| 000 Template | Sample Docs Form Flow to 2023 Info 2022 Info ATX LACERTE |
| 529 Plan Contributions | – Not deductible on Federal taxes – Each State has it own plan – For Federal, Earnings in 529 plan grow tax-deferred and are not taxed upon withdrawal when used to pay for qualified education expenses New York 529 Plan Contributions Form NY IT-203, line 29 Note: Amount will show in Federal amount column only Lacerte Info: 1. Add New York as state in Screen 1 2. Go to Screen 51 -Modifications, select New York, then in Sections select New York Subtractions. 3. Enter amount in S-103 College tuition savings deduction 3a. Year 2023: amount limit is $5,000 single, $10,000 MFJ |
| 529 Plan Distributions Expenses, Losses | To report 529 plan expenses on your taxes: – You receive Form 1099-Q and/or Form 1098-T, which will list the amount of the 529 plan distribution and how much you used to pay for college tuition and fees, but it is up to you, the 529 plan account owner, to calculate the taxable portion. You can write off Losses – If you close the account, withdrawing all the funds, the investment loss is deductible as a miscellaneous itemized deduction on Schedule A. Transfer to Roth IRA – Starting 2024, under certain circumstances, 529 account holders can transfer up to a lifetime limit of $35,000 to a Roth IRA for a beneficiary |
| 568 – LLC Limited Liability Company Single Member LLC Multiple Members LLC CA LLC Fee | Single Member LLC 1. Income and Expenses reported on Schedule C of 1040 (Personal) return. 2. Federal – For Single Member LLC, no tax return to file; disregarded entity per IRS. 3. State – not all states require you to file return. Multiple Members LLC 1. IRS treats multi-member LLCs the same as partnerships, unless it files Form 8832 and affirmatively elects to be treated as a corporation. 2. Therefore, when filing taxes, a multi-member LLC must file a Form 1065 Partnership Return (unless elected to be treated as Corporation, then file Form 1120-S). And, K-1 Statement is issued to each partner. 3. 1065 is an informational return only, as the tax liability will pass to the individual members on their personal tax returns. ——————— California – requires you to file Form 568 1. LLC Fee (See SMLLC Fee Fee List): Gross Income from schedule C is used to determine how much your LLC Fee will be. If gross income < $250,000 then fee is $0. gross income between $250,000 and $499,999 then fee is $900. 2. Annual LLC Tax: is $800 due April 15. Example for tax year 2024, $800 due April 15, 2024. $800 is deductible on Schedule C. Texas 1. No annual tax return, but must file Texas LLC Franchise Tax 2. Taxpayer ID number lookup (needed to file LLC franchise tax) ——————— States that Requires You to File Return – Pay Franchise Taxes States are: Alabama, Arkansas, California, Delaware, Georgia, Illinois, Louisiana, Mississippi, Missouri, Minnesota, Nevada, New Hampshire, New York, North Carolina, Oklahoma, Tennessee, Texas, Vermont, and the District of Columbia. |
| 568 – LLC Tax Vouchers CA LLC Voucher | Current Year Voucher – Form 3588 (California) Next Year Voucher – Form 3522 voucher a. for California $800 annual payment – Form 3536: Estimate Fee (paid in addition to $800 annual fee) a. used during tax year to pay California next year’s LLC tax. Use this form only if income is $250,000 or more. Amount of tax is based on gross income. |
| 568 – Single Member LLC Enter on Individual Return (1040) | Use for Single Member LLC only Confirm single member: Form 568, p2, K, max # members should be 1 ——LACERTE info —— 568 Enter on Individual 1040 1. Add California as State return 2. In 1 (Client Info), be sure to check to e-file California LLC 3. Go to 54 (Taxes) 4. In left section, select California SMLLC 5. In top section, for Form, select Schedule C and select activity name 6. LLC name, address and income is auto taken from Schedule C. 7. Section California Single Member, enter… a. CA secretary of state number b. Set Initial or Final return, if any c. Sent Amended Return d. Override amount taxes paid View Return Go to Forms, CA SMLLC If Multiple LLCs for Individual Return (Lacerte Info) 1. Section California Single Member LLC, scroll down to Additional Linked Business. 2. In Form column, select other businesses; and set activity number File Extension for LLC Section California Single Member LLC, scroll down below additional linked business, to Extension. Check box File Form 3537. —— ATX —— 568 Created Using Partnership (yes single member use partnership) 1. Select Partnership/LLC/LLP 2. Enter Company Name, … 3. State Info tab: State =CA, Form =CA 568 Limited Liability Company Return of Income 4. You will have 1065 and Sch K-1 Forms; you can leave them. You will only e-file the CA form. 5. Once finish enter info, exit then re-open return, so all info gets set. |
| 568 – Multiple Members LLC Enter as Partnership (1065) | – Multiple Members LLC is NOT a disregarded entity. It is a partnership. – Multi-member LLC file a partnership tax return AND prepare Schedule K-1. Each member of LLC receives a K-1. ——LACERTE—— 568 is entered as Partnership – Enter total sales on Schedule 1W LLC, line 5. a. get total sales from 1040, Schedule C, line 1, gross sales (not net sales) – C/O (in care of) = 37, Section =CA Misc Info, Field =Additional Info for address. (or, from menu, State & Local; 37 Misc Info; California) – Mark as Final Return ATX: CA 568, Data, check box Final. The word “Final” and the number 1, show at top of 568 form, below address. Lacerte: 37, Section =CA Miscellaneous Info, near top, enter 1 for Final return. The word “Final” and the number 1, show at top of 568 form, below address. – Mark as Initial Return ATX: CA 568, Data, check box Initial. The word “Initial” and the number 1, show at top of 568 form, below address. Lacerte: 37, Section =CA Miscellaneous Info, near top, enter 1 for Initial return. The word “Initial” and the number 1, show at top of 568 form, below address. |
| 592 CA 592 | CA 592 – Resident and NonResident Withholding Statement 1. Non-real estate withholding; for any withholding other than real estate 2. Withholding can be for trust distribution, estate distributions, rents or royalties, independent contractors, etc… see 592 form for list of income. 3. Submitted by Withholding Agent (entity, business, person that withheld the money) to CA FTB. 4. Withholding Agent also sends a 592-B to each entity, business or person that it listed on 592. I.E., Withholding Agent sends 592-B to each entity, business, person from which it withheld money. 5. Entity, business, and person… they are to report the withholding on their tax return. |
| 592-B CA 592-B | CA 592-B – Resident and NonResident Withholding Tax Statement 1. For Entity, business or person (called payee) that had money withheld from them. Form 592-B states how much was withheld. 2. Entity, business or person report withholding on their tax return a. Individual – enter on CA WHWKST, select 592-B Report on California tax retun as follows: For Individual — report on CA 540, p3, line 73 For 1041 (trust) — report on CA 541, p1, line 31 For 1120-S — report on CA 100S, p2, line 33 For 1120 — report on CA 100, p2, line 33 For 1065 — report on CA 568, p1, line 11 |
| 592-PTE CA 592-PTE | CA 592-PTE – Pass-Through Entity Annual Withholding Return 1. Use to pass withholding from Withholding Agent (entity, business, person that withheld the money) to another entity, business, person. 2. Submitted by Withholding Agent to CA FTB. 3. Withholding Agent also sends a 592-B to each entity, business or person that it listed on 592-PTE. I.E., Withholding Agent sends 592-B to each entity, business, person from which it withheld money. 4. Entity, business, and person… they are to report the withholding on their tax return. 592-PTE Sample Form (a) on top line, only need to enter the number of payees. Leave all other boxes unchecked. (b) Part I – is the trust (or entity, business, person) that is distributing money to beneficiaries. (c) Part II – is the company that collected the money. On last line, “Amount of Tax Withheld”, is the total amount of money withheld. (d) Part III – is the total amount of money withheld (e) Schedule of Payees are the beneficiaries. Total beneficiaries amount must equal to amount in Parts II and III. |
| 593 CA 593 | CA 593 – Real Estate Withholding Statement 1. For real estate withholding only 2. Submitted by Escrow Company to CA FTB 3. Escrow Company provides copy to seller 4. Seller report withholding on their tax return For Individual — report on CA 540, p3, line 73 For 1041 (trust) — report on CA 541, p1, line 31 For 1120-S — report on CA 100S, p2, line 33 For 1120 — report on CA 100, p2, line 33 For 1065 — report on CA 568, p1, line 11 |
| 843 | IRS Request for Abatement | IRS Info Inside tip. For California, you can fax form to Fresno fax # 855-230-1160 although IRS say to mail form, you can fax to this number. Then call IRS account services in 2 weeks later to see form processed. |
| 8915-F | Qualified Disaster Retirement Plan Distributions and Repayments. Form 8915-F replaces Form 8915-E for 2021 and later years. Flow to ——LACERTE—— 1. Go to Screen 13.1 Pensions, IRA Distributions. 2. Enter the information from the 1099-R. 3. Select the Section for Form 8915 (Qualified Disaster Relief for Retirement Plans). 4. Check the box for the appropriate tax year of the qualified disaster. 5. Complete the required information. |
| 990 / 990-EZ Exempt Org | ——LACERTE—— C/O (in care of) = 65, Section = CA Misc Form 199; Field =Additional & Supplemental address info. (OR, State & Local; 65 Misc Info; California) Year of Formation = 1, Section =Return Info, Field =Year of Formation Mission Statement = 35 – Schedule O – Part III, line 28, click on amount and jump to; enter in “Exempt purpose achievements” – also in wording above line 28 Detail / Pro Serv Acc |
| 990-PF | Form 990-PF is the annual tax return used by private foundations exempt from income tax. |
| 1040-SR | Form 1040-SR is a large-print version of Form 1040 that is designed for taxpayers who fill out their tax return by hand rather than online. A standard deduction table is printed right on the form for easy reference. You need to be 65 or older to use Form 1040-SR. You can use all IRS schedules (additional forms) with Form 1040-SR, including Schedules 1, 2, and 3, to report information not directly reported on Form 1040-SR |
| 1041 Trusts Estates, Fiduciary | – Brokerage Fees / Investment Advisory Fees – Not Deductible (IRS Info) |
| 1042-S | Flow to 1040-NR Used to report various types of income paid to nonresidents in the US. Or, foreign person that gets U.S. income that is subject to withholding. Lacerte: 1. 58.2 2. Enter info using 1042-S form |
| 1065 Partnership Return Review Return for last year ending balances | Special Allocation Depreciation – Real Estate A special allocation is a financial arrangement that is set up in a partnership or LLC that restructures the manner in which profits and losses are distributed to the owners or partners in a way that does not correspond to their actual percentage interests in the business. Lacerte Info 1. This is “Other Deductions” 1065, p4, line 13d 2. In this case, the other deduction is a special allocated depreciation 3. Depreciation is allocated to Schedule K-1, box 13, code W 4. Depreciation does not go on 8825 5. It’s a special allocation, because the allocation percent is different from partnership percentage Note: when entering allocations in 29 (Special Allocations), it takes time for the system to update amounts in box 13, code W Tax Return Review 1. Make sure last year ending balance is the current year beginning balance and print forms for: 7203, Schedules L, M-1 and M-2 Special Allocation – Cash and Marketable Securities Lacerte Info |
| 1098-T Tuition Statement American Opportunity Tax Credit (AOTC) Life Time Learning Credit (LLC) | Form 8863 — flow to 1040, Sch 3, p1, line 3 If Scholarship is Taxable: flow to 1040, Sch 1, p1, line 8r ATX: Enter on 1040 EdExp (1098-T) Lacerte: 38.1 Box 1 = total tuition costs and fees paid during the tax year Box 2 = blank, not used Box 3 = blank, not used Box 4 = school adjusted expenses for previous year. If it turns out a previous year’s expenses were lower than initially reported, student may need to file amended return and may own taxes for that year. Box 5 = total scholarships awarded. Scholarships amounts were paid directly to the school for the student expenses. Box 6 = shows any adjustments the school has made to scholarships and grants reported on a previous year’s 1098-T. These adjustments may affect the student’s tax liability for the previous year, so the student may have to file an amended return. Box 7 = this box is checked if the amount in Box 1 or 2 includes expenses for an academic term that begins in the first three months of the year following the year covered by the 1098-T. Box 8 = indicates that student is enrolled at least half time Box 9 = indicates student is enrolled in a graduate program Box 10 = When an insurer reimburses a student’s expenses, it provides that student with a copy of the 1098-T. Box 10 is used to show the amount reimbursed. ——————————— Scholarship is taxable income = Amount in Box 5 (scholarships) is GREATER THAN the amount in Box 1 This means you cannot use any expenses to reduce your tax bill. You must report the excess as taxable income on the federal return. Scholarship is NOT taxable, so can use expenses as a deduction or credit = Amount in box 5 is LESS THAN the amount in Box 1. So, Subtract Box 5 from Box 1 (or Box 2); then report that amount on taxes. ——————————– LACERTE Scholarship is taxable income 1. Box 5 amount is Greater Than Box 1 2. Taxable Amount = Box 5 minus Box 1 3. Enter Taxable Amount in: 14.1 / Alimony and Other Income / Taxable Scholarships and fellowships. — flow to 1040, Sch 1, p1, line 8r Scholarship is NOT taxable income, so deduct expenses 1. Box 5 amount is Less Than Box 1 2. Deduct Expenses Amount = Box 1 minus Box 5 3. Enter Deduct Expenses in: 38.1 a. Enter Student Information b. Enter American Opportunity Credit (AOC) Disqualifiers, if any c. Enter Educational Institution d. Current Year Expenses: d1. Enter Deduct Expenses Amount in Qualified tuition and fees (net of nontaxable benefits) d2. Books and supplies required to be purchased… = get info from student d3. Books and supplies not entered above (AOC only) = other expenses 4. Flow: Form 8863, which flow to 1040, Sch 3, p1, line 3 ——————————- FAQs IRS Info – American Opportunity Tax Credit (AOTC) 1. How many years can you claim American Opportunity Credit? 4 years 2. What is the credit amount? Max credit is $2,500 per year. If the credit brings the amount of tax you owe to zero, you can have 40 percent of any remaining amount of the credit (up to $1,000) refunded to you. 3. Can Graduate Student claim AOTC cedit? no? may can claim the Lifetime Learning Tax Credit IRS Info Life Time Learning Credit IRS – Compare AOTC vs LLC More 1098-T info Can Claim Post secondary (College Credit) for Either: 1. The American Opportunity Credit, part of which may be refundable. 2. The Lifetime Learning Credit, which is nonrefundable. NOTE: Student may have to get copy of form from school, because school don’t always send them to the students. Who Enters 1098-T Parent or Student? If the parent is claiming the student as a dependent on their (the parents) income tax return, then the parent enters the 1098-T Tuition form on their (the parents) income tax return. If You have a Business, and you do not receive 1098-T, you can deduct education expenses on Schedule C. However, you must be getting an education to improve your skills for your business. You can Deduct – Tuition, books, supplies, lab fees, equipment, and similar items – Certain transportation and travel costs – Other educational expenses, such as the cost of research and typing You can NOT Deduct – College Application Fee – Parking – Room and board, or other living expenses – Student health fees and other medical expenses – Transportation – Insurance, including property or renters insurance for college students – Expenses for sports, games, or hobbies, unless they’re necessary for your degree program – The cost of non-credit courses, unless necessary for your degree program (the LLC may include these costs if they’re for a career development course) American opportunity tax credit (AOTC) IRS Requirements | Who Can – Can’t Claim Credit | Comparison / Easy List 1. Can deduct up to $2,500 2. must receive form 1098-T 3. be pursuing a degree or other recognized education credential 4. be enrolled at least half time for at least one academic period* beginning in the tax year 5. Not have finished the first four years of higher education at the beginning of the tax year 6. Not have claimed the AOTC or the former Hope credit for more than four tax years 7. Not have a felony drug conviction at the end of the tax year 8. If married, you cannot file separate return |
| 1098-T Tuition – Self Employed | Deduct “Qualifying Work-Related Education” on Schedule C You Can Deduct Tuition, books, supplies, lab fees, transportation to and from classes and related expenses. You must be able to prove that the course: 1. Maintains or improves skills you need in your trade or business 2. Is required by law or regulation for keeping your license to practice in your trade or profession You can’t deduct education expenses you incur: 1. To meet the minimum requirements of your present trade or business 2. That qualify you for a new trade or business |
| 1099 – ATX Payroll | Print Single 1099 1. Click Detail tab; on left in Print column, put ‘X’ in only the 1099 you want to print; click print Add another 1099 to an already accepted e-file 1. You cannot add to an accepted e-file. 2. Instead, you can duplicate the existing company, go to detail tab, delete all 1099 recipients, then add new recipients. create e-file, then transmit |
| 1099-B Stock Sale Computershare see also Restricted Stock Unit | Flow to 8949 and Schedule D, which flow to 1040, line 7 (Capital gain or loss) Enter: Form 8949, tab = input Covered Transactions (covered securities) = broker is required to report cost basis to both taxpayer and IRS Noncovered Transactions = broker only send cost basis to taxpayer. However, taxpayer should report on tax return. Because cost basis is subtracted from sale price (proceeds), which lowers taxed amount. ——LACERTE—— Enter: 17 Dispositions (or Detail / Income / Dispositions) for Various, enter negative date; ex: -01/01/2022 Gain or Loss = N/C, then make cost basis same as proceeds Gain or Loss = N/A, then make cost basis same as proceeds Cost Basis = N/A, then enter cost basis same as proceeds When Gain or Loss is not determine, make cost basis same as proceeds so net effect is zero gain/loss. Sales Proceeds not provided – for K-1 when sales proceeds not provided, enter zero for sales proceeds, which makes the transaction a loss – client need to call their broker for the info ??? – can happen on K-1 that has a 8949 Cost basis is the price paid to acquire shares, plus commissions and any fees. Cost Basis is Zero (example) Check for code to see if supplemental info is provided. If provided use cost basis info from supplemental. If not provided you will have to ask client or look at past returns. Cost Basis is Partially Provided (example) Taxpayer will have to get info for their broker or find stock purchase document, which should show purchase price |
| 1099 Distributions and Charges | Limited Partnership Income 1. Enter on Schedule K-1 Non-Reportable Dividends and Interest Non-Reportable Tax-Exempt Interest Taxable Muni Accrued Int. Paid Non-Tax Muni Accrued Int. Paid 1. Enter on 1099-INT 2. Create New Record 3. Enter in Tax-Exempt Interest, Total municipal bonds Other Accrued Interest Paid Flow to Schedule B -Interest and Ordinary Dividends 1. Enter on 1099-INT (interest income), 2. Go to Adjustments to Federal Taxable Interest, enter in Accrued Interest Margin Interest 1. Enter on Schedule A, Investment Interest Non-Reportable Distribution Expenses Excess Bond Premium Additional Bond Premium |
