Lion EA

We do what Frog does. Been with our gal a very long time, and she's seen us through the ups and downs of the market with our retirement monies and with our investment accounts, and now with our RMDs, too. This client has little to nothing in cash/securities. She buys a house, lives in it with her fiancé, perhaps does some fix up (fiancé's in construction), mostly profit by buying in improving markets, and sell in a couple years. Both high income from day jobs. My client works for a company with a great defined-benefit pension building for her. (Not familiar with fiancé's finances, because he was my client for only one year when he started a side gig at the very beginning of Covid. His construction biz rebounded quickly with outdoor projects in FL during Covid.) They've lived in FL for years, but want to sell that house and move to SC in an area they've identified for their needs. This time both will purchase house together. High earning years for both, but starting to look to how things will change in retirement, or how things could change if the one in construction has an injury/illness. The houses they purchase are not expensive compared to Greenwich, CT, where she lived when she first became my client (NYC commuter back then). So they do have disposable cash, over and above the house purchased for cash and her building pension and whatever her fiancé has. They want to be more diversified and intentional than just their house buy/sell method. Or, they might expand their RE holdings. They want some guidance in their long-term planning, but it might not lead to traditional portfolio of financial investments at a brokerage. Therefore, their request for a FA who has no profit motive in their next steps, just charges for planning services.

Did he contribute for 2023 but during 2024? Then he could work with his broker to make it a 2024 Roth contribution instead. Or, 2023 non-deductible Traditional IRA, followed by a back-door Roth. Or, remove with earnings by the due date. (I think. It's late, and I'm tired.)

She could afford Cadillac, but might not want to. Again, fee-only, one-off, so maybe she will. Let me know his contact info. If he's Cadillac and private, you can message me.

Anyone have a for-fee financial advisor you love and trust and recommend? My favorite FA works for Morgan Stanley and isn't right for this particular client. Looking for one of those consultants who helps design a financial plan. Probably one-off.

Oh, darn, one more thing to watch out for! Thanx for alerting us to that, Frog.

https://www.irs.gov/taxtopics/tc421 https://www.irs.gov/publications/p970#en_US_2023_publink1000178003

Yes, annoying. Can't remember the client now, so it may've been one of those brokerages that doesn't send consolidated 1099s until March and then sends corrected forms in April or later. I guess I can see how the CP letters go out before all the underlying forms are entered into the tax payer's account. But, still annoying. And, the client thinks we did something wrong!

I do about what Tom does, file a return for the child. I too have seen IRS letters based on Proceeds, even though the major brokerage reported Basis to the IRS. It's so much faster and easier to file the return for a child than to respond to an IRS letter. Filing for children (and the elderly) also can prevent ID theft, or in one case with a client, uncover ID theft early. Even though if it's only interest/dividends and can go on the parents' return, it has saved my clients a bit when reported on the child's return. Years ago in my HRB days, we got an IRS letter looking for a child's return when the interest had been reported on the parents' return where the child was a dependent. Time-consuming to deal with. And, unhappy clients getting an IRS letter! I charge a flat amount for children, sometimes separately and sometimes on the parents' invoice.

Hang them on your house to scare away woodpeckers.

The S Corp still can open and fund a SEP, which is an employer only plan.

First of all, it'd have to be a true no-strings-attached donation with nothing in return, and with that appropriate IRS language on his receipt. Second, he can look up IRS-approved charities: https://www.irs.gov/charities-non-profits/search-for-tax-exempt-organizations

Yep, keep one or neither. You'll fill the spot with a conflict-free client.

It's your job to advise your client how to get her lowest tax liability. But how can you advise the wife on claiming her son while also advising the husband's rep on claiming the son on the husband's final return?! I hope you have their signed conflict of interest waivers on file.

Ah, AFTER retirement no SE tax on HA. Wow! That's quite a good benefit. And, they still continue deducting mortgage interest and property tax on Schedule A, right?

Wait, the housing allowance is NOT subject to SE tax? I thought just not subject to income tax, but INCLUDED for SE tax. (I agree with the lesser of FRV, actual expenses, or designated HA to not be subject to income tax.)

In my software, I just keep adding Box 12 codes and amounts, as many as needed, on the main Form W-2 and e-file. The "second" W-2 might be a limitation at the payroll company and not a limitation from the IRS for e-filing.

Too much investment credit. I don't use ATX, so can't comment on boxes to check or lines to fill in manually. Line by line instructions: https://www.revenue.state.mn.us/sites/default/files/2023-01/m1wfc_22_0.pdf

If the kids are biological children of both parents as a couple, I'd be suspicious that it's one household. But I think we've all seen a bit of everything. I have two cousins who inherited a house from their grandmother and live there happily ever after. No kids, so don't have to deal with HOH, thank goodness. Split everything 50/50 for decades. Even when they were still working, and the one with higher income would've benefited from a larger percentage of the deductions. They wanted everything 50/50, each year. One always drove them to work and to everyplace for years until her eyesight failed, loving to have a truck and a fast car and a reliable commuter car and a spare car; now the other does all the driving, I think only an SUV. Still vehicle ownership and car tax remain 50/50. The split of deductions no longer matters on their nearly identical retirement incomes and with the higher standard deduction. I've had divorcing clients/divorced clients who couldn't afford a separate house/apartment close enough to kids/schools, jobs, etc., so one moved into the guest room or the finished basement or the mother-in-laws' quarters or the guest house or otherwise divided up the physical house. Separate households. Didn't Fergie and her Prince live together to continue to co-parent for years? We see it all in our biz. But we are required to ask more questions if we're not comfortable that what we're hearing is the full, complete story. Don't let your clients tell you how to file their taxes. It's our job to tell our clients their options or option.

What entries do you have in Parts IV and V? Did you answer Yes to using it out of the country?

If you're old enough to remember the old TV show "Kate & Allie" about two single women with their own kids sharing a house, that could've been two households. maybe. I was taught at Block, if they share the master bedroom, it's ONE household. Do what Lynn said.

Even though parents earn enough to be in phaseout territory?! But doing the support worksheets is a good idea in any case to CYA.

In the situation where the parents do NOT claim him but could, doesn't the student get to claim education benefits, except NOT the refundable part? Too tired to look it up now, but check on it, John.

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There are NON-tax reasons for MFS. A divorce on the horizon is a big one.

Other scenarios where you should explore MFS: Student loan repayments, if they lower the payment more than the MFS higher tax. I had a lot during Covid where the lower income spouse taking all the kids could get more credits MFS.