Kea

Interesting that their videos show entering the client PIN and nothing about using the new 8878 for signatures.

So I can put them on Sch E. (I do like that better than using Sch C.) Do I use a "fake" K-1 and show the old EIN and business name? Thanks so much

Client had a restaurant business (LLC) that closed in 2009. However they are still paying back the business loans. It is business interest but there is no more business return (Final K-1s were issued). Can this be deducted somewhere on their 1040? If so, where? Can I show it on Sch E even though there is no K-1 or EIN -- or use old EIN? Start a Sch C with just interest & tax prep fees? Thanks.

The extension I did today did have a balance due. Client wanted to pay by check. Since she had to mail in paper anyway, I e-mailed the extension to her so she could mail in with check.

I agree with everything you said, KC. That's why I was surprised & bothered to see the signature requirement for the e-filed version.

But the "I authorize..." is just like the 8879 -- It still requires a signature. I do like KC's approach since it is more practical. If it turns out the signature is required for e-file, it may make sense to have the clients send in a paper copy. I'm sure that will make IRS happy!!! We could send the paper copies for them, but I don't plan to wait in line at the post office on the night of the 15!!

I filled out an extension for a client and ATX took me to a signature page -- Form 8878. It looks like a Form 8879, but it's for Forms 4868 & 2380. But when I looked through the instructions, I didn't see a signature requirement & there is no signature line on the F4868 itself. Is this something new? I've never had any intention of filing any extensions without my client's knowledge, but trying to get signatures at the last minute is going to be an extra challenge. Is this a new requirement?

That is a tough call. I agree with your reasoning. However, what if she asked you for a copy of past tax return? Could you not provide it since it has his SSN on it? It's their joint return (and she should already have a copy), so I would think she should be entitled to that copy. Maybe someone else with have a more definitive answer.

Maybe the fog is beginning to lift?? Thanks for beating me upside the head with a 2x4. If the fog is clearing: It goes straight to the 1041. Which is what you said before. I kept letting myself get confused because of the specific beneficiary designation. Thanks

I am still confused. For the 706, I am only reporting value of IRA CD on DOD + accrued interest. For alt val, I will use the same value as DOD. (No adjustments will be made for the RMD or additional interest. 1099R not involved.) However, the 1099R was issued in decedent's name and SSN. Therefore (I think) it should go on decedent's final 1040 -- that's where IRS matching computers will look for it. Since it was paid after DOD, it is not taxable on decedent's 1040. It should be taxed to client who is the is the beneficiary. If this were a 1099 INT or DIV it would get nomineed out of the decedent's 1040 and a new 1099 INT or DIV would be issued to my client. Not the case with the 1099R? (At least I can't figure out how to show it on the forms.) Does the bank need to re-issue the 1099R in the beneficiary's name & SSN? That would make my life easier, but I'm not sure this bank is capable of making this change. (Client had minor nightmare moving IRA to inherited IRA at another financial institution.) I know that the RMD will eventually get reported on beneficiary's 1040. I'm just trying to make sure I know the procedure for getting it there. Thanks for your patience.

The RMD was transferred into a still-open joint checking account (decedent & beneficiary) at that same bank. The 1099R is in the decedent's name & SSN. Yes, the bank was already aware of the death prior to distribution. Checking account was still open to catch any direct deposits / withdrawals until those could be stopped. Since IRS computers will look for the 1099R on decedent's 1040, could I back it out on line 21 & pick it up on line 21 of beneficiary's 1040? Thanks

My client is the beneficiary. And yes I did realize (very late last night / early this morning) that it had not been previously taxed. I'm a bit brain-fried on this, so I just want to make sure I understand: Value on 706 for DOD and Alt val are the same (ignoring the RMD) and other changes were just interest. RMD is reported on beneficiary's 1040 since it was distributed after DOD. If that's the case, I go back to my previous question -- how do I "nominee this out" on the decedent's final 1040? I know how to do that for the interest & dividends, but I don't see a way to do that for a 1099R. If I just report it on the beneficiary's 1040 it will confuse the IRS matching computers, right? Thanks so much.

Glad I could help.

I'm filing (or trying to) a 706 for client's late father. I'm using the alternate valuation date due to the stock market decline. There was an IRA that was invested in a CD. Since the change between DOD and alt val is just interest, the 2 values would be the same. HOWEVER, the bank paid out an RMD in between those dates (even though there were no required distributions in 2009 -- oh well). Does that alternate valuation get reduced by the distribution? I would think not, except that the distribution is taxed on the 1041 (thanks OldJack!) Is this just another area of double taxation? Thanks.

Typically yes. However, when you enter date of death ATX fills in the signature line with "filing as surviving spouse" on page 2 of Form 1040. According to the updates, they've added it to the 8879, too. The one I did this year was before that update, so I had client sign "Signing as Surviving Spouse." Shouldn't have to do that now.