| 1099-DIV | Box 1a – Total Ordinary Dividends a. flow to 1040, line 3b Box 1b – Qualified Dividends a. flow to 1040, line 3a b. the portion of box 1a that is considered to be qualified dividends Box 2a – Total Capital Gain Distributions a. flow to 1040, Schedule D, line 13; AND to 1040, line 7 b. capital gain distribution from your investments; e.g., mutual fund distribute capital gains to you Box 2b – Unrecap Section 1250 Gain a. flow to Box 2d – Collectibles (28%) Gain a. flow to Box 2e – Section 897 Ordinary Dividends a. flow to Box 2f – Section 897 Capital Gain a. flow to Box 3 – Non-Dividend Distribution a. flow to Box 4 – Federal Income Tax Withheld a. flow to 1040, p2, line 25b b. federal taxes withheld from your distributions. Box 5 – Section 199A Dividends a. flow to 8995, line 6 Box 6 – Investment Expenses a. flow to CA, Sch CA, p6, line 21 other expenses: investment, … Box 7 – Foreign Taxes Paid a. flow to Schedule 3, p1, line 1 b. if date not provided, enter year end date , ex: 12/31/2023 c. must add form 1116 (Lacerte 35) d. Foreign Source Income is Ordinary Dividends (also called non-qualified) ….. Ordinary Dividends = Total dividends and distributions i.e. all dividends i.e. = non-qualified (ordinary) + qualified + section 199A + long term capital gain, … e. Foreign Qualified Income is Qualified Dividends ….. Qualified Dividends = Qualified Dividends f. Sample calculate foreign taxes g. Other dividend Info, explanation Box 8b and 8c – if not provided, use same amounts in 1a and 1b Box 9 – Cash Liquidation Distributions (Lacerte Details) a. flow to 8949; Schedule D b. If cost basis is provided, enter box 9 info and cost basis in form 8949, like other 1099-B transactions — check end of 1099 statement for cost basis; maybe in section “Unrealized Cost Basis Information for Securities Subject to Amortization/Accretion…” c. If NO cost basis, Do not enter; since don’t have cost basis. Note: more info This amount is the cash the investor/taxpayer received upon liquidation of all or part of the underlying entity. Generally the cash distribution is considered a return of the cost or basis in the investment. Box 10 – Non-Cash Liquidation Distributions (Lacerte Details) a. flow to 8949; Schedule D b. If cost basis is provided, enter box 10 info and cost basis in form 8949, like other 1099-B transactions — check end of 1099 statement for cost basis; maybe in section “Unrealized Cost Basis Information for Securities Subject to Amortization/Accretion…” c. If NO cost basis, Do not enter; since don’t have cost basis. Note: Liquidating distributions (cash or noncash) are a form of a return of capital. Any liquidating distribution you receive isn’t taxable to you until you recover the basis of your stock. After reducing your stock’s basis to zero, you’ll need to report the liquidating distribution as a capital gain on Schedule D. Box 12 – Exempt Interest Dividends a. flow to 1040, line 2a b. sample how to calculate c. Lacerte: Enter 12, Section =Tax-Exempt Interest, Field= Total Municipal Bonds d. For In-State Municipal Bonds, if amount is not provided, you must calculate amount. To calculate, check pages which contains “Detail for Dividends and Distribution”. Look for CA or state that tax return is for. Get CA (state) percent and multiply by stock amount. –California Municipal Bonds are exempt from California (State) Taxes Box 13 – Specified Private Activity Bond Interest Dividends a. flow to b. Lacerte: enter 12, Tax-Exempt Interest, Field = Certain private activity bonds (6251) Box 14 – state withholding Other Info A common reason for receiving a 1099-DIV form is because some of the investments you own paid dividends during the year. You won’t file the 1099-DIV with the Internal Revenue Service, but you will need the information it reports when preparing your tax return. |
| 1099-INT | Flow to Schedule B Interest and Dividends flow to Schedule B ref: Buetow, Mac 13 – Bond Premium on Tax-Exempt Bond 15 – State (CA) a. If 13 has an amount and CA (or State) is shown in 15, check if any of the bond premium is exempted by the State. b. Add “Tax-Exempt Interest From California” AND “Bond Premium From California”. note : bond premium from california is a negative number. Enter result in 1099-INT, Tax-Exempt Interest, In-State Municipal Bonds. |
| 1099-K | If Sold Personal Items and receive 1099-K Sold at Loss: 1. Report Income received from sale on Schedule 1, line 8z 2. Report Price you paid for item on Schedule 1, Part II, line 24z Or you can 1. Report Income received from sale on form 8949 Sold and Made Profit (your profit is taxable) 1. Report on form 8949 You Received 1099-K In Error (i.e., money given to you by friends and family) If you cannot get corrected 1099-K from issuerer. Then you need to report the income; and you can enter adjustment. 1. Enter Income Schedule 1, line 8z 2. Enter Adjustment on Schedule 1, line 24z, which nets to zero |
| 1099-LTC | Sample Flow to Form 8853 Lacerte (info) 1. 32 (HSA/MSA/LTC Contracts) 2. Enter according, look at box 3 to determine where to enter box 1 amount. Also look at box 5 for type of illness |
| 1099-NEC 1099-MISC 1099 Filings 1099 IRS Free Filing 1099 IRS Filing | If Receive, Report on Schedule C Issued to Vendors: Based on Calendar Year 1. 1099 is issued based on Calendar year. It is NOT based on fiscal year. 2. Even though your company’s tax year straddles 2 calendar years, the 1099-misc and nec forms must be filed on a calendar year basis. 3. Therefore, report payments made during calendar year. Do not report payments made in a different year. Self Employment Tax 1. Applies to all 1099 income over $400 2. Report 1099 Income on Schedule C Who Receives 1099 Anyone receiving payment over $600 that is one of the following: 1. Single Member LLC 2. Multiple Member LLC 3. Partnerships 4. Limited Liability Partnerships (LLPs) taxed as Partnership 5. Trusts 6. Estates 7. Lawyers, even if lawyer or law firm is a corporation Who Do NOT Receive 1099 1. Corporations (1120, 1120-S (s-corp)); except law firm always get 1099 2. LLC Electing to be taxed as S-Corp or Corporation Correcting 1099 after it has been accepted see info E-Filing Required if submitting more than 10 1099s IRS E-File System (Free) | Information Returns Intake System (IRIS) Info – Can file online Free. – Will need to setup IRIS Taxpayer Portal account. – To use the IRIS Taxpayer Portal, you need an IRIS Transmitter Control Code (TCC). This 5-digit code identifies your business when you e-file forms. It can only be used for IRIS. – You can apply for IRIS TCC for a. your business only (issuer), b. your business and others (transmitter) c. software developer |
| 1099-MISC Split Income with Another Person | 1040: for for Misc Income Split with Another Person 1. Enter full amount from 1099 (INT, DIV, MISC, etc) on 1099 form 2. Enter 1/2 the amount as other income; enter as negative number (to subtract from income); put the description as “Nominee Adjustment”. I.e., 1040, line 8 (other income), click arrow, Sch 1, line 8z, click arrow, description is “Nominee Adjustment” and enter amount as negative number. |
| 1099-MISC Rent Box 1 | info If you own property that is rented to a business and you receive a 1099-MISC with the amount of rent paid to you reported by the business in box 1, you should report the amount on Schedule E of Form 1040 as passive activity income If you’re in the business of renting personal property, you should report income and expenses related to personal property rentals on Schedule C (Form 1040) If you’re not in the business of renting personal property, you should report the rent as other income; 1040 line 8. |
| 1099-MISC Other Income | Flow to Form 1040, Schedule 1, line 8 ——LACERTE—— 1. 14.1 (SS Benefits, Alimony, Miscellaneous Income) 2. In section Alimony and other Income, Field =Other Income |
| 1099-MISC Royalties Box 2 | Enter on Schedule E If for Oil & Gas – deduct depletion expense; which is typically 15% of the amount in box 2. — In Lacerte, enter on Schedule E, section Oil & Gas, field is Production type (at top of oil & gas section) |
| 1099-OID Original Issue Discount | IRS Form Flow to Schedule B see Lacerte explanation reference Christian and Julia Will, Morgan Stanley account xx8682 ref Gus Christopoulous OID Box 1 – Original Issue Discount a. enter on 1099-INT b. Lacerte: 11, Bank, S&L, etc; c. flow to 1040, p1, line 2b (taxable interest) OID Box 2 – Other Periodic Interest a. enter on 1099-INT b. see Lacerte explanation on where to enter c. flow to 1040, p1 line 2a (if tax exempt – municipal bonds) OR 2b (if taxable interest) OID Box 3 – Early withdrawal penalty a. enter 1099-INT b. Lacerte: 11, scroll down to Other, enter in Early withdrawal penalty c. flow to 1040, Schedule 1, p2, line 18 OID Box 4 – Federal Income Tax Withheld a. enter 1099-INT b. Lacerte: 11, scroll down to Tax Withheld / Federal Income Tax Withheld c. flow to 1040, p2, line 25b OID Box 5 – Market discount a. enter on 1099-INT b. Lacerte: ??? c. flow to ??? OID Box 6 – Acquisition premium a. enter on 1099-INT b. Lacerte: 11, b1. If there’s an amount in both boxes 6 (acquisition premium) AND 11 (Tax exempt original issue discount), enter Acquistion premium in Total Muncipal Bonds; AND enter Tax Exempt Original Issue discount in Amortizable bond premium on tax-exempt bonds. — Add new Interest record, to enter info, add “OID” to payer’s name; to identify record as OID. c. flow to OID Box 8 – Original issue discount on U.S. Treasury obligations a. enter on 1099-INT b. Lacerte: 11, enter in U.S. bonds, t-bills (nontaxable to state) or can enter in Banks, S&L, etc. c. create new line, name ex: schwab 1099-OID d. flow to 1040, line 2b (taxable interest) OID Box 9 – Investment expenses a. enter on Schedule A, Misc Ded Subject to 2% AGI limitation, Investment Expense b. Lacerte: 25, Misc Ded. Subject to 2% AGI limitation, investment expense c. flow to Sch CA, p6 line 21 OID Box 10 – Bond Premium a. enter on 1099-INT b. Lacerte: 11, enter in Banks, S&L, etc. c. create new line, eame ex: schwab-bond premium d. flow to 1040, line 2b (taxabel interest) OID Box 11 – Tax Exempt OID a. enter on 1099-INT b. Lacerte: 11, Adjustments to Federal Taxable Interest . Original Issue Discount (OID) c. flow to ??? ATX Support | atx support Enter using form 1099-INT. Enter in Box 1; AND in the adjustment to box 1; enter amount and code (code O?) |
| 1099-Q | Form 1099Q Worksheet If taxable: taxable amount flow to 1040, Schedule 1, line 8z You are the designated beneficiary of a 529 plan or a Coverdell Education Savings Account (Coverdell ESA). 1. You don’t need to report if all distributions used for Your qualified education expenses. 2. If you did not use the money for Your education, then the full or adjusted amount on 1099-Q is taxable. (flow to sch 1, line 8z) ——Lacerte—— 1. 14.3 (Education Distributions) 2. Qualified Expenses: usually same as gross distributions 3. Form 1099-Q: enter info 4. if it should not be taxable, make sure nothing is showing on sch 1, line 8z Tax Cuts Jobs Act (TCJA) expanded the types of expenses a 529 plan can be used to pay. Expenses include: K-12 elementary and secondary school tuition for public, private and religious schools. Previously only Coverdell ESA funds could be used for primary and secondary expenses. You can also you 529 plan to pay for registered apprenticeship programs You can also rollover amounts from 529 plans to ABLE accounts (Achieving a Better Life Experience act of 2014) –tax advantaged savings accounts for individuals with disabilities and their families. |
| 1099-R (Roth IRA Distribution) | Distribution code = J, means Roth IRA distribution. – distribution may not be taxable. – you can withdraw money you contribute to Roth IRA anytime and without penalty – you can withdraw earnings after age 59 1/2 after owning the account for at least five years. Withdrawing money earlier can trigger taxes and 10% early withdrawal penalty. Roth IRA Basis = total contribution – total withdraws Taxable amount = distribution – Roth IRA Basis; if <=0, no taxes Make Distribution Non-Taxable – scroll down on 1099-R form, check box “Box 7 include codes J or T” – or, Form 8606 enter 0 on line 7; to zero out amount Box 2a has UNKNOWN … Pension exclusion calculator … Can use IRS Simplified Worksheet – see Part IV, Page 22 … Look at prior year return to calculate percentage: box 2a divided by box 1; use same percent this year |
| 1099-R (State has $0 distribution) | State has withholding, but $0 in state distribution. Put amount from 2a in state distribution |
| 1099-R Required Minimum Distribution (RMD) | RMD 1. You MUST take the distribution or pay penalty 2023 Penalty is 25%. It reduces to 10% if corrected within two years. 2022 Penalty is 50%. 2. Contact company for your 1099-R or corrected 1099-R. RMD Taken Late (taken after December 31) 1. Still take the distribution. It will be reported on your next year’s taxes. So for current tax year, you will not have a 1099-R to report on your taxes. (note: next year you will have double the 1099-R income to report). 2. File form 5329 to get penalty waived for not taking distrubtion on time 3. Lacerte 5329 – Penalty Waiver (Flow to 5329, p2, part IX) a. 41 (Retirement Plan Taxes 5329) b. Section Excess Accumulation in Plan, enter info, explanation (info sample): On January 15, 2024, while collecting documents to give to our tax preparer, taxpayers discovered that for tax year 2023, the required amounts for RMD were not distributed. During the year in question, taxpayers were unaware of the error as taxpayers were provided incorrect information by their financial institution. Upon discovery of the error, taxpayers took immediate and corrective action by taking the distributions on February 2, 2024 in the amounts of $5,000 and $10,000. Taxpayer believes these actions warrant relief under IRC 4974(d). |
| 1099-SA | 1099-SA worksheet – distributions from health savings account (HSA) Note: Contributions to HSA is Form 8889 (Flow to 1040, Sch 1, p2, line 13) ——LACERTE—— 1. 32 (Health Saving Account) 2. Section Distributions, enter info 3. To exclude distribution from being taxed, a. enter amount in box “Qualified unreimbursed medical expenses…” b. enter info in “Amount to exclude from 20% tax…” |
| 1120 Corporation | |
| 1120S S Corporation Tax Return Review Return for last year ending balances | Schedule M-1 – used to reconcile the income (or loss) that the S corporation is reporting on the tax return with the income (or loss) in its accounting records. Not all S corporations are required to complete Schedule M-1. Schedule M-1, Line 8 should equal Schedule K line 18 Schedule M-2 – reports an analysis of the partners’ capital accounts. This Schedule explains the difference between the partners’ capital accounts as shown in the Balance Sheets (Schedule L) at the beginning of the tax year and at the end of the tax year. more info on accumulated adjustment accounts (AAA). 15a Post 1986 depreciation adjustment – info flow from Fixed Assets, Federal AMT column, line AMT/State Adjustment. Info on this line is auto calculated: Federal Current Year Depreciation minus (-) Federal AMT current year depreciation. Look for Alternative Minimum Tax Depreciation Report (not sure if ATX has this report. CCH prosystem fx has this report) Distributions – Prior Years Distribution 1120S, tab= line 16 d – distributions Flow to Sch K-1, K-1 Stmt; and Form, line 16 D Charity / Contributions 1120S, p3, line 12a Tax Return Review 1. Make sure last year ending balance is the current year beginning balance and print forms for: 7203, Schedules L, M-1 and M-2 |
| 3800 General Business Credit | Can Carryforward Credit for 20 years Lacerte 1. Enter Carryover in Screen 34, General Business & Vehicle Credits 2. Section – Business Credit Carryforwrds and Carrybacks (3800) a. Select Type of Credit; enter Carryforwards amount b. For Type of credit check Part III. See line where amount is entered, this is the type of credit Carryforward Credit 1. Check total amount Current Year Credits (this includes credit from prior years): Part 1, Line 6 2. Check total amount Allowed credit for this year: Part 2, Line 17 3. Carryforward = Line 6 minus Line 17 a. If Line 6 is zero, there are NO credits; and therefore nothing to carryforward 4. There should be part IV showing carryforward credit ??? |
| 3921 ISO Disqualifying Disposition | Example 3921 is a form that companies have to file with the IRS when an existing or former employee exercises an ISO. ISO = Incentive Stock Options Two Calculations Needed 1. Alternative Minimum Tax (AMT) — report on form 6251 a. AMT = fair market value (fmv) – exercise price b. info on form 3921, employee get this form from employer b. report AMT on Form 6251, line 2i 2. Capital Gains (Form 8949) View Info from The Balance Other Info 1. Fidelity 2. ISO cannot be transferred to another person or donated to charity. Reporting a Qualifying Disposition of ISO Shares The gain should be reported on Schedule D and IRS Form 8949. The gross proceeds from the sale are required. This information is provided by the broker on Form 1099-B. |
| 5405 Home buyer credit Home buyer tax credit First time home buyer credit | 2023 You must file Form 5405 with your 2023 tax return if you purchased your home in 2008 and you meet either of the following conditions. You disposed of it in 2023. You ceased using it as your main home in 2023. Lacerte Info – how to enter |
| 5498 – IRA Contributions | IRA /Roth Worksheet (look for and enter contributions) Flow to 1040, Sch 1, p2, line 20 NOTE: Do not make entries on a Form 1099-R in the program unless you received a 1099-R from the payer. If you rolled money from a 401(k) to an IRA, you may receive a Form 5498 from the NEW trustee, and a 1099-R from the OLD trustee. Just enter the 1099-R data, not the 5498 data. You will enter the data from the Form 1099-R and the amount of the distribution that was rolled over. If 5498 received after taxes filed, just make sure numbers on 5498 matched what you reported on your taxes. ——LACERTE—— 24 (Adjustments to Income) |
| 5498 – SEP Contributions | 1040, sch 1, p2, line 16 Current Tax Year 5498 Form This form shows what person has already contributed to their SEP. The contribution shows amount with the current tax year, but amount is for the previous tax year. For Example: Tax year 2023, 5498 statement show SEP contribution of $30,000. However, the $30,000 is for tax year 2022. So, you need to calculate how much person can contribute for tax year 2023. Inform person of the amount, and make sure person makes the payment. If they do not make the payment, remove amount from SEP contribution. If you do not remove amount, person has incorrect income adjustment on 1040, p1, line 10. ATX Calculation – Calculate Amount Client can Contribute to SEP IRA – 1040, sch 1, p2, line 16; click arrow – Filer and/or Spouse column, select 2-SEP for “Compute maximum allowable contribution” – Make sure client makes the contribution before filing their taxes. If client does not make the contribution, then remove this amount from taxes. Lacerte Calculation – Calculate Amount Client can Contribute to SEP IRA – 24 (Adjustment to Income) – Section = SEP, Simple, Qualified Plans – Self-employed SEP = enter 1 for system to calculate maximum amount – If tax payer can contribute, amount shows on 1040, sch 1, p2, line 16 |
| 5498 – Re-characterize | Form 1099-R, Enter Gross Distribution in Box 7; Code is R |
| 5498-SA | Form 8889 Flow to 1040, Sch 1, p2, line 13 Contributions made to health savings account (HSA) Note: Distribution from HSA is form 1099-SA 1099-SA worksheet – distributions from health savings account (HSA) Note: Contributions to HSA is Form 8889 (Flow to 1040, Sch 1, p2, line 13) ——LACERTE—— Info 1. 32 (Health Saving Account) 2. Section Contributions and Deductions, enter info |
| 5695 Residential Energy Tax Credit 3800 General Business Credit | Residential Energy Tax Credit – Solar Panels: 5695, P1, Line 1; andP2, Line 17a, b, c – Energy Efficient Windows: 5695, P2, Line 19d Flow to 1040, Sch 3, Line 5 NOTE: Check Contract, can only Deduct Solar Items; ex: solar, sunlight power. Cannot deduct ducts redo, attic fans, window tinting/film Form 5695 | Instructions | IRS FAQs 1 | IRS FAQS 2 IRS Website, EnergyStar.Gov – find rebates and more info Includes solar, appliances, home, commercial, etc. 2023: Can deduct 30% of installation costs (equipment + labor) Energy Credit – Residential and Commercial The Inflation Reduction Act of 2022 provides federal tax credits that empower Americans to make homes and buildings more energy-efficient to help reduce energy costs while transitioning to cleaner energy sources. Home Owners … New federal income tax credits for energy efficiency home improvements are available through 2032. … Up to $3,200 annually to lower the cost of energy efficient upgrades by up to 30 percent. … Upgrades such as heat pumps, heat pump water heaters, insulation, efficient doors and windows, electrical panel upgrades, home energy audits and more, are covered by these new tax credits. Home Builders … The Inflation Reduction Act of 2022 updates and extends the Section 45L Tax Credit for Energy Efficient New Homes. … For homes and units acquired on or after January 1, 2023, the base level tax credit for home builders will be specifically tied to ENERGY STAR certification for single-family, manufactured, and multifamily homes. This tax credit has been extended through 2032. Commercial Building Owners … The Inflation Reduction Act of 2022 extends and expands the energy efficient commercial buildings deduction that was made permanent under Section 179D in 2021. … Buildings that increase their energy efficiency by at least 25 percent will be able to claim this deduction, with bonuses for higher efficiency improvements. |
| 5695 Energy Credit FAQ Solar Tax Credit Solar Credit | 1. Roof Repairs and Replacments. IRS Info. Are NOT covered by Federal Solar Tax Credit, unless it assists with generating electric. a. Per IRS – In general, traditional roofing materials and structural components do not qualify for the credit. However, some solar roofing tiles and solar roofing shingles serve as solar electric collectors while also performing the function of traditional roofing, serving both the functions of solar electric generation and structural support and such items may qualify for the credit. Components such as a roof’s decking or rafters that serve only a roofing or structural function do not qualify for the credit. |
| 7203 | Used by S-Corp shareholders – to figure the potential limitations of their share of the S corporation’s deductions, credits, and other items that can be deducted on their individual returns. Effective for 2021, IRS requires S corporation shareholders to prepare and attach Form 7203 to the taxpayer’s Form 1040 to track and report stock and debt basis |
