just over the threshold of gross income of $4,300 so he does not qualify as a qualifying child (not a full-time student) nor a qualifying relative (didn't pass the gross income test), so is he eligible for the refundable portion of the AOC and Stimulus monies?

I reviewed Pub 537 and do not see any instruction regarding updating Part 1 of form 6252. Pub 537 is where I found the worksheet for the recalculation of gross profit percentage. Pub 537 instructions show a recalculation is required but does not go into detail about updating the 6252. The instructions for form 6252 also provide no info regarding updating form due to recalculation. Peggy Sioux

Another question regarding the reporting of new gross profit percentage due to reduction in sales price for an installment sale.....Do you adjust Part 1 of the 6252 when you have a new gross profit percentage due to reduction in sales price or leave all information as originally input and just change the gross profit percentage based on new calculations? Peggy Sioux

Taxpayer’s husband passed away several years ago. 2020, W-2 was issued under deceased spouse’s social security # with federal withholding due to class action suit. Does taxpayer need to request for correction from W-2 in husband’s name to 1099 in taxpayer’s name and social? Peggy Sioux

Question regarding a complex trust – two beneficiaries of complex trust. In 2020, trustee distributed $1,000 to one of the beneficiaries and nothing to the second. Trust earned income in 2020 of $6,000 and normally accumulates the yearly income rather than disbursing. Trust document states funds can be disbursed to beneficiaries at the discretion of trustee. In my research, I read that the distribution to the beneficiary is treated as coming first from the income being corpus can’t be distributed without first distributing income. If the trust is set up at 50% per beneficiary, is it possible to only distribute to one of the beneficiaries? Peggy Sioux

You are correct; I was mistakenly using the "principal previously reported" and not the "installment sale income". Thank you so much!!! Makes so much more sense now!! Peggy Sioux

I am working through the calculations of the reduced sales price to determine new gross profit percentage for installment sale, but am uncertain on how to handle some aspects of worksheet that are found in pub 537. Example: Original sale price: $350,000 Adj. basis: $275,000 Reduced sale price: $340,000 Installment sale income rpt prvsly ($130,000) _______ Calculations $340,000 less Adj basis $275,000 Net: $ 65,000 Less prvs income $130,000 Net: ( $65,000) Future Instll Pymt: $210,000 Worksheet directs me to divide the (65,000) by $195,000 to determine new gross profit percentage. So do I have a new gross profit percentage of zero? Peggy Sioux

Original loan was in 2015 and balance of loan at refi was $220,700. Refi'd in 2020 and took out an additional $100,000 for down payment on second home. Second home purchase price was $300,000 so well below the $750,000. The point that I get stuck on is the IRS stating loan has to be secured by the qualified home in order to be deductible. If second home interest is deemed deductible based on info above, why would the IRS provide the example that I listed above showing second home interest not deductible being loan was not secured by the second home. Also, code shows home equity debit is currently not deductible. I appreciate everyone's input and I would like to include all interest, but just want to be clear in my mind the correct handling. Peggy Sioux

Another tax preparer forwarded to me this example from IRS this morning: Example 2: In January 2018, a taxpayer takes out a $500,000 mortgage to purchase a main home. The loan is secured by the main home. In February 2018, the taxpayer takes out a $250,000 loan to purchase a vacation home. The loan is secured by the vacation home. Because the total amount of both mortgages does not exceed $750,000, all of the interest paid on both mortgages is deductible. However, if the taxpayer took out a $250,000 home equity loan on the main home to purchase the vacation home, then the interest on the home equity loan would not be deductible. Based on the example, I would think the refi interest that pertains to the second home would not be deductible. I read the tax codes that you provided, but am still leaning toward non deductible, but with such varying opinions of other tax preparers, I wanted to make sure I was not missing anything. Peggy Sioux

Taxpayer refi'd primary home and used proceeds for down payment of second home. Is all interest that applies to aquisition debt of both homes deductible on refi? I recall a webinar a few years back that stated the home had to be used for collateral on loan in order for the interest to be deductible. If that is the case, the second home was not used as collateral so therefore not deductible, correct? I have had other tax preparers tell me that the interest on refi that pertains to second home would be deductible. Peggy Sioux