Dave T

I must be doing something wrong. New client comes yesterday. He and wife both clergy. He opted out of SS years ago, she did not. Their AGI was $39,049 and they have one child under 19. Before calculating S/E tax on wife's income I prepare EIC and find they are eligible for EIC of $1,116. I then prepare the S/E for the wife based on her $27K w-2 wages and EIC goes away. Looking at Work Sheet B of the EIC questions it looks like AGI and S/E amount are added together to put them over the $46K threshold. Am I doing something incorrectly or is this supposed to be the correct calculation and they are not eligible for EIC. Thanks very much Dave T

Case #2 A serviceman with the U.S. Navy divorced his spouse in 1993. The divorce decree required the serviceman to pay one-quarter of his naval retirement pay to his ex-wife under the Uniformed Services Former Spouses' Protection Act. He was also ordered to make child support payments and help pay medical and dental costs for each child. When he retired from the Navy in 2000, the taxpayer began receiving retirement pay, but did not make any payments to his former-spouse as set forth in the divorce decree. However, after being compelled to do so by court order, he eventually made payments of $6,074 in 2002, some of which were for his children's uninsured dental expenses. The serviceman then deducted the entire amount as alimony on his federal tax return. The IRS argued these payments did not qualify as alimony because part of it involved child support and the remaining portion was a property settlement. But the Tax Court disagreed. Absent other terms in the agreement, the Court ruled that a portion of the payments constitute alimony if they would terminate upon the ex-spouse's death. In this case, the retirement benefits halt upon the death of the first spouse to die, so the serviceman would not be liable for payments to his ex-spouse's estate. The payments also met the other tax law requirements for alimony. Result: Payments of $3,387 could be treated as alimony. {Proctor, 129 TC No. 12) Above is the case I looked at to determine whether the one half of military pension is alimony. A bit more background. Client recieves payment directly to him montly ant then sends ex wife her half less 10% withholding as he receives the 1099-R from the government.

Picked up a new client recently who has been divorced for many years. There were two components to the divorce decree., For the first two years $xxx per month. Secondly he was required to give the ex-wife half of his military pension which he has done regularly. ( The first component is long in the past so not an issue ) The question is whether the military pension is considered an alimony Prior preparer did not take it as alimony but in my brief research I found a tax case in which it was allowed. It is a fairly substantial amount which not only impacts this year but prior years if it is indeed considered alimony. Any input is appreciated. Thank you Dave T

Schedule A Line 13 is greyed out with the remark " Reserved for Future Use" Previously that line was for Mortgage Insurance Premiums. I read somehere recently that the provision for deductibility of the premiums was extended to 2017 and 2018. I have a client whose mortgage statement has the premiums amount paid and he meets the criteria for deductibility but I guess I will have to wait unitl a subsequent version is available before I can file. Am I correct in this? Thank you Dave T

Husband and wife both self employed music teachers. Some lessons given in home. others at students' homes. Health insurance is purchased through exchange. T/P receives 1095-A showing premiums under silver plan and advance payments of FTC. I'm in the process of preparing the 8962. My question is, can they claim the amount paid out of pocket as the Self Employment Heatlh Insurance adjustment. Seems I saw something indicating they can't take this but not sure about this one. I haven't encountered this in the past. Thanks for your assistance. Dave T

Watermark on NYS forms says not approved for filing yet it lets me create the NYS e-file. Two questions: will the file reject if sent and does anyone know when the forms will be approved? I don't want to give a client a hard copy with the watermark on it. Thanks Dave T

T/P's husband died in early 2014. Sometime later she gets $ 62 K distribution form his IRA. She then ( within allotted time ) rolls into her own IRA. The 1099 form Met Life has the $ 62 K as fully taxable and distribution code 4. No Federal w/h I don't believe this should be taxable to her since she rolled it but am wondering how the IRS would know since it wasn't a direct transfer ( Code G ) but rather a cash receipt and redeposit. Do I change 1099 to show as non-taxable? Thanks Dave T