| 8606 – Nondeductible IRAs This form is not just for reporting nondeductible contributions to traditional IRAs. You also use it to report other IRA-related transactions where the government needs to track the status of your money—whether it’s been taxed or not taxed. | Use Form 8606 1. To report any money you contribute to a traditional IRA that you do not deduct on your tax return. Also called “nondeductible contributions”. Reporting it saves you money down the road. That’s because no individual’s money is supposed to be subject to federal income tax twice. Form 8606 gets it “on the record” that a portion of the money in your IRA has already been taxed. Later on, when you take distributions, a portion of the money you get back will not be subject to income tax. 2. When you take distributions from a Roth IRA 3. When you take distributions from a traditional, SEP or SIMPLE IRA at any time after you have made nondeductible IRA contributions. 4. When you Convert a traditional, SEP or SIMPLE IRA into a Roth IRA File Form 8606 …For every year you contribute after-tax amounts (non-deductible IRA contribution) to your traditional IRA …For every year you receive a distribution from your IRA as long as you have after-tax amounts, including after-tax rollover amounts from traditional, SEP, or SIMPLE IRA plans. You can file Form 8606 for Prior Years …The penalty for late filing a Form 8606 is $50. …There is no time limit for the amended/late filing. However, if a filing omission resulted in an immediate tax consequence (like the full taxation of a Roth conversion), the amendment must be made prior to the three-year limitation on refunds. |
| 8880 – Retirement Savings Credit Savers Credit Savers Tax Credit IRS Form 8880 | IRS Guidelines Credit for Qualified Retirement Savings Contributions Let’s you take a credit for saving for retirement. This credit can be claimed in addition to any IRA deduction that you claimed on Schedule 1 (Form 1040), line 20. 8880 flow to 1040, Sch 3, p1, line 4 Note: must have taxable income to get credit 2023 – Guidelines: … Credit Amount 1. Max credit is $2,000 married filing joint; $1,000 all others. 2. Depending on adjusted gross income, credit amount is 50%, 20% or 10% of the contribution made; with max as listed in #1. 3. Non-Refundable credit. However, it can lower your tax bill. … Eligible 1. Must contribute to retirement plan. Cannot be rollover contribution. 2. Age 18 or older, 3. Not claimed as a dependent on another person’s return, and 4. Not a student … Income limits – see IRS website 2022 – Who Qualifies: … Anyone who contributed to a retirement plan AND meet income guidelines … Income limits: Income from Form 1040, 1040-SR, or 1040-NR, line 11, cannot be more than; $34,000 Single; $51,000 if head of household; and $68,000 if married filing jointly … Contribution Requirement: you must have made a contribution (other than rollover contributions) to; (a) traditional or Roth IRA; (b) elective deferrals to a 401(k), 403(b), governmental 457(b), SEP, SIMPLE, or to the federal Thrift Savings Plan (TSP); (c) voluntary employee contributions to a qualified retirement plan, as defined in section 4974(c) (including the federal TSP); (d) contributions to a 501(c)(18)(D) plan; or (e) contributions, as a designated beneficiary of an ABLE account, to the ABLE account, as defined in section 529A. — Non Refundable credit. However, it does lower your tax bill. ——LACERTE—— Suppose to auto create, based on info entered. Lacerte will typically generate this credit automatically based on your IRA contribution entries in Screen 10, Wages, Salaries, Tips, Screen 13.1, Pensions, IRAs (1099-R), and Screen 24, Adjustments to Income. If your client meets all the conditions for the credit, but the form isn’t generating, make sure that your inputs are marked accurately as Taxpayer or Spouse. Additionally, if the credit is being reduced by a pension distribution on line 4, see Form 8880 Not Generating Credit Due to Pension Distributions in Lacerte. |
| 8938 | Statement of Specified Foreign Assets (need to investigate further) |
| 8949 vs 4797 8949 A= short term, basis reported B= short term, basis not reported C= short term, not received D= long term, reported E= long term, not reported F= long term, not received | info 8949 – Sales and Other Dispositions of Capital Assets. Form 8949 is for gains/losses on personal property. Property is not for producing income. 4797 – Sale of Business Property Form 4797 is for property used for business purposes, which is for producing income Part I — Sales or Exchanges of Property Used in a Trade or Business and Involuntary Conversions From Other Than Casualty or Theft—Most Property Held More Than 1 Year. Part II — Ordinary Gains and Losses. This section is for property held for a year or less. Part III — Gain From Disposition of Property Under Sections 1245, 1250, 1252, 1254, and 1255. This section is used to calculate the gain on specific types of properties as listed in the section title. Part IV — Recapture Amounts Under Sections 179 and 280F(b)(2) When Business Use Drops to 50% or Less. This is the shortest section on Form 4797. It is self-explanatory and only applies to property types for Sections 179 and 280F(b)(2). Examples: 1. Sell of your personal residence is reported on 8949. 2. Sell of a rental property is reported on form 4797 3. Sell of land that was held for investment only and not for production of income, is reported on form 8949. 4. Sell of stocks, bonds, etc are reported on form 8949. ——LACERTE—— 1. 4797, line 8 IRC 1231 loses enter in 17, select description/property, then in left panel click “Carryover/Misc”, enter info in section Form 4797, field Net Section 1231 Losses 8949: Accrued Market Discount 1. 17 (Dispositions), bottom left menu click Schedule D |
| 8958 | Allocation of Amounts Between Certain Individuals in Community Property States Complete for Married Filing Separate and person(s) live in community property state – ex California ——LACERTE—— 1. Go to 3.1 (Community Property Income Allocation) 2. Complete for the different income i.e., wages, interest income, dividends, state income tax refund,… |
| 8960 | Net Investment Income Tax – Rate is 3.8% on certain net investment income of individuals, estates and trusts that have income above the statutory threshold amounts. – Includes interest, dividends, capital gains, rental and royalty income, non-qualified annuities, etc. – Not included, wages, unemployment compensation, Social Security Benefits, alimony, and most self-employment income. |
| 8995 vs 8995-A | Both are for qualified business deduction. – 8995 is the simplified form, only one page. – 8995-A is complex form, two pages, four section. you calculate phase-in/out deductions; plus other calculations. |
| 8995 – Qualified Business Income Deduction (QBI) | Flow to 1040, line 13 qualified business income deduction Lacerte Info how enter and calculate QBI See also info 2023 – who can take deduction Where owners of pass-through entities—sole proprietorships, partnerships, LLCs, or S corporations—use to take the qualified business income (QBI) deduction, also known as the pass-through or Section 199A deduction. – Pass through income is business income that you report on your personal tax return. – Qualified Business Income means your business’s net profit. – Business owners can deduct up to 20% of their qualified business income. – 2023: Total taxable income (this is not just your business income but other income as well) in 2023 must be under $182,100 for single filers or $364,200 for joint filers to qualify. – 2024: In 2024, the limits rise to $191,950 for single filers and $383,900 for joint filers. – If you’re over that limit, complicated IRS rules determine whether your business income qualifies for a full or partial deduction. – Not all business income qualifies. QBI excludes: a. Capital Gains or Losses, b. Dividends, c. Interest Income, d. Income earned outside U.S., e. certain wage and guaranteed payments made to partner and shareholders – If your total QBI is less than zero, you must carry the loss forward into the next tax year. |
| Above Line vs Below Line Deductions | Above the line deductions are used in calculating your adjusted gross income (AGI). Below the line deductions are deducted after your AGI has been calculated to arrive at your taxable income. Above the line – IRA – Health Savings Accounts – Student Loan Interest – Education (Teachers) expenses – Early Withdraw Penalties Below the line – Itemized deductions |
| Adoption | Form 8839, flow to Schedule 3, line 6c IRS Info Lacerte – Screen 37 – Get Credit for qualified adoption expenses paid to adopt an eligible child. It is a non-refundable credit. However, credit in excess of your tax liability may be carried forward for up to file years. – Exclude from income any employer-provided adoption assistance. Eligible Child – An individual who is under the age of 18 or is physically or mentally incapable of self-care Qualified Adoption Expenes 1. Reasonable and necwssary adoption fees 2. Court costs and attorney fees. 3. Traveling expenses; including meals and lodging while away from home 4. Other expenses directly related to and for adopting a child 2023 Tax Credit a. max credit $15,950; b. phase out at modified adjusted gross income > $239,230 c. complete phase out at modified adjusted gross income > $279,230 2022 Tax Credit a. max credit $14,890 b. phase out at modified adjusted gross income $223,410 c. complete phase out at modified adjusted gross income $263,410 Special Needs Adoption / Adoption from Foster Care For Adoptions, Special Needs does not mean disabled. Generally, “special needs adoptions” are the adoptions of children whom the state’s child welfare agency considers difficult to place for adoption. 1. You are eligible for the maximum amount of credit in the year the adoption became final for each adopted child. 2. You can claim max credit even if you had little or no adoption expenses. However, Max credit will be reduced by any qualified adoption expenses you claimed for the child in prior years. Note: you only get max credit; not max credit plus adoption expenses. 3. Modified Adjusted Gross Income Apply A child has special needs for purpose of the adoption expenses if: 1. Child is a citizen or resident of the United States or its territories when the adoption effort began; 2. A state determines that the child can’t or shouldn’t be returned to their parents’ home; and 3. The state determines that the child probably won’t be adoptable without assistance provided to the adoptive family. |
| Adoption California | Form 540, line 43 or 44 California Info 2023 Tax Credit – California If you adopted a child in California you can claim a credit for 50% of the cost. – Max deduction is $2,500 per child in a tax year. – If your costs were more, carry over the extra credit to future years until the credit is used. |
| Alimony | Alimony Paid — 1040, Sch 1, p2, line 19 Alimony Received — 1040, Sch 1, p1, line 2a Can You Deduct OR Must You Report Alimony Payment 1. Support Order AFTER 1/1/2019 – If your first spousal support order or judgment was completed on or after January 1, 2019: Federal income taxes = you cannot deduct the payments made AND you do not report payments received as income on taxes. State Income taxes = California law differ from Federal. You can deduct payments made AND you must report payments received as income on California taxes. 2. Support Order BEFORE 1/1/2019 – If your first spousal support order or judgment was completed before January 1, 2019: Federal and California are the same. You can deduct payments made AND you must report payments received as income on federal and state taxes. ——Lacerte—— Alimony Paid = 24, section = Alimony Paid, enter in Alimony paid Alimony Received = 14, section =Alimony and Other Income, enter in Alimony received |
| Alternative Minimum Tax (AMT) | Form 6251, Flow to 1040, Schedule 2, page 1, line 1 info on AMT ——LACERTE—— Force Print Alternative Minimum Tax 1. 40 (Alternative Minimum Tax 6251) 2. Scroll to bottom, field 1=Force Form 6251…, enter 1 |
| Amend Return – ATX | atx support Enter Original Return, if not in system; then select Amend Federal = 1040X; CA = CA SCHX Can adjust amount paid with extension Refund – Federal, cannot do direct deposit of refund – CA, you can direct deposit refund Create and e-filing form 1040X. 1. Open the original return 2. Click the Returns menu, then select Amend Return 3. The amendment form is installed to the return and opens the return. 4. Make changes 5. Be sure to add explanation on page 2 6. Save 7. Click e-file, Create E-file. |
| Amend Return – LACERTE | Individual Return | for other types | Trust Return Individual (screen 59) Partnership (screen 70) S-Corporation (screen 79) Corporation (screen 55) Exempt Organization (screen 74) Fudiciary (screen 74) Individual Return (screen 59) 1. Copy existing return, name file AMEN9999 2. Open return you just copied (AMEN9999) 3. Go to Screen 59, Amended Return (1040X) 4. Select returns to amend (federal/state) from the drop down in Federal/State return(s) to amend (Ctrl+T) (MANDATORY) and select OK to continue. 5. Select year to amend 6. Verify the time and date listed in the information window, then select OK. 7. Lacerte will automatically bring over original amounts from the return into the Original Amounts column on this screen. If the amounts don’t auto-populate, make sure the F4 status of the return isn’t marked as Return Complete. 8. Enter reason for amend in Section =Explanation of changes Remember to enter reason for amending 9. Use the primary input screens to make the necessary corrections to the return. For example, if you’re amending to report additional wages, go to Screen 10, Wages, Salaries, Tips to correct the wage amount. – Use the Forms tab to review the 1040X for accuracy. Refund for Amended Return – Federal, cannot do direct deposit of refund – California, you can direct deposit refund |
| Amend Return California – ATX | CA Info for 2022 For other years search: California 2020 Instructions for Schedule X (change 2020 to year you want) Individual filing amended personal return, use Schedule X; attach Schedule X to your completed amended tax return. Attach to amended tax return: – Federal schedules if you made a change to your federal tax return. – Documents supporting each change, such as corrected federal Form(s) W-2, Wage and Tax Statement, or 1099, California Schedule(s) K-1, Share of Income, Deductions, Credits, etc., escrow statements, court documents, contracts, etc. |
| Assembly Return | Individual (1040) Corporation (1120) Partnership (1065) Estates (1041) |
| Bonus Contribution | Bonus Contributions means amounts contributed to the Plan by the Employers. Bonus Contributions are part of the ESOP (Employee Stock Ownership Plan). |
| Business Mileage, Vehicle Lease | Beginning Jan. 1, 2023, the standard mileage rates for the use of a car (also vans, pickups or panel trucks) will be: … 65.5 cents per mile driven for business use, up 3 cents from the midyear increase setting the rate for the second half of 2022. … 22 cents per mile driven for medical or moving purposes for qualified active-duty members of the Armed Forces, consistent with the increased midyear rate set for the second half of 2022. … 14 cents per mile driven in service of charitable organizations; the rate is set by statute and remains unchanged from 2022. These rates apply to electric and hybrid-electric automobiles, as well as gasoline and diesel-powered vehicles. |
| Business / Short-Term Rentals | Sch C, flow to 1040 line 8 (or 1040, Sch 1, p1, line 3) If Taking Depreciation If your short-term rental only averages 30 days or less as an average rent period, it would classify as transient. It is therefore classified as a commercial property and depreciates over 39 years. |
| Business Taxes | IRS Info 1. Income Tax All businesses except partnerships must file an annual income tax return. Partnerships file an information return. 2. Extimated Taxes Generally, you must pay taxes on income, including self-employment tax, by making regular payments of estimated tax during the year. 3. Self Employment Tax Self-employment tax (SE tax) is a social security and Medicare tax primarily for individuals who work for themselves. Your payments of SE tax contribute to your coverage under the social security system. Social security coverage provides you with retirement benefits, disability benefits, survivor benefits, and hospital insurance (Medicare) benefits. Generally, you must pay SE tax and file Schedule SE (Form 1040 or 1040-SR) if either of the following applies. — If your net earnings from self-employment were $400 or more. — If you work for a church or a qualified church-controlled organization (other than as a minister or member of a religious order) that elected an exemption from social security and Medicare taxes, you are subject to SE tax if you receive $108.28 or more in wages from the church or organization. 4. Employment Taxes When you have employees, you as the employer have certain employment tax responsibilities that you must pay and forms you must file. Employment taxes include the following: — Social security and Medicare taxes — Federal income tax withholding — Federal unemployment (FUTA) tax 5. Excise Tax You may have to pay and file the forms if you do any of the following. — Manufacture or sell certain products. — Operate certain kinds of businesses. — Use various kinds of equipment, facilities, or products. — Receive payment for certain services. |
| CA 565 vs CA 568 | CA 565 – Return of Partnership Income – File by Partnership Filed by a partnership (including REMICs classified as partnerships) that engages in a trade or business in California or has income from a California source must file Form 565. LLCs Classified as Partnerships File Form 568 LLCs classified as partnerships should NOT file Form 565, Partnership Return of Income. CA 568 – Return of Limited Liability Income – File by LLC Form 568 must be filed by every LLC that is not taxable as a corporation if any of the following apply: The LLC is doing business in California. The LLC is organized in California. |
| California Adjustments | While the Tax Cuts and Jobs Act (TCJA) eliminated various deductions, California Not Confirm – Allows (and not allow) Deducting the following 1. Business can NOT take Section 199A, Qualified Business Income (QBI) 20% deduction 2. State and Local Tax deduction can exceed $10,000 3. Unreimbursed employee business expenses are allowed 4. Employee Moving expenses allowed (Form FTB 3913) 5. Miscellaneous Expenses allowed include: a. Investment Advisory and Management fees b. Legal and Tax Advice fees c. Trust Fees to manage IRAs and other investment accounts d. Safe Deposit box rental fees e. Tax Prepare Fees 6. Alimony Payments – taxable to individual receiving alimony payments, and person making alimony payments can deduct payments as an “above the line” adjustment to income 7. Mortgage Interest – allow deductions for home mortgages up to $1 million plus up to $100,000 in equity debt, regardless of date purchased. (TCJA limits to $750,000, depending on date purchased) 8. Cannabis Business – between 1/1/2020 and 1/1/2025 If licensed, cannabis business can deduct ordinary and necessary business expenses on California return. If not license, business can NOT take deductions; they can deduct cost of goods sold. California Conform / Agree with TCJA on following 1. Medical Expense must be 7.5% of adjusted gross income 2. ABLE program (Achieving a Better Life Experience) 3. Cannot deduct Business Entertainment Expenses 4. Can exclude Student Loan Debt Cancellation from taxable income, if for profit school closed 5. many other areas |
| Capital Gain / 1099-B | Form 8949, flow to Sch D for State: CA, flow to CA sch D (540) |
| Capital Loss Carryover | Schedule D | Sample Carryover Schedule D | Sample 2 Capital Losses flow to 1040, line 7 State: Sample ATX: CA Sch D 540, tab= Cap Loss Co (next year) – Max allowed to deduct each year is $3,000 – Use Short-term Carryover amount first, then long-term amount – Capital losses that exceed capital gains in a year may be used to offset ordinary taxable income up to $3,000 in any one tax year. Net capital losses in excess of $3,000 can be carried forward indefinitely until the amount is exhausted. Get Remaining Balance / Next Year Carryover Info ATX: Sch D, tab= Cap Loss Co (Next Year) Lacerte: 17 (dispositions), click button Carryover/Misc Calculate Carryover Loss using amounts on Schedule D – amount must be negative to be a loss carryover – positivie amount is NOT a loss carryover – you subtract 3,000 to get amount; since loss is negative, you add 3,000 1. Short-Term Carryover = line 7 amount +3,000 2. Long-Term Carryover = line 15 amount +3,000 Enter Carryover Info – Lacerte Instruction on Different Types of Returns 1. Individual Return: 17, Section Dispositions, click button “Carryovers/Misc”, enter info in Schedule D – Capital Loss Carryover |
| Cancellation of Debt (Debt Cancellation) | Client receives 1099-C 1040, p1, line 8, click arrow, line 8c, click arrow, 8c (or can enter on line 8z) or, 1040, Sch 1, p1, line 8c, click arrow, 8c Exclusion for Qualified Principal Residence 1. Provide tax relief on canceled debt for homeowners involved in mortgage foreclosure 2. Allow taxpayer to exclude up to $2,000,000 for married filing joint; $1,000,000 all others 3. Under Consolidated Appropriations Act of 2021, congress retroactively extended from 2018 through 2025 tax year. 4. Taxpayers can exclude mortgage foreclosure debt cancellation from taxable income |
| Car Payment – Car Lease Lease Down Payment | Purchased Car 1. Cannot write off car loan payments 2. Cannot write off down payment 3. You can write off car loan interest, based on business usage % Leased Car 1. You can write off lease payment, based on business usage % 2. You can amortize lease down payment over the term (life) of lease agreement Standard or Actual Mileage Deduction Standard mileage rate is the best method when you drive a lot for work. Otherwise, actual is better. Costs not included with Standard Mileage, but can be deducted – parking fees, – tolls, – DMV fees, – car washes – etc. Changing from Standard to Actual Mileage If you use the standard mileage method in the first year, you can change to the actual expenses method the next year. However, if you use the actual expenses method the first year, you cannot change to another method in future years. |
