peggysioux5

From Pub 721: If your annuity starting date is before 1987, you can continue to take your monthly exclusion figured under the General Rule or Simplified Method for as long as you receive your annuity. If you chose a joint and survivor annuity, your survivor can continue to take that same exclusion. The total exclusion may be more than your cost. Peggy Sioux

Yes, you have answered my question. Thank you!! Peggy Sioux

Is unemployment income considered funds belonging to person supported or funds provided by others (state)? Peggy Sioux

Thank you so much for info. Peggy Sioux

Taxpayer lives in CA, a community property state. Taxpayer has not filed 2018 tax return yet. In 2018 taxpayer was married and lived with spouse all year. Per taxpayer, taxpayer and spouse planned to file jointly when they did file. However, spouse decided to file on her own last month. She did not ask taxpayer for his tax info and he was under impression that they would be filing together. I understand there are exceptions that allow for spouses to only claim their income in instances where spouses don’t have knowledge of other spouse’s info. However, this situation is convoluted (much like any couple going through a divorce), and taxpayer does have spouse’s info. Taxpayer would prefer to file claiming 1/2 his income and 1/2 her income. So my question is this…..taxpayer has spouse’s W2 and tax info for 2018. When he files his tax return, should he file under the community property regs and claim ½ his income and ½ her income if she did not? How would other tax preparers handle? PeggySioux

S-Corp has a SBA loan in 2020 for which SBA made six payments of principal and interest due to COVID. The second stimulus enacted December 27, 2020 amended the CARES Act to provide that the SBA's payments of principal and interest made on behalf of the borrower were not taxable income to borrower. Bank that handles loan submitted a 1099-Misc reflecting the loan payments as "other income" in Box 3. Being the payments are non-taxable, should a 1099-Misc be issued? Peggy Sioux

Taxpayer has several IRA accounts and turned 70 1/2 in 2019. Financial institutions provided the information of RMD amounts needed for for each IRA account. Taxpayer cashed in an annuity that was over the required minimum distribution of all IRA accounts and received a 1099-R for the distribution from the annuity. The 1099-R for the annuity distribution is not marked as an IRA. My question - does the distribution from the annuity satisfy the RMD requirement for the IRA's? Or being the annuity was not part of an IRA, the RMD's are still required from the IRA accounts? Peggy Sioux

Taxpayer received a Partner K-1 showing an "Other Decrease of $5,000" in L - Partner's Capital Acct Analysis with an explanation of decrease of "Miscellaneous Deduction on Books and Not on Return". I use Drake Software and the only way I can reflect the $5,000 decrease in basis is if I input the $5000 in box 18, code C "nondeductible expenses". However tax preparer did not input anything in box 18. Being the K-1 does not show anything in box 18, I am unsure if there would be an issue if I input the $5000 in box 18 to get the correct basis. How would other tax preparers handle? Peggy Sioux

Thank you all for your valuable input and information; it is very much appreciated. Would other tax preparers see this error as a "change in accounting" and eligible for 3115? In my research, I read that posting and mathematical errors are not eligible for 3115. Unsure if this issue would be a considered posting error or a change in accounting. Peggy Sioux

I found an article from Spidell's CA Tax letter from January 2018 stating FTB issued Notice 2017-3 which states CA generally follows federal law in the area of unclaimed depreciation as long as: 1. CA follows the underlying federal law (e.g., MACRS for personal income taxpayers and S-Corps); and 2. The taxpayer made the same election for CA purposes as it did for federal purposes. Letter also states CA does not have an independent automatic consent procedure in place, so if a taxpayer wants to make a change in accounting method different that the method used on the federal return, the taxpayer must request a change from the FTB. So after reading the info in the Spidell's CA Tax Letter, I still don't have a good understanding. The taxpayer did make the same election for CA purposes on original tax return, but tax preparer basically adjusted basis processing the 2015 tax return. I was hoping other tax preparers had dealt and researched this issue in the past and would be able to provide some input. I was firstly trying to determine if the error would be considered a posting or mathematical error or a change in accounting then secondly determine if a change can be made via 3115 for CA only or request a change from the FTB. The unfortunately thing is 2015 and 2016 were the largest deductions and amended returns can no longer be filed so I was hoping there would be another way to correct. Peggy Sioux

Taxpayer had asset set up in 2014 correctly with bonus depreciation of 50% and depreciation has been correct on the federal side for 2014 through 2018. However, for CA return even though asset set up originally correct in 2014 for full amount of asset with no bonus depreciation, in 2015, tax preparer somehow began calculating depreciation on the basis for federal (which was 50% less) so there is missed depreciation for CA from 2015 through 2018 of over $65,000. Would this be considered a posting or mathematical error and thus not eligible for 3115 filing for CA only? Peggy Sioux

That was my thinking as well but wanted input to confirm. So would you (or any other tax experts) also agree with the below : "If taxpayers ceased using the acreage for business use two years prior to sale (and continued to live on property but converted the 45 acres to personal use), then the property as a whole would be included in home exclusion deduction." Thank you for your input. Peggy Sioux