T/P has two 1099 DIV with Foreign Tax paid totaling 999 so I realize it can't be put directly on 1040. Here is the data on the two: Fidelity Canada Dividends and Qualified Div. - same amount $ 2417 Capital Gain Distribution $ 21,517 Foreign Tax 406 Paine Weber - Other Country Dividends and QD - the same - $ 4137 - Foreign Tax 593 I've input these two items into the Detail schedule of the 1116 but nothing is flowing to the 1040. I'm obviously doing something wrong but can't figure it out. In column (c ) Income amount what should go in there? Is it the total dividends and capital gain or something else? I recall having a similar issue with this last year but can't recall how I resolved it. Thanks for any help. Dave T

I haven't had to deal with this yet so please forgive me if this has been discussed already. Young couple get married in November 2014, both under 26. Young man covered under parents policy then takes out policy through work in November. In other words covered for the year. Young woman didn't have insurance for first ten months and then gets policy through work ( same employer as husband ) In November. Trying to compute the shared responsibility amount. Her income was $ 20 k and his $ 27 K. Not sure if I'm working through 8965 correctly or not but it looks like the penalty is $ 248 which seems high. Again, apologize for not having a better handle on this but just looking for some guidance. Thank you. Dave T

I've seen some posts regarding version 14.5 but I don't know if the problem I'm encountering is related or not. Earlier in the week my hard drive crashed without warning and now am in the process of having to reload the program. ( ugh ) I'm getting an error message that the server can't be located. Is this what others are getting when upgrading to the newer version? Thanks for any insights. Needless to say this has been a very stressful week Dave T

Go for it Bob. My sons were in Columbus last summer and were very impressed by the city. I plan on doing a duatholon the week after tax season, 5K run, 20 mile bike , and another 5K run. Hopefully the weather breaks early this year ( although I'm not hat optimistic ) so that I can get out on the bike. Dave T

I've used Brother printers for several years now and have very pleased with them. Last evening I was in Office Max purchasing toner and was looking at one of the new Brother printers and noticed that it said it can print two sided. It got me wondering if ATX accomodates two sided prinitng. Does anyone know? The printer was quite reasonable and the thought of being able to print retruns on both sides seemed appealing. Thanks Dave T

I've never encountered this before so I would appreciate your input. I have an elderly woman client who I've worked with for several years. She informed me when we me that her 62 year old son was very ill ( cancer ) and wasn't sure how much longer he would live. Soon thereafter I received a call from this man's brother concerned that his brother, due to his condition, hadn't prepared his taxes and would I be willing to do so? I said I would but due to the lateness of the season I would probably need to file an extension which he was fine with ( he said he would pay my fee as well ). I met with the man and his wife, got their documents, and filed the extension. I began working on the return several days later and encountered some items that I needed follow up information on, basis of a stock transaction, as well as some of his business records as what he had provided didn't make a lot of sense. This morning I called and left him a message about getting together to discus these and shortly thereafter I contacted the out of state brother to let him know how things were progressing. He just emailed me thanking me for taking care of this but also to let me know his brother passed away this morning. I'm not exactly sure how to proceed at his point. I believe his wife will be able to assist with some of the easier questions but not so sure about the business aspect. Any help would be appreciated. Thank you Dave T

T/p is 57 years old and receives a 1099R with Distribution Code 3 - Disability. Below the box 7 it asks, if Code 3, is recipient below minimum retirement age? Is this considered to be 59 1/2 or is it dependent upon the employer's retirement policy? He worked for New York State which does allow retirement at 55 . If it's 59 1/2 I check yes and he becomes eligible for EIC as this disability pension is considered earned income, in fact when inputting it flows to line 7. If it's 55 no EIC and he ends up owing some. Tried looking in the Pub on 1099's but didn't see the issue addressed. Thanks very much Dave T

Our church has used Power Church for a number of years and it works very well for tracking contributions. It also has a number of other financial features but we use it primarily for donations. The posting source is the prenumbered offering envelopes we provide to our members. Dave T

Thanks for the responses on this. There was no reimbursement from the agency on this it was just a monthly stipend without the requirement of how the funds were spent. The client didn't track expenses and so it isn't possbile to determine if they exceeded the stipend so I agree the $3,300 is all income and there is no charitable contribution. Thanks again, Dave T

Yes - that is correct. The 1099 came to my client as a stipend for housing the exchange student. It was mentioned, and I admit I didn't know this, that a charitable contribution can be taken for this as well. Am I understanding this correctly? Thanks to those that responded to this as I know I have another client coming later who did the same thing. - Dave T