| Car Sale | Report on Schedule D If you made a profit on the sale of your car Example: purchased car for $5,000 and sold it for $7,500; you made $2,500 profit; therefore you must report sale on taxes. Proceeds = Sale Price Cost Basis = Purchase Price + Shipping Costs + Setup Costs + Sales Tax + Improvements a. Cost Basis does NOT include regular maintenance or repairs b. And, You must subtract any sales tax refunds and manufacturer rebates From Cost Basis |
| Carryover Losses Carryforward Losses Carryback Losses Unallowed Losses Carryover Carryover Sample Carryover Example Carryover Credit Carryforward Carry Forward | – 1116 Foreign Tax Carryover a. Lacerte: 35.1 Foreign Tax Credits; Section top left, Foreign Tax Credit Carryovers b. ATX: Go to 1116, Tab =Sch B, Line 7, Current Year Carryover – 4952 Carryover – Investment Interest Expenses a. Lacerte: 25 – Itemized Deductions; Section Interest / Investment Interest Carryover – 8582 Carryover – Rental Property, Schedule E a. Lacerte: 18 – Rental (Schedule E); Section Prior Year Unallowed Passive Losses b. AT: Sch E, p1, bottom tab= click loss limitation, ck ‘X’ at top of page to enter prior year At-Risk or Passive Carryover amounts – 8829 Carryover – Business Use of Home a. Lacerte: 29 – Business Use of Home; Section Carryover of Unallowed Expenses – 8995 Carryover – Qualified Business Income Deduction a. If QBI for Rental: Lacerte: Screen 18, Section Prior Year Unallowed Passive Losses b. If QBI for Business: Lacerte: Screen 16, Section Prior Year Unallowed Passive Losses c. If QBI for K-1: Lacerte: Screen 20.1, Select K-1 Type, Section Prior Year Unallowed Qualified Business Income – K-1 1065 Carryover – Passive a. Lacerte: Screen 20.1, Select K-1 Type, Section Prior Year Unallowed Passive Losses – Partnership Basis Carryover a. Lacerte: Screen 20.1, Select K-1 Type, Section Basis Carryovers b. ATX 1. On the K-1 (1120S) or K-1 (1065) Input tab select the box at the top “Check (X) to enter prior year Passive carryover amounts”. 2. Prior year passive losses should be entered on the Input tab in the Passive Limitation section at the very bottom of the sheet. Schedule C Carryover – Business a. Lacerte: 16 – Business Income, Section Prior Year Unallowed Passive Losses – Schedule D Carryover – Capital Losses (Sample 2 | State Sample) a. Lacerte: 17.1- Dispositions; Section Carryovers/Misc Info (or click button Carryovers/Misc) b. Capital Losses flow to 1040, line 7 |
| Casualty Lost or Theft | Form 4684; flow to 1040, Sch A, line 15 for personal flow to 1040, Sch 1, line 4 or 4797 for Business / Trade Property a Total Loss If your rental property is completely destroyed or stolen, your deduction is calculated as follows: Adjusted basis – Salvage value – Insurance proceeds = Deductible loss. Your adjusted basis is the property’s original cost, plus the value of any improvements, minus any deductions you took for regular or bonus depreciation or Section 179 expensing. You determine the basis for your building, land improvements, and landscaping separately. Adjusted basis should be easily found from a rental property’s depreciation schedules and/or tax returns filed for the property. Salvage value is the value of whatever remains after the property is destroyed. This usually won’t amount to much. For example, if a rental house burns down completely, there may be some leftover bricks, building materials, personal property, and other items with some scrap value. Obviously, if a personal property item is stolen, there will be no salvage value at all. |
| Celsius Bankruptcy Digital Currency | Per Celsius Bankruptcy Order Sample Calculation | Celsius Distrubtion Effective Date 1/16/24 see page 13 | Celsius Value Time of Bankruptcy see page 5 | more info 1. Bankruptcy filed 11/21/2022 2. Persons holding coins in Celsius will value their holding based on coin worth on 7/13/2022. They can use this amount to determine their claim with Celsius. 3. Celsius Bankruptcy order issued 3 types of assets to settle claims: BTC (Bitcoin), ETH (Ethereum), and Shares of Ionic Stock. 4. Court put the Issued assets value, of the coins, based on worth on 1/16/2024; which is BTC = $42,972.9948 ETH = $2,577.4752 Ionic Stock = $20 per share |
| Charity Donations | 2023 – must itemize to get charity donation – there are no above the line deductions – limit on cash contributions is 60% of taxpayer’s adjusted gross income 2022 – must itemize to get charity donation – there are no above the line deductions -$300 or $600 married filing joint – limit on cash contributions is 60% of taxpayer’s adjusted gross income Benefits – Charity donations reduce your tax bill roughly 25 cents for every dollar donated. 50% Charities = most religious groups, schools, hospitals and public charitable organizations 30% Charities = veterans associations, fraternal organizations and cemetery organizations. Plus, Deductions for contributions of long-term capital gain property (such as appreciated securities held for more than one year) are limited to 30% of AGI. |
| Charity Donations – Non Cash > $500 | Form 8283 Make Donor Cost / adjusted basis 3.1 time fair market value |
| Child and Dependent Care Credit (child care provider) Child Care Expenses | Form 2441 — flow to 1040, Sch 3, p1, line 2 CA FTB 3506 Also, check amount on W2, Box 10 — flow to 1040, line 1e – must enter expenses in 2441 to eliminate line 1e taxable income HouseHold Employees count as child care expenses. You report household employee on Schedule H and also enter amount on 2441 2023 – max expenses is $3,000 one dependent AND $6,000 for 2 or more dependents – child must be under 13 when care provided – spouse physically or mentally not able to care for themselves and lived with you half the year 2022 – max expenses $2,000 for each dependent – child must be under 17 at end of 2022 2021 – max expenses $3,000 to $8,000 for one dependent; AND $6,000 to $16,000 for 2 or more IRS Info – claiming credit … Amount Employer paid or incurred on your behalf. Amounts over $5,000 are also included in box 1 … Complete form 2441 to determine amount in box 10 you can exclude from income. … Must get receipts from taxpayer that total to amount in box 10 |
| Child Filing Taxes Under 19 or Student under 24 Claiming Kid Claim Kid Claiming Child Claim Child | IRS Kids Fililng (publication 929) — Once your child reaches the age of 18, they are considered an adult in the eyes of the IRS. However, if they are still a full-time student, you can continue to claim them as a dependent until they turn 24. Once they are no longer a full-time student, you must stop claiming them. —W-2: If your dependent receives a Form W-2, you cannot report it on your tax return. Your dependent has to report the Form W-2 on their own tax return (if they are required to file). • A minor who may be claimed as a dependent must file a return if their income exceeds their standard deduction. • A minor who earns less than standard deduction will not owe taxes but may choose to file a return to receive a refund of withheld earnings. • A child who earns [$1,150] or more in “unearned income,” such as dividends or interest, needs to file a tax return. • A minor who earns tips or makes more than [$400] in self-employment income will have to pay Social Security or Medicare taxes, regardless of their total earnings. |
| Child and Dependent Care Tax Credit | Form 2441, Flow to 1040, Sch 3, Part 1, line 2 — CA FTB 3506 2023 1. Max credit up to $3,000 for one individual; $6,000 for two or more individuals 2. Who Qualify a. Your dependent qualifying child who was under age 13 when the care was provided, b. Your spouse who was physically or mentally incapable of self-care and lived with you for more than half of the year, or c. An individual who was physically or mentally incapable of self-care, lived with you for more than half of the year, and either: (a) was your dependent; or (b) could have been your dependent except that he or she received gross income of $4,400 or more, or filed a joint return, or you (or your spouse, if filing jointly) could have been claimed as a dependent on another taxpayer’s 2022 return. Care Must be Provided by 1. Daycare provider or person. You will need their tax ID or SSN, address, phone number, etc. Care Can NOT be Provided by 1. Your Spouse 2. Parent of Child; i.e. ex-spouse 3. Anyone listed as a dependent on your tax return 4. Your own child age 18 or younger, regardless of whether they are a dependent on your tax return Child Tax Credit vs. Child and Dependent Care Credit Although similar sounding, the child tax credit and the child and dependent care credit are not the same thing. The child tax credit is a tax incentive for people with children, while the child and dependent care credit is another tax credit for working parents or caretakers designed to help offset expenses such as day camp or after-school care. Both credits have different rules and qualifications. |
| Credit for Other Dependents (ODC) | Schedule 8812, Flow to 1040, p2, line 19 If your child or a relative you care for doesn’t quite meet the criteria for the CTC but you are able to claim them as a dependent, you may be eligible for a $500 nonrefundable credit called the “credit for other dependents.” 1. Max credit is $500 for each dependent 2. Who Qualify a. Dependents of any age, including those who are age 18 or older. b. Dependents who have Social Security numbers or Individual Taxpayer Identification numbers. c. Dependent parents or other qualifying relatives supported by the taxpayer. d. Dependents living with the taxpayer who aren’t related to the taxpayer. |
| Child Tax Credit (CTC) | Schedule 8812, Flow to 1040, p2, line 19 Credit for people who have a qualifying child. It can be claimed in addition to the Credit for Child and Dependent Care Expenses. 2023 1. Max credit – $2,000 per child 2. Allow up to $1,600 to be refundable. If credit greater than tax liability, can only get max refund of $1,600. 3. Income Limit – Modified Adjusted Gross Income (MAGI) $200,000 for Single, Married Filing Separate, & Head of Household. MAGI $400,000 for Married Filing Jointly. 4. Who Qualify a. Age: Your child must have been under the age of 17 at the end of 2023. b. Relationship: The child you’re claiming must be your son, daughter, stepchild, foster child, brother, sister, half brother, half sister, stepbrother, stepsister or a descendant of any of those people (e.g., a grandchild, niece or nephew). c. Dependent status: You must be able to properly claim the child as a dependent. The child also cannot file a joint tax return, unless they file it to claim a refund of withheld income taxes or estimated taxes paid. d. Residency: The child you’re claiming must have lived with you for at least half the year (there are some exceptions to this rule). e. Financial support: You must have provided at least half of the child’s support during the last year. In other words, if your qualified child financially supported themselves for more than six months, they’re likely considered not qualified. f. Citizenship: Per the IRS, your child must be a “U.S. citizen, U.S. national or U.S. resident alien,” and must hold a valid Social Security number. g. Income: Parents or caregivers claiming the credit also typically can’t exceed certain income requirements. Depending on how much your income exceeds that threshold, the credit gets incrementally reduced until it is eliminated. 2022 1. Max Child Tax Credit – $2,000 2. Sch 8812, line 13a and 14f 2021 1. Max Child Tax Credit – $3,600; also fully refundable; and monthly advance payments made; per American Rescue Plan Act in 2021. 2. Who Qualify as a Dependent a. Be under age 17 at the end of the year b. Be your son, daughter, stepchild, eligible foster child, brother, sister, stepbrother, stepsister, half-brother, half-sister, or a descendant of one of these (for example, a grandchild, niece or nephew) c. Provide no more than half of their own financial support during the year d. Have lived with you for more than half the year e. Be properly claimed as your dependent on your tax return f. Not file a joint return with their spouse for the tax year or file it only to claim a refund of withheld income tax or estimated tax paid g. Have been a U.S. citizen, U.S. national or U.S. resident alien |
| Additional Child Tax Credit (ACTC) | Schedule 8812, Flow to 1040, p2, line 19 The ACTC is a credit that may be available to a taxpayer who qualified for the Child Tax Credit (CTC), but who could not get the full amount of the CTC. The ACTC is a refundable credit, which means that it can produce a refund even if there is no tax liability on the return. Question: May I claim the child tax credit/additional child tax credit or credit for other dependents as well as the child and dependent care credit? Answer: Yes, you may claim the child tax credit (CTC)/additional child tax credit (ACTC) or credit for other dependents (ODC) as well as the child and dependent care credit on your return, if you qualify for those credits. |
| Crypto Currency Coinbase Coin base digital currency bitcoin, bit coin | Sample Coinbase Enter on 8949 Sales and Dispositions Flow to Schedule D 1. Client should give you 8949 report. This report is a summary of their capital gain and losses from their crypto trading. 2. If client gives you a list of transactions from their trading, tell client to use online software to convert transactions into 8949 report OR Schedule D |
| Currency Exchange Rates Foreign Currency Exchange | US TFMS – lookup Treasury Rate Exchange |
| De Minimis | Still enter info on taxes. It means amount is too small of a factor, based on an overall picture over a period of time. The de minimis rule states that if a discount is less than 0.25% of the face value for each full year from the date of purchase to maturity, then it is too small (that is, de minimis) to be considered a market discount for tax purposes. Instead, the accretion should be treated as a capital gain. |
| Deduction Vehicle (Vehicle Deductions) | Employees who are not a business owner Federal Taxes Employees who use their car for work can no longer take an employee business expense deduction as part of their miscellaneous itemized deductions reported on Schedule A. Employees can’t deduct this cost even if their employer doesn’t reimburse the employee for using their own car. This is for tax years after December 2017. State Taxes Employees can deduct on form 2106 |
| Deferred Compensation Nonqualified Deferred Compensation | Nonqualified Deferred Compensation Plan – Info Employee a. If employee receives 1099 for other income; enter on 1040, Schedule 1, line 8z. Do NOT deduct self-employment taxes. b. FICA and Medicare taxes should have been deducted when the compensation was originally deferred. Qualified Plans Examples — 401(k) plans, 403(b) plans, profit-sharing plans, and Keogh (HR-10) plans. NonQualified Plans Examples a. Voluntary salary and bonus deferrals b. Stock plan deferrals (e.g., Restricted Stock Units, Performance Awards) c. Executive bonus plans Qualified plans are funded with pre-tax money and withdrawals are taxed as ordinary income. Non-qualified plans are funded with after-tax money, and only earnings are taxed upon withdrawal. Qualified deferred compensation plans have a limit. For example, employees can only defer up to $23,000 to their traditional 401(k) plan in 2024. Nonqualified deferred compensation plans have no limit. Employees can defer as much of their compensation as they would like. |
| Dependent | To claim your child as your dependent, your child must meet either the qualifying child test or the qualifying relative test: Qualifying Child Test – Your child must be younger than you AND – either younger than 19 years old or be a “student” younger than 24 years old as of the end of the calendar year. There’s no age limit if your child is “permanently and totally disabled” or meets the qualifying relative test. Qualifying Relative Test – Child’s gross income must be less than $4,400 for the year. When does your child have to file a tax return? For 2022, a child typically can have up to $12,950 of earned income without paying income taxes. |
| Depletion | on Schedule C, line 12 – calculate as 15% of gross income from oil and gas property |
| Depreciation vs Amortization | Depreciation is tangible assets. It is a planned, gradual reduction in the recorded value of a tangible asset over its useful life by charging it to expense. Depreciation is applied to fixed assets, which generally experience a loss in their utility over multiple years. Example Depreciation Assets: building, equipment, vehicles, machines, Amortization is intangible assets; where expense is taken over the life of the asset. It is the process of incrementally charging the cost of an intangible asset to expense over its expected period of use, which shifts the asset from the balance sheet to the income statement. Need to Know the number of year asset will exist; and that is the number of years used in the amortization. Example Amortization assets: closing costs, client lists, loans, patents, copyrights, taxi licenses, trademarks, etc. |
| Depreciation vs Expense | See IRS Q&A |
| Depreciation | Form 4562 Net Book Value – original cost of asset MINUS accumulated depreciation, accumulated depletion, accumulated amortization, and accumulated impairment. Recovery Basis 1. If Property Acquired by Purchase. Recovery Basis = asset purchase price, minus any discounts, and plus any sales taxes, delivery charges and installation fees. 2. If Property Acquired by Gift. Recovery Basis = same as the donor’s basis at the time of the gift (what donor say property is worth) 3. If Personal-use Property Converted to Business Use. Recovery Basis = lower of a. fair market value at the time fo the conversion or b. cost plus any additions or improvements, and minus any deducted casualty losses, up to the time of the conversion Method DB = declining balance. Depreciation Expense will be faster in the early years of the asset’s life but slower in the later years. 200 DB – 200% Declining Balance The percentage is calculated based on the service life of the asset. For example, if an asset has a service life of five years, the percentage is calculated as 40 percent (200% ÷ 5). 150 DB – 150% Declining Balance 125 DB – 125% Declining Balance SL/GDS – Straight Line / General Depreciation System SL/ADS – Straight Line / Alternate Depreciatin System SL/4562 – Straight Line reported on form 4562, depreciation and amortization A18 – 18 year property placed in service 3/16/1984 – 6/22/1984 (assets fully depreciated by 2004) A18b – 18-yr real property placed in service 6/23/1984 – 5/8/1985 (assets fully depreciated by 2005) A19 – 19-yr real property placed in service 5/9/1985 – 12/31/1986 (assets fully depreciated 2006) SYD – sum-of-the-years-digits – This method originated for pre-1981 assets but can be used for a current asset if you elect out of using MACRS. The depreciation is determined by multiplying the cost by a fraction (numerator is the remaining life and the denominator is the sum of the digits (years) in the useful life. PRE – PRE method can be used for property placed in service before 1987 (Pre-MACRS or ACRS). This method does not calculate so enter any depreciation manually. Other – assets are assigned to this method when they are imported from other software and the Fixed Assets form does not have the same method. In order to calculate future depreciation after importing, you will need to assign a method supported by the ATX tax program. Conventions (see atx definitions) HY = Half Year MM = Mid Month MQ1 = Mid Quarter, First Quarter MQ2 = Mid Quarter, 2nd Quarter MQ3 = Mid Quarter, 3rd Quarter MQ4 = Mid Quarter, 4th Quarter MY = Modified Half Year FM = Full Month |
| Depreciation | IRS – How Depreciate Property 2022 If Asset is < $2,000 expense it; do not depreciate If all Assets < $2,000 expense it; do not depreciate If Single Asset > $2,000 depreciate it To Depreciation an asset must – Be owned by you – Be used in your business or to produce income – Have a determinable useful life – Be expected to last for more than one year Depreciation Period NOTE: when improvement is done to commercial building, period is 39 years (for commercial, use 39 instead of 27.5 years) – Residential Rental Property = 27.5 years – Commercial Rental Real Estate & Buildings = 39 years – Remodeling/renovation to building (residential) = 27.5 years – Remodeling/renovation to building (commercial) = 39 years – HVAC units, air conditioners, roofs/gutters = 27.5 years – Water heater = 27.5 years – Painting (if part of large remodeling) = 27.5 years – Painting by itself = repair expense – Windows Installed = 27.5 years – Broken Windows fixed = expense – Door Replaced = 27.5 years – Damaged Door fixed, Door Knob replaced = expense – Furnace Replaced = 27.5 years – Carpet (tacked down) = 5 years – Carpet (glued down, considered part of building) = 27.5 years – Floor tile or hardwood = 27.5 years – Plumbing Improvement = 27.5 years – Bathroom Remodel = 27.5 years – Bathroom Faucet, Toilet, Tub, … (not part of remodel) = 7 years – Fixing leaking faucet, toilet, tub, … = expense – Office Furniture = 7 years – Office Equipment (desktop, laptop, printer, copier, electronic, …) = 5 years – Furniture in rental property = 5 years – Appliances (Stove, Oven, Microwave, Refrigerator, Sink, Washing Machine, …) = 5 years – Kitchen Remodel = 27.5 years – Kitchen Cabinets, Bathroom Cabinets, … cabinets = 7 years – Ceiling Fan, Light Fixtures = 5 years – Vehicles (auto, trucks, golf cart) = 5 years – Vehicles > 6,000 pounds AND Business use > 50%, you can use section 179 deduction, which lets you write off the full purchase price up to $1,080,000 for tax year 2022; and $1,160,000 for tax year 2023. – Fencing, Shrubs, Landscaping = 15 years – Parking lots, stairways, roads = 15 years – Replace Entire Roof, All Gutters, or All Windows = 27.5 years |