Taxpayer buys home that sits on 50 acres and he decides to use 45 of those acres for ranching. If taxpayer prorates mortgage interest between home/5 acres and remaining 45 acres and applies the mortgage interest from acreage to Farm Schedule, when he decides to sell 10 years later, will the gain of the sale pertaining to the acreage be excluded from the home exclusion deduction? Peggy Sioux

Taxpayer received a 1099-Misc from Union for working on a committee of Union. Would other tax preparers determine that self-employment tax needs to be calculated? He did say he will continue to be on committee ongoing so not a one-time thing but he is not looking to make a profit and it is not a business. Peggy Sioux

She is going to have the same issue for 2019 as the ex has already filed for 2019 as well so her return will be rejected if efiled.

I am currently working on a 2018 tax return for taxpayer and tax return cannot be electronically filed due to ex-husband already claiming children even though taxpayer had more than 50% custody. Being paper returns are not going to be processed for some time, what is the best way to handle so that taxpayer can receive stimulus payment? My first thought was to file as single with no dependents just to get tax return electronically filed and then file an amended. However, there is a tax liability if taxpayer files single and she really doesn't have the monies to pay the liability to get bank info into IRS system. Any suggestions would be appreciated. Peggy Sioux

Taxpayer and ex-spouse have joint custody of children and divorce decree states ex-spouse claims children. Taxpayer has children more than 50% of the time and provides a home for the children. In a current tax year, I would advise the taxpayer to file as HOH and submit a form 8332 to ex-husband. However, taxpayer is just now filing for 2018 and wants to file as described above; however, 8332 instructions state "the custodial parent must sign Form 8332 stating that she will not claim the child as a dependent for the tax year and the non-custodial parent must attach to his tax return." Ex-husband has already filed for 2018. Can a Form 8332 be prepared for 2018 and submitted to ex-spouse if filing late? Peggy Sioux

1099 Composite form shows assets sold that were held less than one year; however, transactions are listed as long term. Are there exceptions that allow for assets held less than one year to be considered long term? Peggy Sioux

2018 tax return shows form 3801, line 2c with $10,000 loss. I am only trying to continue the carryover to the next year as 2018 allowed none of the loss.

I have a new client that has a passive loss carryover from Schedule C. Drake software is not allowing the carryover for the CA tax return stating CA does not allow. I can't find in CA regulations where CA does not allow a carryover passive loss from previous year. It makes no sense to me that CA allows the current year passive loss but does not allow previous year loss to carry forward. Drake programmer is stating the program is correct, but I disagree. Taxpayer was not passive for 2018 or 2019. The passive loss was from earlier year. Any input would be appreciated. Peggy Sioux

Max, thank you for the references; very helpful. After reading the references, I am hoping you can answer an additional question for me - Section 1314(e) states "this part shall not apply to any tax imposed by subtitle C (Section 3101 and following relating to employment tax)." The tax that was erroneously charged was self-employment of almost $5000. Is there another tax code that pertains to employment taxes?

No; taxpayer is requesting that I attempt to obtain correspondence from former preparer. However, in speaking with IRS, no correspondence is noted in taxpayer's account from June 2016 until April 2019 when I got involved. I think what transpired is previous tax preparer started the process in 2015/2016 and IRS made some (but not all) changes and tax preparer did not follow up after 2016. Taxpayer made many calls to previous tax preparer asking for information on the issue but nothing in writing so I would think that might be an issue in the appeal as well.

I have a new client that had an issue with 2013 tax return that former CPA was handling. 2013 federal tax return was filed as MFS in a community property state with form 8958 submitted. Previous tax preparer input 50% of spouse’s income on line 21. IRS recalculated federal tax liability in 2015. Tax preparer submitted correspondence to IRS in 2016 along with 8958 and IRS adjusted tax liability but one issue still was not resolved – IRS deemed line 21 income as self employment income. Taxpayer asked me to look into in 2019 and I submitted new info to IRS for which IRS has adjusted taxpayers account. However, IRS is disallowing refund due to time limits. The taxpayer contacted previous tax preparer many times regarding issue and tax preparer would advise client that “it just takes time with IRS” but according to IRS nothing was submitted to IRS after 2016. With the above information, would other tax preparers consider lack of handling by previous tax preparer grounds for appeal?

I am having the same issue in the Drake software for CA. Odd that Drake and ATX has the same programming issue. Peggy Sioux

Handling tax returns for registered domestic partners in CA, both receiving Social Security income. I have researched to determine if social security income should be considered community income in the year received and I do not find anything definitive; however it appears from things I have found, it appears that social security income is considered community income. However, the last two tax preparers who have handled taxpayers' returns have not applied the social security income as community. Hoping other tax preparers have handled this issue in the past and provide some input. Thank you. Peggy Sioux