Clients had young woman from China stay with them while she attended high scholl in US. Upon graduation she stayed in US to attend Univ. of Wisconsin in fall of 2013. The sponsoring agency provided clients with 1099-Misc. with box 7 filled in, Non-Employee Compensation for $ 3,300. I've added this to line 21 as " Other Income". Clients don't track incremental food costs or other items so I'm wondering if there is any type of offset ( per deim allowance ) to this income and if so how would it be shown? Thanks very much. - Dave T

I’m probably not thinking clearly on this and wondering if someone might be able to shed some light on what I’m missing. Parents take a distribution from their 529 plan (QTP) to pay for college expense for son. Here is the breakdown on the 1099-Q Total Distribution $ 19,800. Earnings - $ 6,618 – Basis $ 13,182. Here are the expenses – Room & Board - $ 9,215, Tuition, fees and books net of scholarships - $ 7,166= total expenses of $ 16,381. I’ve calculated the tax free and taxable portions of the distribution as follows: $ 6,618 x 16,381/19,800 Tax Exempt $ 5,475 Taxable 1,143 Where I’m getting hung up is whether they can still take the American Opp. Credit. I’m trying to follow the example in Publication 970 and this is how I’m figuring it: Net Tuition, Fees and Books $ 7,166 less $ 4,000 allowable for computing credit = $ 3,166.. I believe I then need to again compute a taxable and non taxable portion as follows: 6,618 x 3,166/19,800 Tax Exempt – $ 1,059 Taxable 5,559 If my calculations are correct, and I’m not entirely sure at this point, they would probably be better off by not taking the credit. I apologize for throwing a lot of numbers out there and also for being obtuse about this but I’m trying the best I can for this new client and help mitigate what is already a rather large amount due. Thanks for your assistance.

Over the years that i've been with ATX I've particularly benefited from this board. There is a wealth of knowledge out there and I've appreciated the wisdom and willingness ot others to share it. That being said, there is one contributor we haven't heard from in a while and that is Jerome. For those of you who have been here awhile as well I'm sure you miss his sage tax advice as well as his perspective on life in gerneral. Any idea where he might be? Wondering if perhaps he went with one of the big firms. Dave T

I have a new client coming this evening who has informed me that she took money from her 529 plan to help pay for son's college tuition. I happened to mention this to my co-worker who also uses ATX and he said he'd had that situaiton this weekend but didn't see where there is an input screen for the 1099-Q. Should there be one? I know this withdrawal can't be used in calculating Education Credits and also know I have to do a calculation to see if any of the withdrawal might be taxable but I just wondered if there is an input screen or not? Thanks Dave T

Ooops - forgot to spellcheck before submitting. Meant to say I had to rely on her for the verification. Thanks

Pacun, No I didn't interview parents nor did I prepare the returns. I had the client check with her parents to verify. They (parents ) are in Montana and I'm in NY so I relied on her information. Thanks - Dave T

Don't know who is still reviewing the board but would like to get confirmation on an item if possible. Young couple came to me to get taxes done but had to put them on extension as all info. wasn't avaialble at the time. At any rate, the young woman is in graduate school and therefore has already completed her four year degree. While an undergrad her parents claimed as a dependent but for whatever reason did not take the AOC in all the four years they were entitled to. ( Again, not sure why ?) I believe that even though the credit wasn't used, the fact that because she has completed four years of school she would not be entitled to the AOC. Am I correct in this.? I feel bad for the couple as the husband is a part time youth pastor making very little money but is going to get hit with SE tax and I was hopng that the refundable portion of the AOC would mitigate that but it doesn't appear to be the case. I suppose the parents could amend their return to help them out but that's not my call. Thank you. Dave T

T/P has several 1099-DIV's with Foreigh Taxes paid totaling $ 966.00. Line 47 only shows $ 236 and when I try and figure where the number is coming from I can't find it. There is a 1116 and a 1116 AMT but don't see the number on either. I've noticed other times with Foreign tax from a 1099 that the amount flows directly to line 47 withour a 1116 at all. Any thoughts? Thanks - Dave T