| Depreciation (items you cannot depreciate) | You Cannot Depreciate – Land – Collectibles (e.g., art, coins, memorabilia, etc.) – Investments (e.g., stocks and bonds) – Personal property (not used for business) – Leased property – Any asset used for less than one year |
| Depreciation – Bonus Bonus Depreciation | For Qualified Purchases: 9/27/2017 to 12/31/2022 = 100% depreciation 2023 = 80% depreciation 2024 = 60% depreciation 2025 = 40% depreciation 2026 = 20% depreciation 2027 = 0% depreciation |
| Depreciation – Section 179 Section 179 Depreciation | Allows businesses to write-off the full purchase price of any qualifying piece of equipment or software in the year it was purchased or financed. For 2023, you can expense up to $1,160,000. For 2022, you can expense up to $1,080,000. 1. The deduction starts to slip away after spending $2,700,000 If you spend more than $2,700,000 on qualifying property, your deduction will be reduced on a dollar-for-dollar basis. For example, if your business purchases $2,800,000 of property, you’ll have gone over the cap by $100,000. So your maximum Section 179 expense will be $980,000 ($1,080,000 minus $100,000). 2. Your net income is the ceiling Your Section 179 deduction is also limited to your business’ net income for the year—you can’t deduct more money than you made. For example, if you have net income of $50,000 before taking the Section 179 deduction into account, and you purchased $60,000 worth of eligible property, your deduction is limited to $50,000. At that point, you can opt to take regular depreciation on the remaining assets. |
| Depreciation – Real Estate A building can be depreciated, but land cannot Allowable Closing Costs – Real estate broker commission – Real estate finder or referral fees – Owner title insurance premiums – Title, Escrow, Attorney Fees – Attorney or Tax Advisor Fees – Recording and filing Fees – Documentary or transfer tax fees – Mortgage Interest – Property Taxes NOT Allowed Closing Costs … Pro-rated rents … Security deposits … Utility payments … Associations dues (HOA) … Repairs and maintenance costs … Insurance premiums … Home Warranty … Loan acquisition fees: points, appraisals, mortgage insurance, lenders title insurance, inspections and other loan processing fees and costs | Assessor Total Value (Land + Improvements) EQUALS Purchase Price Depreciation Cost Basis = Purchase Price (building value) + Capital Improvements + Allowable Closing Costs + Any Seller’s Debt Buyer Agreed to Pay Building Value = Purchase Price – Land Value Land Value = use info from county assessor ————————– Assessor Total Value (Land + Improvements) Does NOT Equal Purchase Price, then you must determine percent and amount for Land and Improvements (building). Assessor Example 1: Ryan bought office building for $100,000. However, property tax statement shows a total value of $80,000: Step 1: Determine Percents Improvements: $60,000 (75%) === (60,000 / 80,000 = 75%) Land: $20,000 (25%) === (20,000 / 80,000 = 25%) Total Value: $80,000 === (100%) Step 2: Determine Amounts Use percents from step 1 to calculate Land & Building Value Land Value = Purchase Price of $100,000 * 25% = $25,000 Building Value = Purchase Price of $100,000 * 75% = $75,000 So, depreciate $75,000 Note: If percents not provided, calculate as follows: Building % = improvements / total value = ($60,000 / $80,000) * 100 = 75% Land % = land / total value = ($20,000 / $80,000) * 100 = 25% Assessor Example 2: Bought a rental property for $200,000. However, property tax statement shows Total Value is $150,000 Building and Improvements: $120,000 Land: $30,000. Building Value = $120,000 / $150,000 total assess = 80% = 80% * $200,000 purchase price = $160,000 you depreciate |
| Depreciation – Real Estate – Lacerte | Screen 22 (Depreciation) If form 4562 not showing depreciation amount, i.e., 4562 is not being created, you can force 4562 to create and show amounts 1. Go to Depreciation screen a. Individual, Screen 22 b. Partnership, Screen 14 c. Corporate, Screen 21 d. S Corporate, Screen 16 e. Fiduciary, Screen 27 2. Select the Misc/Short Year button – in individual it is labeled Misc./Sec. 179 [O]; under the Asset section. 3. Scroll down to the Form 4562 section, Enter 2 to force Lacerte create 4562 only under certain conditions. So if it is not auto created, you need to force the creation. You can set option to always force creating 4562 1. Go to the Settings, Options (or Primary Options). 2. Select the Tax Return tab. 3. Scroll down to the Federal Tax Options section. 4. Select Force from the Form 4562 option. |
| Depreciation – Vehicle Vehicle Depreciation Business Vehicle Purchase Depreciate Vehicle Business Vehicle Depreciation | – Vehicles (auto, trucks, golf cart) = Depreciate 5 years – Can Depreciate Full Purchase Price, including Tax & License Fees, Warranty, Registrations. – Can NOT Depreciate financing / loan interest. Instead deduct interest in year it occurs. This is because if you sell vehicle before it is paid off, you would have to recapture interest that you previously deducted. Instead of recapturing, just don’t depreciate; but write of interest in year it occurs. – Vehicles > 6,000 pounds AND Business use > 50%, you can use section 179 deduction, a. 2023 can write off full purchase price up to $1,160,000 b. 2022 can write off full purchase price up to $1,080,000 |
| Disability Insurance | On disability insurance – it is mostly not deductible for sole proprietors unless it specifically only covers overhead and NOT loss of income. BUT, if they deduct premiums, then if they get disability payouts those are taxable. So balance whether they should deduct or not. For instance, Peter Grue is not going to get his $1400 premium deducted but if he collects ever, nothing is taxable and I would guess his payments would be more than the premium. I don’t think these are deductible anyway since his overhead for insurance purposes, is pretty low. |
| Due Diligence – CA FTB-3596 CA Earned Income Tax Credit | For CA – If CA Adjusted Gross Income is over $30,000 don’t complete CA FTB 3596. Person does not qualify for the credit 2=Y, 3=Y, 4=Y, 5=N a&b blank, 6=Y tax docs, 7=Y, 8=N/A, 9a=N, b=Y, c=N/a, 10=Y |
| Due Diligence – Form 8867 EIC, CTC/ACTC/ODC, AOTC, HOH | 1-Y, 2=Y, 3=Y, 4=Y a&b blank, 5=Y tax docs, 6=Y, 7=Y a blank, 8=Y, 9a=Y b&c blank, 10 thru 14 blank, 15=Y ——LACERTE—— 1. 77.2 (Paid Prepare Due Diligence) 2. Can check box, “Due diligence requirements have been completed” |
| Early Withdrawal Penalty | Can deduct on Form 1040, Sch 1, p2, line 18 |
| Earned Income Credit (EIC / EITC) Also known as Earned Income Tax Credit | 1040, p2, line 27 Schedule EIC (claim qualifying kids) ——LACERTE—— 38.2 (EIC, Residential Energy, Other Credits The EITC is a credit available to employed, low-income households. It is intended to boost the effective income of people who are employed. 2023 Maximum Credits – IRS Info … No qualifying children: $600 … 1 qualifying child: $3,995 … 2 qualifying children: $6,604 … 3 or more qualifying children: $7,430 2022 Maximum Credits Depends on # qualifying children and your income. Maximum Credit amount of Earned Income Tax Credit: … No qualifying children: $560 … One qualifying child: $3,733 … Two qualifying children: $6,164 … Three or more qualifying children: $6,935 Qualify – must have … Social Security number … Income from job, business, farm, or certain long-term disability benefits … Income less than $59,187 joint or $53,057 single, surviving spouses or head of household … Cannot file Form 2555 or 2555-EZ (foreign income) What Counts as Earned Income Examples… of earned income are: wages; salaries; tips; and other taxable employee compensation. Earned income also includes net earnings from self-employment. Earned income does not include amounts such as pensions and annuities, welfare benefits, unemployment compensation, worker’s compensation benefits, or social security benefits. For tax years after 2003, members of the military who receive excludable combat zone compensation may elect to include it in earned income. |
| Earned Income Credit California (CalEITC) | CA FTB 3514, info online To Qualify: … Must bo 18 or have a qualifying child … Earned income of at lease $1 AND not more than $30,000 … Have SSN or ITIN (individual taxpayer id number) … Live in CA for more than half year … Not claimed as child on anyone else return … Not claimed as dependent on anyone else return |
| Earned Income Credit (EIC) vs Child Tax Credit (CTC) | The child tax credit is a credit for having dependent children younger than age 17. The Earned Income Credit (EIC) is a credit for certain lower-income taxpayers, with or without children. |
| Education Expenses | 1040, Sch 1, p2, line 11 2023 Max deduction $600 if married filing joint; all others $300 2022 Max deduction $600 if married filing joint; all others $300 Qualify Kindergarten through grade 12 teacher, instructor, counselor, principal or aide for at least 900 hours a school year, in a school that provides elementary or secondary education. Qualify – Business Also, if you are going to school to improve skill for your business, you can deduction education expenses on schedule C. |
| Employee Business Expenses – Form 2106 | Form 2106 – State only deduction (CA still allow deductions) – No Federal write-offs, unless you are a qualified employee or eligible educator Qualified Employee 1. Armed Forces reservists 2. Qualified performing artists 3. Fee-basis state or local government officials 4. Employees with impairment-related work expenses – No other type of employee is eligible to claim this deduction. Eligible Educator Is a kindergarten through grade 12 teacher, instructor, counselor, principal or aide for at least 900 hours a school year in a school that provides elementary or secondary education as determined under state law. Use 2106 to deduct ordinary and necessary expenses for your job. – ordinary is one that is common and accepted in your field of trade, business, or profession. – necessary is one that is helpful and appropriate for your business. – an expense does not have to be required to be considered necessary. ——LACERTE—– To get expenses to show on form 2106, 1. Go to 30 (vehicle / employee business expense 2106) 2. Add Activity (note 2106 used by other forms, ex Sch C), so need to add activity 3. Top of page, set Form = Form 2106 4. MUST enter number in field “1=qualified performing artist, 2=handicapped 3=fee basis government official”. 5. Enter employee expenses in a. section =Employee Business Expenses; including meals and other than meals b. section =Vehicle Expenses –use only for vehicles that is not being depreciated. If vehicle is being depreciated click “Depreciation” button at top of screen and enter all vehicle info with the depreciation. |
| ESPP vs RSU Employee Stock Purchase Plan Restricted Stock Units | ESPP – grants you the option to purchase company stock at a specific price before a certain date. Whether, and when, you actually purchase the stock is entirely up to you. RSU – grants you the stock itself once the vesting period is complete. |
| Employee Stock Purchase Plan | Report Sell of Stock on Form 8949 / Schedule D You should have receive from 1099-B, regarding the stock sale. More Info 1. Make sure cost basis is correct. Sometime 1099-B may have cost basis as 0. In this case you need to determine cost basis. Employee should have report from when they purchased stock. 1a. Check if 1099-B has supplemental info that shows cost of stock when purchased 1b. Employee should have report on when they purchase stock When you buy stock under an employee stock purchase plan (ESPP), the income isn’t taxable at the time you buy it. You’ll recognize the income and pay tax on it when you sell the stock. When you sell the stock, the income can be either ordinary (if stock held for less than a year) or capital gain (if stock held for more than a year). |
| Estates vs Trust – CA | CA Filing Requirements – for Estates and Trusts An Estate is all the property a person owns (money, car, house, etc.). When a person passes away, their estate may be taxed. A Trust is an agreement to hold and administer property, typically in a written document in which someone (a trustee) is responsible for managing property for someone else (beneficiary). File Form 541 in order to: – Report income received by an estate or trust – Report income distributed to beneficiaries – File an amended return for the estate or trust – Claim withholding |
| Estate Taxes | An estate of any decedent dying in calendar year 2023 Exclusion amount is $12,920,000 if person died in calendar year 2023 2022 Exclusion amount is $12,060,000 if person died in calendar year 2022 California does NOT have an estate tax |
| Excess Distribution on Schedule K-1 | Reported on Schedule D, and since it is a gain, it increases your taxes. Excess distributions represent distributions paid from an S corporation to a shareholder in excess of the shareholder’s stock basis. Ways to Decrease or Eliminate Excess Distribution 1. Increase capital contributions (Form 7203) Check if tax payer has made contributions not accounted for on Schedule K-1. If so, enter these contribution on Form 7203. 2. Check that Beginning of Year Basis is entered / correct. Located on K-1 in section “Increases to Partner Basis”. |
| Extension – CA | CA FTB 3582; CA 540, p3, line 72 see Federal on how to submit in Lacerte |
| Extension – Federal File Extension | Individual Form 4868, 1040, Sch 3, p2, line 10 / 1040, p2, line 26 Confirmation extension filed: Form 9325 Business Form 7004 There is NO confirmation for business extension filed in ATX. Can print confirmation from Lacerte. ——LACERTE—— 1. Select Individual or Corporation (can select multiple using ctrl key) 2. Click icon “ef” or form menu select E-File, then select Start e-file extension wizard 3. Check box to file federal and California (or state) 4. Click Next 5. Cilck Send To Receive Acknowledgement 1. Click icon “ef down arror” or from menu select E-File, then select e-file acknowledg status, receive acknowledge status |
| Extension – Where to File | IRS – Mail 4868 – Individuals 7004 – Business 941 – Employer Quarterly Taxes States Extension Filing for each State |
| Filing Status Change Filing Status | Change from Married Filing Separate to Married Filing Joint Change from Single or Head of Household (HOH) to Married Filing Joint 1. IRS Info 2. Must file within three years from the due date of the original return without regard to extensions, provided the IRS did not mail either spouse a notice of deficiency for which a petition was filed timely in the U.S. Tax Court, and neither spouse has commenced a suit for refund in any court, or entered into a closing agreement, or offer-in-compromise. 3. If both persons have filed a return, Amend only one of the return. Amend most complex / detail return. 3. You only Amend one return; the other MFS, Single or HOH return will be disgarded |
| Fixed Asset – add | Example Building, Land, Refinance Add Form 4562 – Depreciation and fixed asset is added Or click on Depreciation in Rental or Business Schedule |
| Fixed Asset | Equipment – Bonus Depreciation starting 1/1/2023 cannot take 100% bonus depreciation; new per Bonus Depreciation for Qualified Purchases For Qualified Purchases: 9/27/2017 to 12/31/2022 = 100% depreciation 2023 = 80% depreciation 2024 = 60% depreciation 2025 = 40% depreciation 2026 = 20% depreciation 2027 = 0% depreciation |
| FBAR (Foreign Accounts) | Form 114 (sample) File if have >= $10,000 in foreign bank account, anytime during year; regardless of age Online System | FBAR Authorization Form | IRS Info ATX: must file online LACERTE 1. Go to 1 (Client Info), in section Electronic Return, check box Federal Form 114 (Taxpayer) (and spouse if apply). This will e-file form 114 2. Go to 82.1 (Foreign Reporting 114, 8938) 3. On left, Account section, click 1 under General Information Flow to Form 114 4. Information on Financial Accounts: a. set Type of account b. enter Financial Instution (this is the foreign bank) c. if joint account, enter info “Accounts Owned Jointly (Part III)”. Enter info for joint account holder — tax id, name, address 5. On left, top, Foreign, click “Statement of Foreign Assets” Flow to Form 8938 complete when account aggregate value exceed $50,000 a. enter Description of asset b. enter “Foreign Deposit and Custodial Accounts (Part 1)”. |
| Filing Requirements Minimum Filing Requirements | Who Must File Tax Return Minimum Income to file tax return 2023 IRS Minimum Income to file tax return 2023 California Minimum Income to file tax return |
| Flexible Spending Account (FSA – Healthcare) | An arrangement through your employer that lets you pay for many out-of-pocket medical expenses with tax-free dollars. Allowed expenses include insurance copayments and deductibles, qualified prescription drugs, insulin, and medical devices. You decide how much to put in an FSA, up to a limit set by your employer. You aren’t taxed on this money. If money is left at the end of the year, the employer can offer one of two options (not both): … You get 2.5 more months to spend the left over money. … You can carry over up to $500 to spend the next plan year. Flexible Spending Accounts are sometimes called Flexible Spending Arrangements. |
| Foreign Income Foreign Wages Foreign Taxes Foreign Income Taxes Form 2555 vs 1116 | Form 2555 (Foreign Earned Income) – you can exclude your foreign income from being taxed by U.S. Or reduce amount of taxes paid on foreign income. To Use Form 2555 You Must Pass Either: 1. Bona Fide Residency Test – resident of country for uninterrupted tax year 2. Physical Presence Test – living outside U.S. for full 330 days If you don’t pass either test, 1. Add foreign income as other income (gross income) 2. Use Form 1116 to get a foreign tax credit for the taxes you paid abroad. 3. Need copy of tax return filed in foreign country, so can verify taxes paid. Example: You live abroad and earn wages (salary or other income). You must file a U.S. tax return and pay taxes on those wages (income). You can file form 2555 if you have lived aboard for a certain amount of time. Or, enter gross foreign income as other income, AND file form 1116 to get a foreign tax credit. Lacerte Form 2555 = 31.1 (video) Or, Form 1040 Sch 1, p1, line 8z other income = 14.1 Form 1116 = 35.1 2023 Foreign Earned Income Exclusion is $120,000 2022 Foreign Earned Income Exclusion is $112,000 |
| Foreign Pension Income | Ex: Canada Pension NR4 More Info and Codes For ATX, entered on the FEC Wkst. Or, enter as Other Income (Sch 1, Z; or Line 8, Sch 1 (1040)) Or, depending on Code, enter in similar US tax form If you received the Canadian Form NR4 for retirement income, such as retirement benefits found in Code 39, you can use the IRS Form 1099-R (Retirement Income). The amount in the NR4 form is in Canadian dollars, so convert it to U.S. dollars before you enter it in your U.S. tax return. |
| Foreign Pension Ex: Canada NR4 Form | Reading Your NR4 Form – Canada Codes Here The NR4 Form is divided into two sections. The first section contains codes, income and withheld tax amounts. The second section contains your name and address as well as that of the company that paid you. In the first row, ensure that Box 10 has the correct year, representing the year that you earned the income. Ensure that Box 12 has your correct three-letter country code. If you’re an American, for example, it should be “USA.” Your gross income is in Box 16, as well as Box 26 if you had two different types of income from the same payer. Boxes 17 and 27 contain the amount of nonresident tax withheld from your gross income. Understanding Income Codes Boxes 14 and 24 on the NR4 Form reveal the type of income you received from the payer, while Boxes 15 and 25 show which country’s currency was used. It is important that you convert the amounts if you are filing taxes in a different country than the currency shown on the NR4 slips. Example Currency Codes CAD: Canadian dollars USD: United States dollars AUD: Australian dollars |
| Foreign Taxes – 1099-DIV Form 1116 | Flow to 1040, Sch3, p1, line 1 Error: Foreign taxes on line 15; adjust line 16…. -this mean problem with foreign tax amount in boxes 8b and 8c on form 1099-DIV |
| Foreign Tax Carryover Sch B 1116 Carryforward | Sample ATX: Go to 1116, Tab =Sch B, Line 7, Current Year Carryover Lacerte: Go to 35.1, in left menu click Foreign Tax Cfredit carryovers; Enter amount |
