Sara EA

Exactly right! If it was jointly owned, there is half step up basis. If the improvements were made prior to his death, his half of those is included in the step-up, but her half should be added to her basis. If you're really lucky, it was just in his name so you get full step-up and don't have to mess with any of this.

The IRS message makes me think (hope) that they are examining their systems to see if they can fix these returns automatically and avoid the need for amendments. Will they do the same thing for the premium advance payments that now don't have to be repaid?

How do you know the scholarships were not restricted? I have never been able to find enough info on any particular scholarship to determine if it was restricted or not. Usually grants are the ones that are not restricted. I would have loved to do what you are proposing but could never find info on the particular award to be sure ("presidential scholarship," anyone?).

Does anyone in congress have any idea of what they just did to tax pros and taxpayers alike? Many, many people have already filed, and a lot of them owe because they had no withholding from their UI. The states each have to decide what they will do about adopting the federal and issuing refunds. A lot of tax pros are either going call it a day tonight or quit tomorrow morning. Yes, the law helps some people but caused untold amounts of havoc. My hope is that IRS can do this without the need for amendments by reprogramming their systems. After all, there is a dedicated line on the tax return for UI, and IRS certainly doesn't want to deal with a billion amendments. Clients who owe and don't plan to pay until April 15 may need us to do some calcs for them so they have to come up with less cash. We can't do that until we find out what IRS and the states are going to do. And we won't have time because Monday morning the phones will start ringing with questions about will I get $1400 and when? ARRRRRRRRRRRGGGGGGGGHHHHHHH!!!!!!!!!!

The EA journal this quarter actually had an article on navigating tax groups on social media--they must have seen a need. It went into how some respondents are nasty, belittle those who asked a question or disagree with an answer, try to show off their smarts, etc. It also talked about people who ask basic questions because they are too lazy to look up the answer. It made me think about why this forum is so great. Everyone truly tries to be helpful so no one is afraid to ask a question. If others disagree with a response, their remarks are always respectful. What a great group!

No excuse for those small fonts. Many places issue beautiful W2s or 1099s, with nice big clear numbers. Others use the exact same 8 1/2 X 11 size paper and teeny fonts that are a strain to read. Why? As for phone photos, we actually put on our client questionnaire this year "NO PHONE PICTURES." We have all wasted too much time trying to decipher them. Yes, it makes a difference if that is a 3 or a 6 or an 8.

You don't want to waste the AOC, which is only good for four years. If your student plans to keep attending school and only went for one semester in 2020, you might want to claim the Lifetime cr and save the AOC for years when she will have double those expenses. About those book receipts, students today do everything electronically, look at you funny when you ask for records like 1098Ts or bursar account printouts, and buy books online and never think about a paper trail. I warm all parents of new students to demand that they get/keep book receipts. They do come in handy at tax time.

Back in the day when I worked at H&RB and efile was new and not many were doing it yet, we did electronically file self-prepared returns. I don't know if they still do so. It is definitely not cost-effective. You have to enter the entire return but don't get paid for tax prep. Often there were errors that wouldn't allow efile, so many of those clients converted to tax prep clients. Maybe that was the point. On the opposite end of the spectrum, at the CPA firm where I work now we have a few clients who only want us to prepare their Sch C. We do that and charge for the work involved.

Don't forget that in 2020, employers could opt to not withhold employee portion of FICA. They are supposed to make it up over 12 months in 2021, when your client is no longer working. Don't know what the consequence is in that case. It was somewhere in the IRS materials. Maybe someone knows.

I know IRS letters came with the first round, but has anyone seen one from the second? I sure didn't get one.

No I wouldn't. Extra bandwidth and software maybe if they're not in the school building. Possi's excerpt states the items/services must be used "in the classroom." If they're teaching from home, I guess that's the classroom. For one of my business clients an auditor wanted to see the whole year of cell phone bills. There were four on there, but she allowed only the one for his two businesses, no percentage of the others. Internet was taken as a ratio for OIH expenses and that was okay. He was a Sch C though, not an A. I only mention this to show that auditors do pay attention to these items that have fuzzy personal/business lines. Has anyone actually seen a audit include educator expenses? My hunch is that the tax on $250 isn't worth an auditor's time, but still....