Thanks!

Thanks KC, that makes my life much easier! The only thing I'll do then is type them up. The photocopies of the handwritten ones are very hard to read. Also, the step-up in basis will not be done inside the partnership. Primarily because the partner who keeps the books and does their taxes wouldn't understand that. Always keeps everything nice and simple. But it works. I'll just handle all the changes on my client's individual return. I'm sure I'll have more questions, but at least I'll understand the answers. One other item I noticed on their partnership return was the box that asked about the assets being over $1 million. They checked "No." They aren't per the balance sheet, but the land has gone up in value significantly is now is over that limit. Should that now change even if the balance sheets don't show that? Just curious since I don't have any experience with partnership returns. (However, in the future I may end up with this one and possibly one that I inherited. I'm content with others doing those for now.) Thanks so much!!

She was & she did. I had to "refresh" also to see the new avatar.

Client inherited 50% share of partnership. Appraisal of land and buildings was done. It shows the total value and a reduced value for her "undivided 50% interest." The appraiser's report said that client's value was less than half the total since it would be difficult to sell an undivided 1/2 interest. When I report this on the 706, do I report 50% of the total or do I use the reduced value? If so, how do I show the difference? EDIT: Never mind. I found that answer (show total back out difference due to lack of control or marketability). But still need help with: Also, the instructions say to include balance sheets for the past 5 years. The partner that prepared the balance sheets never adjusted the values of the assets over the years. The original partners inherited it in the 1970s. The land value is now increased over 10 times. The buildings and equipment were all fully depreciated. (Balance sheet listed original price and accumulated depreciation, zeroing that out.) Do I have to re-do the balance sheets? Will that cause a problem with the partnership returns previously filed? The income & expenses should have been reported correctly. Thanks.

Client got a K-1 from First Bancorp of Oklahoma. There is an entry of $266 on line 12S. This does not carry anywhere from the worksheet. The note on the K-1 says that it is "Section 754 Basis Adjustment from Passthrough Entities" & to see Form 1040 instructions for how to handle (gee, that was helpful). Per Tax Almanac you are to report it on Sch E based on how the partnership would handle this. How do I feed this to Schedule E? Do I just reduce the amount on Sch E by the amount in 12S with an overwrite? Or is there a better way to handle this. The K-1 notes do not indicate if the source is from real estate or business income. (FWIW -- box 1 is $30K and box 2 is $-152) Thanks EDIT: OK, I lied. Even though the worksheet says it doesn't carry it to Sch E, it did anyway. Cool!

I knew that about the Feds (but had heard the limit was $100). Didn't know if it was similar for states or if they had a lower cut-off. I still figured this would be too low, but don't want my client in trouble either. Thanks!

After converting all my files from TaxWise to ATX for 2008 (so they roll over to 2009), I found I had to re-enter almost all data again. (This is the 3rd year I've changed software and in the previous 2 I mainly had to worry about depreciation.) Anyway, when re-doing one with OK non-resident income (publicly traded partnership), I found a couple of errors that affect the federal & OK. I didn't see an OK 511NR X only a 511X. Is this the proper form to use? Also is there an error too small to fix? This one will increase the client's tax by $34. Thanks

I'm no expert on divorce decrees. But as I understand it there is some difference between divorces before and after 1/1/2009. If prior to 2009, you can attach the divorce decree rather than the 8332. (If I remember correctly.)

Client invests in a few mutual funds that contain foreign stocks and pay foreign taxes. I usually just let this carry directly to the credit section of the 1040 since they are generally small amounts. Last year this client had itemized deductions (medical) in excess of her income. No taxable income, no foreign tax credit. I did not really pay attention to this at the time. When I did her return this year and printed it for her signature, I saw the 1116 and all the worksheets. I thought, "I don't need this for $9 in foreign taxes" and removed the forms. Poof, her refund was different. It seems the software carried forward the $26 from last year. At this point I couldn't figure out how to get the carryforward back into the return & re-did it. (Fairly simple return.) When reviewing the computations on the 1116 I saw it was including all dividends from that broker. I changed it to just the dividends from the mutual fund that paid the tax. (I'll check with client to see if other funds are invested in foreign stocks.) Anyway, due to the small amount of dividends from that one fund, the 1116 form calculates a credit of just $5. I know these are small amounts, so I'm mainly asking for education purposes. I assume the election to not use the 1116 is made by removing the form. And I know I can't carryforward the $26 if I elect out of the 1116 for this year. How can I elect to take the whole $9 this year (no 1116) and still carryforward the $26 from 2008? Thanks

I haven't had to do a 1041 in a few years, so I will be reviewing what transfers to the 1041 and what gets "nomineed out" to the heir's 1040. Thanks