| Foreign Tax Credit | Flow to 1040, Sch3, p1, line 1; Form 1116 Sample Calculate Foreign Tax Credit: Dividends, Capital Gain Distribution, Foreign Taxes withheld. – If info not provided; instead, you are given percentages and amount Foreign Source Income = Ordinary Dividends (also called non-qualified) a. Ordinary Dividends = Total dividends and distributions i.e. = non-qualified (ordinary) + qualified + section 199A + long term capital gain, … b. Ordinary Dividends are taxed as ordinary income c. Ordinary Dividends are paid out of earnings and profits Foreign Qualified Income = Qualified Dividends a. Qualified Dividends = Qualified Dividends b. Qualified Dividends are taxed as capital gains, and thus a lower rate – For foreign taxes, foreign also includes Puerto Rico and American Samoa – Foreign tax capital gain is taxed at 30% flat rate Four Categories of Foreign Income 1. General Category Income – salary, wages, and any overseas allowances for an individual employee 2. Passive Income Category – money that you earn without having to perform a specific task or trade; include: dividends, interest, royalties, rents, annuities, and more. 3. Foreign Branch Category Income This refers to any business profit that you receive from a foreign business. This can also include multiple countries and businesses, but they do need to be qualified business units (QBUs). 4. Section 951A Category Income Sometimes referred to as global intangible low-taxed income (GILTI). It’s included by United States citizens who are shareholders in foreign companies going business on foreign shores. ——LACERTE—— Foreign Tax Credit for Individuals – Dividends, Interest Income, Other Income For Dividend (1099-DIV) Regardless of amount (even < $300), must first add Foreign Country in 35 (Foreign Tax Credit) 1. 35 (Foreign Tax Credit 1116) 2. Enter Name of country (ex: other country) 3. Enter Catetory of Income (see definitions above) 4. Enter if taxpayer or spouse 5. Goto 12 (Dividends) a. enter dividend info in top grid b. go to Section – Foreign Tax Credit c. select country name from drop menus (one entered in steps above) d. enter Ordinary and Qualified Dividends, Capital Gain Distribution e. enter “Foreign income tax withheld (US dollars)” f. Foreign Taxes Accrued = check box if foreign taxes were accrued. I.E., foreign taxes were accrued, but not paid. NOTE: you can take a foreign tax credit in the tax year you paid or accrued the foreign taxes g. 1099 taxes = check this box if foreign tax is from 1099 statement; ex: 1099-DIV, 1099-INT, etc. h. enter date paid or accrued (if not 1099 taxes) = if check 1099 taxes box, you don’t have to enter a date. If you did not check 1099 taxes box, and you don’t have date, can enter year end date; ex: 12/31/2022 For Schedule K-1 Foreign Tax Credit on 1040 Click here for instructions. Starting in tax year 2021 the IRS updated the Schedule K-1 to include a new Schedule K-3 to report the partner’s share of international transactions. This replaces and adds more detail to the codes that appeared on 1065 Schedule K-1, line 16 in prior years. Foreign Tax Credit Not Showing on 1040, Schedule 3, line 1 1. If no amount on 1040, line 15, then there is no taxable income (no taxes) to use credit against. 2. If you owe no taxes, then there is no tax to use credit against. 3. Check that it is not on Schedule A as a deduction Flow to 1040, Sch3, p1, line 1; Form 1116 For foreign taxes, foreign also includes Puerto Rico and American Samoa Four Categories of Foreign Income 1. General Category Income – salary, wages, and any overseas allowances for an individual employee 2. Passive Income Category – money that you earn without having to perform a specific task or trade; include: dividends, interest, royalties, rents, annuities, and more. 3. Foreign Branch Category Income This refers to any business profit that you receive from a foreign business. This can also include multiple countries and businesses, but they do need to be qualified business units (QBUs). 4. Section 951A Category Income Sometimes referred to as global intangible low-taxed income (GILTI). It’s included by United States citizens who are shareholders in foreign companies going business on foreign shores. Foreign Tax Credit Carryover 1. 35 Foreign Tax Credit 1116 2. Top left menu section, click Foreign Tax Credit Carryovers |
| Funeral Expenses |  Not deductible on 1040Estate can deduct on Form 706. However, Estate cannot deduct on 1041; cannot reduce taxable income. Funeral expenses paid by the estate aren’t deductible in figuring the estate’s taxable income on Form 1041. They are deductible only for determining the taxable estate for federal estate tax purposes on Form 706. |
| Gambling Winnings Gambling Losses Why Report on taxes? | The amount of gambling losses you can deduct can never exceed the winnings you report as income. So, why report gambling winnings and losses? 1. Winnings are reported to the IRS, so you have to report on tax return. 2. Reporting losses helps you to avoid paying taxes on your winnings. 3. Therefore, at best, deducting your losses allows you to avoid paying tax on your winnings, but nothing more. Other Gambling Expenses are Deductible -losses cannot exceed winnings You may also claim other gambling-activity expenses, such as travel back and forth from a casino or track. |
| Gambling Losses | Schedule A, line 16 Also flow to 1040 p1, line 12, if itemizing deductions Loss Deduction = amount of winnings; you cannot carryover losses Slot Losses = amount of slot jackpot The amount of gambling losses (including slot losses) you can deduct can never exceed the winnings you report as income. For example, if you have $5,000 in winnings but $8,000 in losses, your deduction is limited to $5,000. You can not write off the remaining $3,000, or carry it forward to future years. — ATX — 1. Schedule A, line 16, click arrow, enter on line 8 2. For Slot Lossess: enter on — Lacerte — 1. Screen 13.2 Gambling Winnings and Losses 2. In top left section, click Losses/Misc Winnings; 2a. enter on line Total gambling losses (add winnings and slot winnings together) |
| Gambling Winnings | W2-G; flow to 1040, Schedule 1, p1, line 8b Also flow to 1040 p1, line 8, other income from Schedule 1 Slot Winnings (sample form): enter amount of Slot Jackpot; you are reporting the jackpot winnings. Do not report slots in; slots, out; slot win/loss; pit win/loss ATX 1. 1040, Sch 1, p1, line 8b, click arrow, 2. For Slot Winnings: enter on line “Gambling Winnings not reported on W-2G” Lacerte 1. Screen 13.2 Gambling Winnings and Losses; click Add, Enter Info 2. For Slot Winnings: In top left section, click Losses/Misc Winnings; enter on line Winnings not reportedon Form W-2G |
| General Partner | a partner who is personally liable for partnership debts |
| General Partnership | composed of only general partners |
| Grants Taxable Grants | Form 1099-G, box 6; link to Sch C if for business or 1040 for other income |
| Gross up Gross-up | Gross-Up is additional money an employer pays an employee to offset any additional income taxes (Social Security, Medicare, etc.) an employee would owe the IRS when that employee receives a company-provided cash benefit, such as relocation expenses. |
| Health Insurance Self Employed Health Insurance | Health Insurance Subsidy – Explained For Self-Employed (info) Form 1040, Schedule 1, p2, line 17 1. Must have a profit from self-employment 2. If have a profit, can deduct amount paid for medical and dental insurance for yourself, spouse and dependents. 3. Senior Citizens 65+ can deduct their social security medicare part B and D 4. Lacerte: for Senior / Medicare a. can enter on 1040, Sch 1, p2 line 17 OR b. 14.1, Section =Social Security Benefits; field = 1=treat Medicare premiums paid as SE health insurance (enter 1) Form 7206 – Self Employed Health Insurance (new starting 2023) 1. This form replaced the Self-Employed Health Insurance Deduction Worksheet that was previously published as a worksheet in Pub. 535, Business Expenses. 2. Use Form 7206 to determine any amount of the self-employed health insurance deduction you may be able to report on Schedule 1 (Form 1040), line . 3. “Limitation on Additional Tax” refers to the caps on how much you have to pay back when you file your taxes if it turns out that your advance premium tax credit/subsidy (the amount sent to your health insurance company each month) was overpaid because your income ended up being higher than projected. Q&A Can you claim self-employed health insurance deduction and premium tax credit? ANS: You’ll find the deduction on your personal income tax form, and you can file for it if you were self-employed and showed a profit for the year. If you’re also eligible for a premium tax credit (premium subsidy), you can only deduct the part of the premiums you pay yourself. ————————————— Individuals – Health Insurance Premium Deduction (for individuals, not self employed, don’t own business) You can deduct health insurance premiums on your taxes if: 1. You itemize your deductions 2. You pay your health insurance premiums directly, not through your employer. Therefore, you can deduct premiums that you pay, including covered ca / exchange premiums. Insurance Premium Amount must exceed 7.5% of Adjusted Gross Income. NOTE: Reason you cannot deduct premiums paid through your employer, is because those premiums were paid with pre-tax dollars. I.E., your health insurance premiums were not included in your taxable income. So you have no taxes to deduct. No Health Insurance If only have W-2 income, and total W-2 Income less than $30,000, then give Exemption using (a) not affordable and (b) minimum essential coverage (mec). |
| Health Insurance – 1095A Advance Premium Tax Credit (APTC) | Form 8962 State: CA 540, line 92, check box everyone had health insurance Excess Premium Tax Credit (amount owe) — flow 1040, Sch 2, Line 2 Refund of Premium Tax Credit — flow 1040, Sch 3, p 2, line 9 Box A -Annual (month) Enrollment Premiums == this is what your health insurance plan cost each month. Box B -Annual (month) Applicable Second Lowest Cost Silver Plan (SLCSP) Premium == the second-lowest priced health insurance plan in the Silver category that was available when you applied for insurance. It’s the standard used to calculate your Premium Tax Credit, even if you’re on a different plan. Box C – Annual (month) Contribution Amount == the amount of your household income you are responsible for paying as your share of your health insurance premiums. This amount is calculated based on your Adjusted Gross Income, Federal poverty line, house hold income as a percentage of federal poverty line. Box D -Annual (month) Maximum Premium Assistance == === Box B minus Box C (if zero or less enter 0) This is the max amount of money you get to help pay your healthinsurance Box E -Annual (month) Premium Tax Credit Allowed == === smaller of Box A or Box D Box F -Annual (month) Advance Payment of Premiun Tax Credit == amounts paid to your insurance company on your behalf to lower the out-of-pocket cost for your health insurance premiums Reconcile 1095-A to 8962 1095-A a. Insurance Premiums that You Paid = (Box A) Enrollment Premium MINUS (Box C) Advance Payments 8962 b. Then, compare, Insurance Premiums that You Paid TO 8962 Box C Contribution Amount. — If you paid more premiums than contribution amount, you get a refund of over payment. I.E., you paid more than your share of health insurance. — If you paid less premiums than contribution amount, you have to repay some (or all) of the advanced payment. I.E. you did not pay enough for your health insurance. ——————– If Self-Employed (and you have 1095-A) 1. Set so Lacerte auto calculate any offsets for “excess advance premium tax credit” (repayment) or “net premium tax credit” (refund). 2. Lacerte auto enters amount in self-employed health insurance deduction; Schedule 1, p2, line 17. 3. Go to 39, same screen where enter 1095-A 4. scroll to section SE Health Insurance. a. Select Form (ex: schedule C), Activity, and enter start and end month that you had health insurance. Who Qualify for Net Premium Tax Credit 1. Buy health insurance through marketplace and enrolled for at lease one month 2. No coverage from employer or government plan (like medicare) 3. Did not file Married Filing Separate tax return 4. Meet income limits 5. Not claimed as dependent by another person How Split Premium when Married Filing Separate You Cannot (IRS info). Filing separately automatically disqualifies the Premium Tax Credit (except for cases of spousal abuse or abandonment). How Split Premium Tax Credit for Others Example: divorce, family plan, taxpayer enrolled in coverage with non-dependent. – Part II, 9, check Yes: Allocating policy with another taxpayer that is not on your tax return – 10, select yes or no – Go to page 2, Part IV, Line 30, click arrow in policy number, enter info. NOTE: Percentages are .50% or however you are dividing them – Back in Part II, line 11f or lines 12-23f, enter taxpayer portion of the premium (note: you are not entering the full amount). Excess Premium Tax Credit Repayment – see below – self employed can deduct excess as a health insurance deduction |
| Health Insurance – 1095A Excess Premium Tax Credit | Excess Premium Tax Credit Repayment – if total monthly enrollment credit > (greater than) total monthly advance payment of premium tax credit, self employed person can deduct difference as self employed health insurance – I.E., month enroll credit – month advance payment; self employed can deduct as health insurance Self Employed can deduct Excess Premium Tax Credit Repayment on 1040, Schedule 1, p2, line 17 – Self Employed health insurance deductions. Even if only one spouse is self employed, that spouse can deduct excess premium for entire family. However, You cannot deduct excess premium tax credit on Schedule C. ——LACERTE—— 1. Lacerte will auto calculate excess premium tax credit for self employed, and enter amount on Schedule 1, p2, line 17 2. Go to 39, same screen where enter 1095-A 3. scroll to section SE Health Insurance. a. Select Form (ex: schedule C), Activity, and enter start and end month that you had health insurance. Not Self Employed can deduct on Schedule A, – ATX: line 10 e- other allowable health insurance premiums. – Lacerte: 25 (itemized deductions), Medical, Insurance premiums not entered elsewhere |
| Health Insurance – CA 3895 | Form 3849 and check box CA 540, line 91 |
| Health Insurance – 1095-C and 1095-B | Do not enter; employer provided; check box CA 540, line 91 1095-C 2A = not employed 2D = waiting, full time employed 2C = enrolled in health insurance 2E = waiting period, not eligible 2F = Employee offered covered, not enrolled |
| Health Insurance – CA – full year | CA540, p3, line 92 |
| Health Insurance – CA Non Resident | If non-resident have to file CA tax return and don’t have health insurance, the non-resident can claim exemption — CA FTB 3853, No ECN, Full Year = E (non-resident / part-time resident) |
| Health Insurance – Self Employed | 1040, Sch 1, p2, line 17 2023 – must file form 7206 to claim deduction must have health plan established under business You cannot deduct health insurance on Schedule C |
| Health Insurance – S-Corp | More Info S-corporations can provide health insurance as a tax-free benefit to their non-owner employees and deduct the cost as a business expense, paying no taxes on the insurance premiums. However, getting tax-free health insurance for S-corp owners isn’t quite so easy. Shareholders owning outstanding stock greater than 2% must include any health insurance costs paid through the company as income, according to Internal Revenue Code Section 707(c)1, making the amount subject to income tax. |
| Health Insurance – Individual Paid (Private) | Sch A, line1, Medical, other insurance premiums – ATX: line 10 e- other allowable health insurance premiums. – Lacerte: 25 (itemized deductions), Medical, Insurance premiums not entered elsewhere |
| Health Insurance – Exemption | Form CA FTB 3853, tab=Individual/Shared Resp Penalty: Step 1: 1=N, 2=N, 3=Y, 4=blank Step 2-5=leave defaults; tab=Household Member: Exempt Cert=No ECN, Full Year=A-coverage consider unaffordable (or select appropriate reason) ——LACERTE—— 1. Goto 39 (Premium Tax Credit) 2. In left menu, click California Premium Assistance Subsidy/Penalty 3. In main window, scroll down to Coverage Exemption…, enter info |
| Health Insurance Penalty | IRS: No Penalty CA: if no coverage entire year: $800 per adult; $400 per dependent child (under 18) |
| Health Savings Account (HSA) | IRS Website – No income limits – Must be on high deductible plan – Have no other health coverage except what is under Other health coverage, later. – You aren’t enrolled in Medicare. – You can’t be claimed as a dependent on someone else’s 2022 tax return. HSAs have a triple tax advantage: The money you put in reduces your taxable income; investment growth inside an HSA is tax-free; and qualified withdrawals (those used for medical expenses) are tax-free. And since the money in an HSA never expires, investing in an HSA — similar to how you would through a regular brokerage account or individual retirement account — can help you build wealth over time. One potential downside of HSAs is that they’re paired with high-deductible health insurance plans, which means you’ll likely be paying out of pocket for your health expenses until you hit that high deductible. According to 2021 research from the Kaiser Family Foundation, the deductible can be pretty high: The average general annual deductible for single coverage is $2,454 for HSA-qualified high-deductible plans and $4,572 for families |
| Home Health – Medicaid Waiver Payments | Not Taxable, if you live with the person and provide care Per IRS: The exclusion only applies to payments for care in the individual care provider’s home where the care recipient lives under the recipient’s plan of care IRS Q&A: https://www.irs.gov/individuals/certain-medicaid-waiver-payments-may-be-excludable-from-income |
| Home Office | – Form 8829 created for Sch C only 1. If home office for Business: Form 8829, flow to Sch C, line 30 2. If home office for Job Expenses: Form 2106, flow to Schedule 1, line 12; a. For California, flow to Sch CA, p6, lines 19 thru 26 3. Employees working form home, cannot take home office deduction Home Office Deduction Test: Do you have a dedicated area in your home used exclusively for your business? AND, it is the principal location of our business, or place where you regularly meet with clients? If so, you can take deduction. Home office with Multiple Offices – Lacerte IRS Chart – Who can deduct home office Deductible Home Office Expense Deductions done based on percentage used for home office. 1. Mortgage Interest, Property Taxes (or Rent) 2. Depreciation – must depreciate home over 39 years, straight line. IRS states home office is a non-residential depreciation. AND, can only depreciate building, not land. a. yes, depreciation effects cost basis when you sell b. you can use simplified method that will not effect cost basis c. simplified method is $5 sq ft for 300 sq ft; total deduction $1,500 (Lacerte: 29 / Business Use of Home / last field, enter 2=elect to use simplified method) 3. Water, Electric, Gas, Phone, Internet, HOA 4. Landscaping, Security, home improvements 5. many others … Who can Claim Home Office Deduction 1. Self-employed, business, freelancers, independent contractors, or gig workers can claim home office deduction on Schedule C. 2. If you’re on a company’s payroll, it means you aren’t eligible to claim a home office deduction. Tax Cuts and Jobs Act eliminated deduction. However, California can deduct expenses on Schedule A, in Misc. Deduction for 2% AGI Limitation. 3. Form 2106 should be used only if you were an Armed Forces reservist, a qualified performing artist, a fee-basis state or local government official, or an employee with impairment-related work expenses. Home Office Exp Worksheet … To enter home office expenses, you must first connect the home office to a Business (Sch C) or Employee Job Expenses (Form 2106) … Connect in bottom section of Home Office Exp form – “Identify the Business Activities that use the Home Office” Mortgage Interest and Property Taxes Deduction ATX: To flow Mortgage Interest, property taxes, etc from Sch A to Home Office Expense Worksheet, when entering and Sch A, check box in Home Office column. Lacerte: Enter mortgage interest and property taxes on 8829, NOT Schedule A. Program will calculate amount to put on schedule A. AND, if person not doing itemized deduction (person using standard deductions), check box on 8829 to allocate all mortgage interest and property taxes to 8829. Direct Expenses are those made specifically to the home office used for business, and not made to the rest of the home. Example: Installation of a ceiling fan in a home office or built-in cabinet in a home office, are both examples of direct expenses incurred for the home office. These are 100% deductible expenses. Indirect Expenses are those made to the whole home, and not only specific to the home office. Example: salaries, insurance, legal charges, rent, rates, and taxes ——LACERTE—— Home Office -Business (Schedule C, E, F) Form 8829 (created for Sch C only), flow to Schedule C, line 30 1. 29 (Business Use of home 8829) 2. Section General Info, select Schedule C (if Rental, select Schedule E) 3. Section Business Use of Home, enter info – area, etc. business usage percent auto calculate based on total area and business area. Usage % = business area / total area 4. Other Sections, enter info – a. Indirect Expenses – apply to entire home (ex: hoa, mortgage, property taxes, …) b. Direct Expenses – apply to office area only (filing cabinets for office) c. Depreciation – click Depreciation button at top of page (if primary residence do not depreciate, cause you do not depreciate your primary home) d. Carryover of Unallowed Expenses e. Allocation – enter when business operated in multiple homes 5. Mortgage Interest, Property Taxes a. enter in Indirect Expenses -enter total amount of mortgage interest and total amount of property taxes. Enter State amount if different from federal. System will use area percent to auto calculate amount to put on 8829 and amount to put on schedule A. Do NOT enter mortgage interest and property taxes on Schedule A. b. if not itemizing, check box “Allocate all mortgage interest, real estate taxes …” This will allow mortgage interest and property taxes amounts to be claimed on form 8829, lines 16 & 17 as excess. Instead of claiming it as a regular deduction on lines 10 & 11 . IRS wants it reported this way. c. if you are itemizing, do NOT check box “Allocate all mortgage interest, real estate taxes …”. Home Office -Business (Schedule C, E, F) – Simplified Method The simplified method allows a standard deduction of $5 per square foot of home used for business, with a maximum of 300 square feet. 1. 29 (Business Use of home 8829) 2. At top, in Business Use of Home section, enter a 2 in the field 1=use actual expenses (default), 2=elect to use simplified method. Home Office -Employee (un-reimburse expenses; NOT using form 2106) Flow: Schedule 1, line 12; For California -Sch CA, p6, lines 19 thru 26 1. 25 (Itemized Deductions) 2. Section Misc. Ded. (Subject to 2% AGI limitation) 2a. If the taxpayer is not filing Form 2106 to report expenses, enter expenses in “Un-reimbursed employee expenses (not for use with screen 30)”. click icon or press Ctrl+E NOTE: Form 2106 should be used only if you were an Armed Forces reservist, a qualified performing artist, a fee-basis state or local government official, or an employee with impairment-related work expenses. Home Office -Employee (unreimburse expenses; USING form 2106) Flow: Schedule 1, line 12; Form 2106; for California -Sch CA, p6, lines 19 thru 26 1. 30 (Vehicle/Emp Bus. Expense) 2. Section Vehicle / Employee Business Expense, a. Form (Ctr+T), select Form 2106 b. Activity name or number (Ctrl+T), enter the number of the W-2 from screen 10 (wages) to which the employee’s expenses relate. 3. Section Employee Business Expenses; enter info 4. If employee has mileage and vehicle expenses, enter in in vehicle sections. If vehicle is being depreciated, click Depreciation button at top or go to 22 (Depreciation). |