I don't know how you would separate their school internet and phone use from their personal use, so I wouldn't do it. I could see teachers spending less this year because with virtual learning they probably aren't buying special books, kleenix, toys, etc. Most of my teacher clients usually spend way more than the $250. Some work in districts that reimburse everything, but others even have to buy their own printer paper once they use up their meager allotment.

The Get my payment link would be more helpful if it gave the amount, but I don't think it's a waste. I too had a client whose spouse died. He got the first payment and not the second. The site showed that the second has not been issued, so at least we know to claim the recovery rebate. Another client lives overseas and only got the first. The site showed the second was mailed, so he'll just have to wait for it. At least the information provided was helpful in both cases.

We are holding off on the 1065s and 1120s, possibly for a couple of weeks. These forms seem to get updated all season long, but the big issues usually get corrected earlier than the later updates (where some insignificant entry doesn't carry to where it's supposed to and only affects one in a million entities). With all the changes to the changes that occurred this year, I doubt the IRS caught everything so we'll give them time. We probably won't efile individuals and 1041s until Monday or Tuesday, just so the ACKs will come back quickly, which probably won't happen with the onslaught on opening day.

I had one of these a couple of years ago. also an A/B situation where the clients did not update things when the new estate tax and portability rules took effect. Originally it was a grantor trust, reported on the couple's individual return. When he died, two trusts were created, hers with half the assets and his with half the step-up basis of the assets. Hers remained a grantor trust reported on her 1040. His required an EIN and a 1041. See who gets the 1099R and look at the trust document. My hunch is his trust gets the funds, which is the purpose of a "look-through"--retaining control of the funds.

If clients want you to review a prior return for accuracy, definitely charge. If they just want you to review the return to see how much you'll charge, you might want to decline. If price is their primary concern, you probably won't engage well on the things that are your primary concern. It sounds like these clients were trying to tell you how much to charge. Who needs that? We are in the fortunate position that we don't want any new clients and only take the few who are referrals from people we don't want to disappoint. When we get a phone call asking how much we charge, it's easy to say we're not taking new clients. The tough ones are people who went to their old preparer for like 40 years and always paid $200. When you tell them it will be more like $800, most understand that they have been getting a too good to be true deal and accept our engagement.

You have to report it if they received a 1099S, but code it on the Sch D to claim the exemption.

The IRS letter is easily satisfied with a letter stating the trust had no income in the years cited. I've had the same letter come when a person died demanding 1041s for six years. In this case it was a grantor trust and reported on the individual returns for those years, satisfied by a letter and some back up docs showing income docs in the deceased's own Soc Sec number. In your case, since the interest is reported to the trust, you will have to file the 1041 with just the statement pushing the income to the surviving spouse. While you're into the situation, document the step-up basis of that real estate for future transactions. If it's jointly owned, half of it gets step up.

From the research I've done, it appears that neither round of stimulus checks could be offset for anything but child support, so I agree that your clients were likely in the phase-out range. (Those numbers with cents in them are baffling though.) However, the "recovery rebate," which is the amount you receive on your tax return because you didn't get the amounts you were entitled to earlier, can be offset for the usual back taxes, student loans, etc. This tax season is going to be the second one frustrated by these payments. Last year it was the zillion phone calls about when, how much, I didn't get mine. This year it will be the same plus disputes over the amounts (if they remember the amounts). Every client who claims a recovery rebate will have to warned that the refund calculated on the return may not materialize. We are so tempted to put another option on our phone lines: "If you are calling about your stimulus payment, press 7," which will give them the IRS number. Either that or fire all the clients except those who make too much to be eligible. So tempting....