| Home Office S-Corp | IRS Regulation 1.62-2(c)(4) Info form Intuit Sample Accountable Plan Option A – Using Accountable Plan S-Corp Reimburse Your for Home Office Expenses 1. You have an S-Corp, AND you are on payroll (must be an employee) 2. Your business in located in your home 3. You have an “accountable plan” 4. You submit expense statement to your S-Corp to be reimburse for home office expenses a. expenses equal percentage home usage b. home usage % = office area sq ft / total house area sq ft c. you can deduct rent, mortgage interest, property taxes, utilities, home insurance, water, sewer, alarm, hoa, trash, repairs, maintenance, gardening. d. total all expenses, then submit expense statement for percent of home office use. E.G. total all expenses is $5,000. You will sumit expense statement for $5,000 * (office area / total house sq ft) = $5,000 * (100/1200) = $417 5. S-Corp write you a check for your expenses, and S-Corp deduct expenses on taxes 6. If you deduct mortgage interest and property taxes, you must deduct that amount from your schedule A deduction. 7. When you sell your home, you do NOT have to pay income (tax on the gain) tax on the percentage of your home used for business; because the home office in same “dwelling unit”. 8. You do not have to report the reimbursement on your personal tax return. Setup for Option A 1. Must have “accountable plan” that include a. The time period for employees to submit expenses; b. The process for requesting reimbursement, including what documents are required to prove the request; c. The process for returning excess reimbursements or allowances; d. The types of expenses that are reimbursable; 2. Must keep records, receipts of expenses 3. Must submit for expense reimburse in a consistant and time manner; at least quarterly Option B – Using Schedule E info 1. You have an S-Corp 2. Your business is located in your home (you cannot have an outside office) 3. S-Corp pays you rent for the dedicated business space 4. S-Corp deducts rent payments on 1120-S, p1, line11 5. You must report rental income on Schedule E 6. On Schedule E you can deduct expenses related to the rental space. a. You can deduct direct expenses – light fixtures, furniture, … for room b. You can deduct indirect expenses – utilities, landscaping, cable, internet, trash. The amount deducted is based on the usage for the space. Ex: your utilities total $100 mo ($1,200) for year. Your office uses 18% of the house space (total house sq ft = 1,100; office area is 200 sf. 200/1100 = 18%). So you will deduct $216 for utilities ($1,200 * 18%) Setup for Option B (S-Corp to Pay You Rent) 1. You must have a lease agreement between S-Corp and you. Agreement must include rent start date, rent amount, rent location. 2. You must give receipt to S-Corp for rent paid each month 3. S-Corp must keep monthly budget |
| Household Employment | Sch H – flow to 1040, Sch 2, P1, line 9 |
| House Flipping Flipping House Flip House Real Estate Flip | 1. Enter on Schedule C (sample): If you are a “Dealer” (IRS section 162); in the business of buying and selling homes. Sales price will be your gross income and basis will be your cost of goods sold. a. House is treated as inventory b. You are taxed at ordinary income c. You pay self employment taxes (on profits over $400) d. Income = sale price e. Cost of Goods Sold = Purchase Price + fees related to house purchase f. Expenses = ordinary business expenses, selling expenses, improvements, repairs, supplies, travel, meals, phone, etc. 2. Enter on 4797: If you are NOT a Dealer; but more of an investor. I.E., you are not in the business of buying and selling house. a. Lacerte enter in 17 Dispositions — Enter descrption date acquired, sold, sale price cost basis, etc — Go to section Form 4797, in Depreciation allowed, enter -1 to trigger form 4797. Also check box “Not a Form 1099-B/1099-S transaction. See if you need to enter any other info in this section |
| Independent Contractor | Income and expenses must be reported on Schedule C, to pay self-employment taxes. Deductions: Medical Insurance Premiums, Medical Expenses, … 1040, Sch 1, p2, line 17, click arrow Income should not be reported on 1040, as other income, to avoid self-employment taxes. Schedule C Cannot Pay themselves a Salary A sole proprietor can not pay himself a salary. Your salary would not be deductible on schedule C nor reportable as wages on the 1040. Sole proprietors of businesses are not eligible to receive salaries, as it is prohibited by law. |
| Inherited Cash Inheritance | IRS Lookup Federal – No taxes on inheritance; no need to report on taxes California – No taxes on inheritance; no need to report on taxes decease person already paid taxes on money |
| Initial Return | —— LACERTE—— 900 Exempt Org – 65, CA Misc, check box Initial Return. 568 Partnership – 37, CA Misc Info, enter 1 in Initial return. The word “Final” with the number 1, show at top of 568 form, below address. |
| IRA – Roth IRA Contribution Calculation 2022 | Roth IRA – IRS Website for 2022 Worksheet to Figure Modified AGI for Roth IRA 2022 ——-LACERTE——- Enter Roth, Traditional, Sep, … Screen 24 |
| IRA – Roth IRA Contribution Calculation 2023 | Roth IRA – IRS Website for 2023 Worksheet to Figure Modified AGI for Roth IRA 2023 |
| IRS | IRS What If Q&A |
| IRS Identity PIN | Enter on Main Info form under section Individual Filler Information. flow to 1040, p2, under Sign Here section – If receive IP PIN for dependent, enter on the Dependent tab. – if a taxpayer has an IP PIN in a year, all returns including amendments must include it in order to efile. |
| Itemized Deductions .. Safe Deposit Boxes .. Investment Advisory Fees .. Tax Prep Fees (can also put on Sch C or E) .. etc. | 1. Federal: Investment fees, trading commissions, etc – Not tax deductible. Eliminated under Tax Cuts and Jobs Act (TCJA) in 2018 2. Trust: can deduct advisory fees 3. CA State level Deductions (Enter: Sch A, Tab = STATE USE ONLY) – for investments, put “X” in investment column – Flow to CA Sch CA (540), p6, line 20 Tax Prep – can also put on Sch C or Sch E, Legal and Professional Fees |
| JT TEN JTWROS | definitions JT TEN – Joint Tenants with Right of Survivorship JTWROS – Joint Tenancy with Right of Survivorship |
| K-1 K-1 Instructions K-1 codes K-1 box codes See also Schedule K-1 Codes | IRS K-1 Instructions Example: search page for “K-1 (form 1065” or can sear for K-1 (form 1120-S 1. K-1 1120-S, Box 17 AC – amount on k-1 is used to determine if section 448(c) gross receipts test is met for section 163(j) small business exemption on Form 8990 -Limitation on Business Interest Expense. Taxpayer meets section 448(c) gross receipts test if taxpayer has average annual gross receipts for the past 3 taxable years of not more that the limiation (see form 8990 instructions). Lacerte assumes test is met. 2. K-1 1120-S, Box 17 AJ – Excess Business Loss Limitations. A. Determine if taxpayer has excess business losses. If excess losses, taxpayer can deduct losses up to the excess limit; then carry forward remaining as net operating loss. B. Use form 461 to show / compute Limitation on Business Losses C. Calculate If any Excess Business Losses If Aggregate Business Deductions NOT greater than Income, then no excess losses, and the entire loss can be deducted If Aggregate Business Activity Total Deductions > Gross Income, THEN Excess Loss = total deductions – gross income You can deduct Excess Loss up to Loss Limitation. Anything over Loss Limitation must be carry forward as net operating loss. D. In Lacerte, enter excess business loss in screen 15, section Excess Business Loss enter net operating loss in screen 15, section Current Year NOL /Misc. NOL flow to Schedule 1, line 8a E. IRS Info Excess Business Losses 2024 Excess Loss Limitations | IRS form 461 instructions Greater than > $305,000 ($610,000 married fining joint) 2023 Excess Loss Limitations | IRS form 461 instructions Greater than > $289,000 ($578,000 married filing joint) F. More Info on Excess Loss Limitations, here, here, |
| K-1 used to complete Sch E Part 2 for … Supplemental Income, … S-Corp, … Partnerships, … Real Estate Royalty (not realty business), … Trust or Estate, … Mortgage Investment, … Farming / Fishing | (sample: james miner) Flows to Sch E, Pg2 Section 199A used in calculating QBI deduction Form QBI K-1 (1065) Box 20, Code Z K-1 (1120S) Box 17, Code V K-1 (1041) Box 14, Code I SSTB – for Specified Service Trade or Business (someone who trade on their name or likeness; ex: law, accounting, health performing art, consulting, etc. Non-SSTB – everyone else ——LACERTE—— 1. 20 (Passthrough K-1) (OR, Income, 20 Passthrough K-1, select type) 2. Left menu, at top, select type of K-1 3. Enter info Import K-1 into 1040 Click here for instructions – The recipient name and SSN/EIN must match exactly for the export or import to work. – Import Process: Note: since a number of data fields are not imported, should also print K-1, then check /enter any missing data a. Go to S-Corp (1120), Trust (1041), Partnership (1065), etc b. Select all shareholders to be exported c. Go to Tools, K-1 Data Export Then, d. Go to individual return, when open return, get auto pop-up menu to import K-1 data e. any changes to s-corp, trust… will auto update in individual return (check that corp changes are actually updated on personal return) 7203 Stock Basis = go to section Basis Limitation Noted Items about Import – The Not a passive activity and Actively participated in real estate check boxes will not mark during import or export. The program doesn’t have input for the partner level, so these must be marked in the Individual module. – Schedule K-1 import feature doesn’t work for fiscal year returns. – A grantor type trust doesn’t produce a Schedule K-1 and therefore can’t be exported. – Most state K-1 information will not import, so amounts from state Schedule K-1s or passthrough summaries must be entered manually. For the Partnership module, certain line items will import the sourcing for California. |
| K-1 Part II, Item K | Per ATX, do not need to enter According to the Form 1065 Schedule K-1 instructions, the information entered in item K on Form 1065 is used to determine the amount at risk and is not intended to be entered on Form 1040 Schedule K-1. For more information see the IRS instructions for Form 1065 Schedule K-1. |
| K-1 Part II, Item L | Partner’s Capital Account Analysis No way to enter in ATX ??? |
| K-1 States K-1 Enter State Info K-1 Nonresident State K-1 State Losses K-1 Losses State | Enter info from K-1 state sheets – If no income or losses, nothinig to enter – If losses, Lacerte 1. Add State 2. Go to 20 Passthrough K-1s, and select K-1 3. For non resident state, enter info in column “State Source Amount”. This column is used for entering state-specific amounts for nonresident states. 4. For resident state, enter info in colulmn “State, if different” |
| K-1 Basis Worksheet | 7203, Basis Worksheet for S-Corp shareholders Print basis worksheet from company, check company info against personal return, attach basis worksheet to personal return. |
| K-1 Foreign Taxes | Form 1116 – Foreign Tax Credit Individuals (1040) – Click here for instructions. Starting in tax year 2021 the IRS updated the Schedule K-1 to include a new Schedule K-3 to report the partner’s share of international transactions. This replaces and adds more detail to the codes that appeared on 1065 Schedule K-1, line 16 in prior years. Form 1118 – Foreign Tax Credit Corporation |
| K-1 IRA | sample K-1 for any IRA account, you don’t need to enter – Part II, I1 type is IRA and I2 box is checked |
| K-1 Prior Year Passive Losses K-1 Losses K-1 Carryover Losses see form 8582 | use passive loss against passive income. If no passive income, then loss will carry forward 1. Total all Prior Year Losses 2. Enter Total Prior Year Losses in K-1: a. check box Passive activity b. scroll to bottom to Passive Limitation, enter total in ordinary Loss (Non-Section 199A) c. Total flow to Sch E, Page 2, G, passive loss allowed Total also flow to 8582 Part I, “All Other Passive Income” section (also see Part V) This does not go on Sch E, page 1 |
| K-1 Prior Year Unallowed Basis Loss Prior Year Carryover | Enter in ATX 1. On the K-1 (1120S) or K-1 (1065) Input tab select the box at the top “Check (X) to enter prior year Passive carryover amounts”. 2. Prior year passive losses should be entered on the Input tab in the Passive Limitation section at the very bottom of the sheet. |
| K-1 Unreimburse Expenses K-1 Unreimbursed Expenses Unrelated Business Expenses Unreimbursed Partnership Expenses (UPE) | Lacerte 1. Go to 20 Passthrough K-1s 2. Go to section Separately Sated Income and Deductions 3. Enter in Unreimbursed expenses (enter as positive number) a. for nonresident state, enter in third column, “State Source Amount” Unreimbursed Partnership Expenses for Schedule E Lacerte Info 1. Go to Screen 20.1, Passthrough K-1s. 2. Select the appropriate partnership K-1. 3. Scroll down to the Separately Stated Income and Deductions section (below line 13). 4. Enter the amount in Unreimbursed expenses (enter as positive) [A]. |
| K-3 K-3 Foreign Income K-3 Foreign Taxes K-3 1065 Foreign Income | Flow to Form 1116 1. K-3 has NO Foreign Income, or Foreign Tax Credits — then you do not have to enter K-3 info 2. K-3 Parts IV – XII is NOT used to calculae foreign tax credit Enter Foreign Income / Taxes Info (sample) 1. Look at Part II, Section 1 Gross Income, Line 2. In Column (b) Foreign Branch Category Income, add income for foreign country. Then, see a. b. c. below: a. Enter the amount in the K-1, Line 16 – International Tax (Schedule K-3), partner’s foreign gross income b. Also enter foreign taxes paid (K-1, line 21) in the Foreign Tax Withheld (Foreign Currency) column. Enter 12/31/23 as date paid c. Also enter Name of Country, and Category of Foreign Income Enter Foreign Credits and Withholding (if any) 1. Lacerte: K-1, Line 15, Credits and Withhohlding ——LACERTE—— Lacerte Info – including Enter Gross Income from All Suorces, Other Parts of K-3 1. Go to Screen 20, Passthrough K-1 2. Select K-1 type (Partnership, S-Corp, …) 3. Scroll down to — Partnership: Line 16 – International Tax (Schedule K-3 – Form 1065) — S Corporation: Line 14 – International Tax (Schedule K-3 – Form 1120-S) Enter info for each country where foreign taxes were paid or accrued: a. Form 1116 Name – leave this field blank unless you want to link the entry to an existing form on Screen 35.1 (existing 1116). b. Name of Country must be selected for any line you’re not linking to an existing Form 1116. c. Enter other info. Repeat steps for any other countries. ——ATX—— K-3 Sample 1. Enter in K-1, Line #16 Foreign Transactions; 2. On K-1 document, in K-3 section, look for Total Gross Income, in Part II Foreign Tax Credit Limitation 3. Enter Foreign Gross Income in #16 a. If multiple countries, select “other countries” b. Income category: see which column amount entered on Part II, where you got foreign gross income (will be Passive or General) 4. Foreign amount flow to Form 1116, see “Detail” tab AND flow to Sch E Pg 2 Other Info (More Info) 1. Schedule K-3 is an extension of Schedule K-1 (Form 1065) and is generally used to report to partners their share of the items reported on Schedule K-2. Partners must include the information reported on Schedule K-3 on their tax if applicable. 2. Schedule K-2 is an extension of Schedule K of Form 1065 and is used to report items of international tax relevance from the operation of a partnership. |
| K-3 1065 Sale and Disposition (8949) | K-3 Sample 1, Sample 2 Enter Info on Form 8949, Flows to Schedule D |
| K-3 Total Gross Income K-3 Gross Receipts K-3 Part II Foreign Tax Credit Limitation line 24 | Lacerte For 1065: enter total from Schedule K-3, line 24, US on — Line 16 – International Tax (Schedule K-3 – Form 1065) |
| Kiddie Tax – 8814 vs 8615 | Form 8814 – use when you report your child’s interest and dividend income on your return; thus you file 8814 with your return. Form 8615 (CA Form 3800) – If your child files their own return and the kiddie tax applies, file Form 8615 with the child’s return. Background Before the Kiddie Tax, parents could save on taxes by putting investment accounts in a child’s name. Parents would gift stocks and other assets to their children, and income earned on the assets would be taxed at the child’s (lower) income tax rate, instead of the parent’s (higher) income tax rate. The Kiddie Tax closed this loophole by taxing children’s passive income at higher rates. 2023 – Does my child need to file their own tax return? Yes, if your child had unearned income of more than $1,250 or earned income over $13,850. If not, parent may elect to report child’s income on their return, using form 8814. However, it may be better for child to file their own taxes. Note, if kiddie tax applies, child will file form 8615 with their return. Child’s Net Unearned Income = Gross Unearned Income – (Greater of Standard Deduction or Itemized Deductions) |
| Kiddie Tax – Form 8814 | Form 8814 Tax form used to report a child’s investment income (interest and dividends) on a parent’s tax return. If your child’s only income is interest and dividend income (including capital gain distributions) and totals less than $12,500, you may be able to elect to include that income on your return rather than file a return for your child Even if the child’s investment income is below the threshold amount, it still needs to be reported on the parent’s tax return. This can be done on Schedule B of Form 1040. 2023 (IRS, see purpose of form) 1. Child has investment income less than $2,300 (if >= $2,300 child required to file their own return). 2. Child is under 19 years old, or under 24 years old if a full-time student. 3. Child’s only income for the tax year is from Interest and Dividends, and the total amount of that income is less than $11,000. If the child has other types of income, such as wages from a job, they cannot use Form 8814 and must file their own tax return. 4. Child does not file a joint return for the tax year. If the child is married and filing a joint return with their spouse, they cannot be claimed as a dependent on the parent’s tax return. 5. Child is claimed as a dependent on the parent’s tax return. The child must meet the requirements to be considered a dependent, including living with the parent for more than half of the year and not providing more than half of their own financial support. 2022 1. Child has investment less than $2,250 ( if >- $2,250 child required to file their own return). 2 – 5 same as listed above?? |
| Kiddie Tax – 8615 | Form 8615 | IRS Info Used to report your child unearned income (investment income), such as interest, dividends, capital gains, rents, royalties, taxable portion of social scecurity, taxable portion of pension benefits paid to child. The purpose is to ensure that minors do not use their lower tax brackets to reduce their tax liability on unearned income from investments. — Enter Data — Must enter parents taxable income and tax amounts on form 8615 to calculate if child’s unearned income should be taxed at child’s lowere tax rate or at parent’s tax rate. 1. In Lacerte, can link parent and child; so software can transfer parent’s tax info to child’s tax return. a. You do not have to ben in any return b. Go to Tools – Family Link (8615) c. Add Parent, then add each kid d. Click Preview Tax Data e. Click Transfer f. Open each kid return to view form 8615 and CA 3800 2023 Child must file Form 8616 1. Child has more than $2,500 in unearned income, AND 2. Child is required to file a tax return, AND 3. Child does not file a joint tax return with a spouse, AND 4. At least one of the child’s parents is alive. 5. By December 31, 2023, child must be under 18, or under 24 if full-time student and does not have earned income that is more than half of the child’s support. Tax Calculation (info online) – Unearned income less than $1,250: Not taxed. – Unearned income between $1,250 and $2,500: Taxed at the child’s tax rate. – Unearned income exceeding $2,500: Taxed at the parents’ marginal tax rate. – Earned income less than $13,850: No impact on kiddie tax. – Earned income exceeding $13,850: Triggers kiddie tax for unearned income exceeding $1,250. 2022 Child must file Form 8615 if they have unearned income exceeding the following thresholds: – $1,100 if child is under the age of 18 at the end of the tax year. – $2,200 if child is age 18 at the end of the tax year and earned income from work does not exceed half of their support. – $12,750 if child is over the age of 18 at the end of the tax year. |