The need for a 1041 depends on who got the 1099. The life insurance interest was paid to the trust, so if the trust's EIN is on the 1099 you'll have to file a 1041. You stated that the house was put in the trust's name. If it is sold the 1099S will also go to the trust's EIN. I agree that this looks like a grantor trust, but a 1041 is required if the trust gets any of the tax docs.

You need to read the trust document. If the parents retained "power of appointment," meaning they could change the terms, beneficiaries, trustees, borrow against trust assets, etc.--in other words, they maintained control over the trust assets and what they did with them--this is a grantor trust and income should flow to their personal return like you plan. Some irrevocable trusts are written to be "intentionally defective" so your plan still works. The trust doc may contain that exact phrase.

This from IRS FAQ: Q3. Am I a qualified individual for purposes of section 2202 of the CARES Act? A3. You are a qualified individual if – You are diagnosed with the virus SARS-CoV-2 or with coronavirus disease 2019 (COVID-19) by a test approved by the Centers for Disease Control and Prevention; Your spouse or dependent is diagnosed with SARS-CoV-2 or with COVID-19 by a test approved by the Centers for Disease Control and Prevention; You experience adverse financial consequences as a result of being quarantined, being furloughed or laid off, or having work hours reduced due to SARS-CoV-2 or COVID-19; You experience adverse financial consequences as a result of being unable to work due to lack of child care due to SARS-CoV-2 or COVID-19; or You experience adverse financial consequences as a result of closing or reducing hours of a business that you own or operate due to SARS-CoV-2 or COVID-19. So it's not any financial impact. It's more specific than that.

Just make sure the distribution is Covid-related. They or a family member essentially had to have had the virus or been quarantined, or had suffered financially due to reduced hours, job loss, lack of child care so they could work, etc. I have had several calls from clients who heard they could take the money out (penalty and tax-free!) and were just checking. Of course they were not told it had to be Covid-related. I had one who works for a huge area employer and said HR told him he could take out $100k and only pay 10% tax. He did it, even though he had not been impacted by the virus. After I told him what his tax liability would really be (and scolded him about setting back his future retirement income), he paid it back except for the withholding. That amount will be taxed and subject to the 10%. Another wanted to drain his IRA to pay off credit cards and thought he would be exempt from penalty. At the end of our lengthy back and forth about it, his employer furloughed everyone for one day a week because of reduced business, so finally my client had a reason that qualified. There's a lot of misinformation out there, so do ask questions about these retirement plan distributions.

One reason that everyone is so down right now is that we just got through the tax season that never ended. We couldn't do much in April because we were too busy taking calls about the stimulus payment and business loans. July was just like the usual April. Immediately after it was time for extensions, and October was just like April. Then it was time for CE. In between there were many more calls from clients who needed help with loans, retirement distributions, new W4s that are incomprehensible, and on and on. We never got a break, and for those who took a few days off there was no travel so we never really got away from it all. Another reason is that there were so many changes to the tax code, and changes to the changes, that our brains are overloaded. We now have to take update courses to the updates we already took. One poster said that she just didn't feel competent going into the coming season, and I think that feeling haunts many of us. Hang in there. We've mastered huge changes before and will again. The new heads of the IRS and Office of Professional Responsibility seem to hear us and to be genuinely supportive (as opposed to treating us like enemies of the gov't and their personal hit men). As the virus winds down and the IRS and congress get their acts together, things have to get better.

Anyone have any idea how it was determined who gets debit cards and others their stimulus payment by check or direct deposit? Ours were paid by check (we had moved and closed the bank acct on our 2018 return) and direct deposit (by then we had filed our 2019 return with updated bank info). I hate it when other things are refunded on a debit card. Buy a washer and dryer and get your incentive rebate on a dr card. No! I took the cash out of savings to buy the darn things and only want to replace the cash. I would think most folks would prefer their tax refunds/stimulus payments any way but dr card. You likely can't pay the rent or car payment or student loan with it. A few years ago the state of CT paid tax refunds with dr cards. There must have been a big backlash because it never happened again.