| Lacerte Diagnostic Lacerte Error | 1. For electronic filing purpose, electronic payment of tax due with extension is required on Form … (ref 50869) 1 ANS: program is trying to file an extension. Go to 9 (Extensions), scroll to state or 4868 and remove check mark for e-file extension |
| Lacerte Setup | Lacerte Support – Release dates for new year forms – Find Field Search tool: While in input screen use Ctrl + F and enter field name as your search. – Rollover / Transfer Data: Tools, Transfer Clients – Force File Extension when said need to paper file a. go to E-File – Efile Support Tool – Disable E-file Error b. Then do extension wizard again (efile, start efile extension wizard) – Settings, Options vs Primary Options a. Changes to Options customize Lacerte on only one computer. b. Changes to Primary Options are shared across the network. – Highlight Input Field = Settings, Options, Fonts & Colors, set Highlight Color – Attach PDF = 4 (Electronic Filing), top of page, click button “PDF Attachment”. … There is also a Settings, Options, Setup, auto generate pdf – Voucher Not Printing – for California Check if person has mandatory electronic payment. If so, voucher will not print. – California Electronic Payment Required Go to 3 Misc Info, Section =California Miscellaneous, near end of section and above “Prior Year Name” check box “Requires electronic payments” – Which documents to print (pdf) = set in Settings, Options (or Primary Options), Items to Print 1. For 8879s: select Government, must include all items in Federal Return and State Return in order for vouchers to print. Otherwise 8879s will print, but vouchers will not. 2. For Client Copy: select Client, for: Client Correspondence: select Client Letter General: select Tax Summary, Agency Disclosure Statements, Federal Estimates: Filing Instructions, Vouchers, State Estimates: Filing Instructions, Vouchers Federal Return: Federal Tax Return Sate Return: Multi-State Separator Sheets, State Tax Return 3. Suppress Printing / Do Not Print Estimated Tax Payments a. Goto 7 2024 Estimates b. Estimate options = 9 suppress estimates and ES worksheets for Federal and State. Can also select a specific state. – Force 1116 to Print (1116 only have carryover amount; but you still want 1116 to print) 1. Go to 35.1 and add blank record. This causes 1116 to print 2. Set Foreign Country to other country and set Category to Passive – Put ERO Name on 8879s = Settings, Options (primary option), Firm Info; Section is Electronic Filing, select Electronic Filing, set ERO Contact. a. Also check — Settings, Options (primary option), Tax Return, Federal Tax options, Preparer Name on Form 1040. ??? set to No so it does not override 8879. But preparer name should show in preparer section of form ???? NEED TO TEST. a. Each Preparer must have their own ERO number. ERO number is not assigned by IRS or any other agency, You decide your own ERO number. Enter each preparer ERO number in Settings, Options, Preparers. – Set Due Date on Client Letter (do not show extension date) (change due date on letter; change date on client letter) a. You can leave field blank, it will default to due date of the return. b. If the return is on extension, it’ll default to the extended due date. c. If the taxpayer is subject to an underpayment penalty, late filing, late payment, or late interest, it’ll default to the Filing Date from the Penalties & Interest screen. d. Follow these steps to change the due date: 1. Go to the Invoice, Letter, and Filing Instructions screen: Screen 5.1 (Individual and Corporate modules) Screen 2.1 (Partnership and Benefit Plan modules) Screen 4.1 (S Corporate and Gift modules) Screen 3.1 (Fiduciary, Exempt Organization and Estate modules) 2. Scroll down to the Client Letter section. 3. Enter the date in the Due date of return [O] in MM/DD/YY format. – Auto Client Number (next number) = Settings, Options, Setup, Client Section, Automatic Numbering, set to yes to system to auto number. When add client, system will default to next number for that type of client. – Auto Save Data = Settings, Options, Setup, Numeric Detail Input, Automatic Detail Save –set how often to save; or Disable. Note: even if disable, Lacerte will save changes when you exit client return. Best Practice: do not disable; instead, copy client return to do what-ifs. – Forms = click tab Forms, in top-left-menu click “Show all” – Set Field Amount to 0 = enter -1 – Various Date for Stock / Capital transaction (form 8949, Schedule D) = enter negative date, ex: “-01/01/2022” – Vendor List (employers, companies, etc.) = Settings, Table Editor, select item from left menu – Clear Client Status Log = select client, press F4 – Change from 1040-NR to 1040 = 58.1, delete data in filing status – Change from 1040 to 1040-NR = 58.1, set filing status, set country – Change from 1040-SR to 1040 = 3, Section Miscellaneous, Field Form 1040-SR enter 2 – Change from 1040-SR to 1040 for All Clients = Settings, Options, Tax Return, Federal Tax Return Option, Form 1040-SR set to Suppress – Form 8949 show all transactions = Settings, Options, Tax Return, Federal Tax Return Options, Report All Assets on Form 8949 set to Yes – Form 4562 (Depreciation) force creating = Settings, Options, Tax Return, Federal Tax Return Options, Form 4562 set to Force – Schedule D: Sale of Primary Home = Settings, Options, Tax Return, Federal Tax Return Options, Sale of Home on Schedule D set to Force. – Tabs at bottom of screen = suppose to drop off if no data entered – Codes N, S, blank = for multi-states, multi-state K-1?? use this column when amounts need to flow to the federal return and the resident state return. N = report this amount on the federal return. This will still flow to state returns (resident state) that start the return on federal amounts. S = report this amount directly on the state return, bypassing the federal return. – Schedule K-1: State Source Amount Column: This column is used for entering state-specific amounts for nonresident states. – Disable Diagnostics to force efile = Efile /Efile Support Tools /Disable Efile Error – Export Client List a. Go to the Clients tab. b. Highlight the client(s) to export. Press F3 to open the Client Group Selection, where you can select multiple clients c. From the Client menu, select Export and choose Export to File in drop menu – Export SMLLC Clients Only (single member llc client list) 1. Identify SMLLC Clients. a. Go to Clients /Group Select b. Select Other, category= Miscellaneous, Name= Single Member LLC Present? Compare= is, Value= Yes c. Click Ok. All SMLLC are highlighted 2. Export Highlighted SMLLC a. Go to Clients /Export /Export to File b. Select fields you want in the report; also set dir path and file name c. Click Ok. File is exported |
| Late Penalty and Interest Penalties and Interest | Rates: Federal, States (scroll down page) —ATX— 1. Federal: 1040, tab: Late Payment / Filing Penalty and interest 2. State -CA: 540, tab: Line 112 (CA 540) – Late Filing Penalty and Interest —Lacerte— 1. Screen 8, Penalties & Interest 2. Enter info in Sections: Underpayment Penalty, Late Return Penalty & Interest, State Interest Rates To Avoid Under Payment Penalty 1. Pay 90% of current year taxes, or 2. Pay 100% of prior year taxes, or 3. you owe less than $1,000 in tax after subtracting withholdings and credits. |
| Life insurance | provides financial protection for your family and will pay out for almost any cause of death. Accidental death and dismemberment (AD&D) insurance, on the other hand, only pays out for accidental death or accidental injury, such as loss of limb. Life insurance and AD&D insurance overlap slightly, but for most people, it’s better to get life insurance coverage because it’s comparable in price and covers you in more scenarios. |
| Life Insurance -Alimony Agreements (before 2019) | premiums are deductible If you have a spousal support or alimony agreement that is pre-2019, where the judge ordered life insurance as part of the agreement, you may be able to write off those premiums according to IRS rules. Unfortunately, alimony and spousal support agreements after December 31, 2018 are not eligible. |
| Life Insurance -Business | not tax deductible if you / company are directly or indirectly the beneficiary of the policy. … The premiums you pay for life insurance policies intended to provide for your family in the event of your death are not tax-deductible, even if you pay the premiums from your business checking account. …If you have a life insurance policy for protecting your business assets, life insurance premiums are tax-deductible. …Premiums are deductible as a business expense only when the insured is an employee and the company is not the policy’s beneficiary. |
| Life Insurance -Charity | premiums are deductible If you purchase a life insurance policy and make a charitable organization the beneficiary, Fidelity Life said “the premiums you paid into the policy or the policy’s overall cash value, whichever is less, is considered a tax deduction.” |
| Life Insurance -Personal | not tax deductible |
| Lifetime Learning and American Opportunity Tax Credit | Form 8863, Flow to 1040, Schedule 3, Part I, line 3 IRS Comparison and qualification 2023 1. MAGI for married filing joint $160,000 2. MAGI for all other filings $80,000 3. Complete phase out if MAGI for married filing joint at $180,000; all others at $90,000 2022 1. MAGI for married filing joint $119,000 2. MAGI for all other filings $59,000 3. Complete phase out if MAGI for married filing joint at $160,000; all others at $80,000 |
| Margin Interest (from 1099 brokerage statement) Investment Intrest Expenses | Enter on Schedule A, Line 9 Flow to Form 4952 —–ATX—– Enter on Form 4952, line 1, click arrow, enter on line 5 for Schedule A Flow to Schedule A, Line 9 ——LACERTE—— 1. Schedule A (25 Itemized Deductions) 2. Section = Interest, enter in Investment Interest (above Investment Interest Carryover) |
| Married Filing Joint vs Married Filing Separate | View Analysis: Go to Forms – Planning/Analysis – Married Joint/Separate Comparison |
| Material Participation | If you are involved in the day to day management or operations, you are probably considered to be a material participant. If you are strictly an investor, you probably do not qualify as a material participant. Specifically, material is defined as any of: more than 500 hours; substantially all of the participation required; more than 100 hours which is at least as much as any other participant. Generally, you materially participated in an activity for the tax year if you were involved in its operations on a regular, continuous, and substantial basis during the year. Specifically for individuals, you materially participated for the tax year in an activity if you satisfy at least one of the following tests. 1. You participated in the activity for more than 500 hours. 2. Your participation in the activity for the tax year was substantially all of the participation in the activity of all individuals (including individuals who did not own any interest in the activity) for the year. 3. You participated in the activity for more than 100 hours during the tax year, and you participated at least as much as any other individual (including individuals who did not own any interest in the activity) for the year. 4. The activity is a significant participation activity for the tax year, and you participated in all significant participation activities during the year for more than 500 hours. A significant participation activity is any trade or business activity in which you participated for more than 100 hours during the year and in which you did not materially participate under any of the material participation tests (other than this fourth test). 5. You materially participated in the activity for any 5 (whether or not consecutive) of the 10 immediately preceding tax years. 6. The activity is a personal service activity in which you materially participated for any 3 (whether or not consecutive) preceding tax years. An activity is a personal service activity if it involves the performance of personal services in the fields of health, law, engineering, architecture, accounting, actuarial science, performing arts, consulting, or in any other trade or business in which capital is not a material income producing factor. 7. Based on all the facts and circumstances, you participated in the activity on a regular, continuous, and substantial basis during the tax year. You did not materially participate in the activity under this seventh test, however, if you participated in the activity for 100 hours or less during the tax year. Your participation in managing the activity does not count in determining whether you materially participated under this test if: a. Any person (except you) received compensation for performing services in the management of the activity, or Page 20 of 39 Tax Glossary 08/05/2023 b. Any individual spent more hours during the tax year performing services in the management of the activity than you did (regardless of whether the individual was compensated for the management services). |
| Medical Expenses Medical Deductions | Enter on Schedule A. Medical expenses are the costs of diagnosis, cure, mitigation, treatment, or prevention of disease, and the costs for treatments affecting any part or function of the body. Not Deductible on Schedule A: Fitness (gym membership), massage therapy, mold remediation. You may can deduct on Schedule C, if it business related. To get benefit, medical expenses must be greater than 7.5% of adjusted gross income. |
| Ministry Minister, Pastor, Church, Clergy | info, info, IRS Info, IRS Info, Lacerte How to Info 1. Wages, Income (Schedule C), Housing Allowance: Subject to Self-Employment Tax: Minister wages, net profit on Schedule C and housing allowance, less pertinent deductible expenses, are subject to self-employment tax — flow to a. Schedule SE; b. Schedule 1, p2, line 15; AND c. Schedule 2, p1, line 4. — Note: Ministry housing allowance is excluded from total income. However, you must pay self employment taxes on housing allowance. 2. Income from performing Marriages, Baptisms and other Services: are subject to self employment taxes. Even if you are an employee. Report on Schedule C. In Lacerte check box ministry income. 3. Mortgage Interest and Property Tax Deductions: if you own your home, you can claim deductions for mortgage interest and real property taxes on Schedule A only. You cannot deduct them as part of ministry expenses. 4. Housing Allowance: is non-taxable income (not included in gross income), but is subject to self employment taxes. However, you can deduct related expenses such as rent, mortgage interest, utilities, and other expenses directly relating to providing a home. Expenses must be reasonable compensation for the minister’s services. 4a. Must report housing allowance even if you have the same amount in expenses. Because you must pay self employment taxes on housing allowance. 4b. Goal is for housing allowance to be the same amount as housing expenses. So that there is no excess housing allowance to add to your taxable income. 4c. Minister can file form 4361 with IRS to get a housing allowance exemption. I.E., housing allowance will not need to be reported; will not have to pay self employment taxes. 5. Housing Allowance Exceeds Expenses, or Compensation, or Fair Rental Value of your home: In this case you must include excess housing allowance in your taxable income. W-2 Wages Lacerte: 1. Screen 10, enter same as other W-2; AND 2. Scroll to Other Information Section, Miscellaneous Information, for Minister wages, enter 1 for subject to SE (self employment) tax ATX: enter in W-2 screen; it will flow to 1040 Clergy Worksheet, line 1 W-2 Salary as a minister Housing Allowance Lacerte: Screen 10, scroll to Wages Section, Box 14, enter in Ministers housing allowance (SE only – Self Employed). Self employment taxes will be calculated — flow to Schedule 1, p2, line 15; AND Schedule 2, p1, line 4. ATX: 1040 Clergy Worksheet, enter in 4a Parsonage or rental allowance 1. A minister who receives a housing allowance may exclude the allowance from gross income to the extent it’s used to pay expenses in providing a home. Generally, those expenses include rent, mortgage interest, utilities, and other expenses directly relating to providing a home. The amount excluded can’t be more than reasonable compensation for the minister’s services. 2. If your housing allowance exceeds your reasonable compensation, or the fair rental value of the home, or your actual expenses directly relating to providing the home, you must include the amount of the excess in income. Expenses to Deduct from Housing Allowance Lacerte: Screen 30 a. Form = “Form 2106 / Schedule SE” (select 2106 with Sch SE) b. check box Minister’s expenses c. enter expenses in Employee Business Expenss ATX: enter in 1040 Clergy, line 4d, actual expenses for parsonage Schecule C Income Lacerte: see instructions Business Activity Code = 813000 |
| Modified Adjusted Gross Income (MAGI) | Modified Adjusted Gross Income (MAGI) in the simplest terms is your Adjusted Gross Income (AGI) plus a few items — like exempt or excluded income and certain deductions. MAGI can vary depending on the tax benefit. MAGI starts with your Gross Income and then your Adjusted Gross Income (AGI). – Gross Income – This is the money you earn from all sources, including wages, tips, investment income, pension or rents. – Adjusted Gross Income (AGI) – This is your Gross Income with certain allowable deductions subtracted but does not include the standard or itemized deductions or any exemptions. – MAGI – There are different definitions of MAGI for different tax benefits. You need to know the MAGI definition for the particular tax benefit you are seeking. To calculate your MAGI, add certain adjustments back to the AGI total. Most common adjustments to add back include: excluded foreign earned income, excluded savings bond interest, excluded adoption benefits, tuition-related costs or deductions, losses from rental properties, interest income, student loan interest, half of the self-employment tax you paid during the year, etc. Example of AGI vs. MAGI Gross Income = $30,000 (all your W-2s) Additional Income = $1,500 from interest and dividends Total Income = $31,500 (on 1040, line 9) Now let’s say you have the following: Student Loan Interest:$1,200 IRA Contributions: $3,500 Moving Expenses: $500 The total of your adjustments is $5,200. AGI (on 1040, line 11) = total income – adjustments = $31,500 – $5,200 = $26,300 Now let’s say you have the following: Tax-Exempt Interest: $200 MAGI = AGI + exclusions = $26,300 + $200 = $26,500 For MAGI you would also add in any income that was excluded from foreign sources, as well as any non-taxable social security benefits, etc. |
| Modified Adjusted Gross Income (MAGI) – Caluclations | CALCULATION FOR: Social Security Higher Income Beneficiaries, IRMAA = AGI + tax-exempt interest income Traditional IRA Deduction = AGI + the following: student loan interest deduction, foreign earned income and housing exclusions, foreign housing deduction, excluded savings bond interest, excluded employer adoption benefits, and for 2017 and earlier, the domestic production activities deduction and the tuition and fees deduction paid before 2021 Roth IRA Eligibility = same calculation as Traditional IRA above + any Traditional IRA deduction reduced by income from a conversion or an IRA to a Roth IRA or a rollover from a qualified plan to a Roth. Child Tax Credit = AGI + foreign earned income and housing exclusions, foreign housing deductions, excluded income from Puerto Rico and excluded income for bona fide residents of American Samoa Premium Tax Credit = AGI + foreign earned income, tax-free interest, and tax-free portion of Social Security benefits. Education Credits = AGI + foreign earned income and housing exclusions, foreign housing deduction, excluded bona fide resident of Puerto Rico or American Samoa income Net Investment Income Tax = AGI + foreign earned income exclusion and certain adjustments for foreign investments. Additional information about Form 8960 and Net Investment Income Tax. |
| Modified Adjusted Gross Income (MAGI) – How to Lower | How to Lower Your Modified Adjusted Gross Income (MAGI) – Earn less – Make or increase contributions to retirement accounts that are funded using pre-tax dollars, such as a traditional IRA, 401(k), SIMPLE IRA, or SEP IRA. (make sure you don’t go over the annual limits) – Open a health savings account or flexible savings account |
| Mortgage Interest Excess Mortgage Interest Points 1098 Mortgage Interest | Mortgages taken AFTER 12/15/2017 – max mortgage amount is $750,000 Mortgages taken BEFORE 12/15/2017 – max mortgage amount is $1,000,000 How Calculate (sample) Data: Mortgage 1: Interest = $41,673.92; Outstanding Principal = $1,555,000 Mortgage 2: Interest = $14,922.14; Outstanding Principal = $215,312 1. Add All Outstanding Mortgage Principal (if more than one mortgage) Outstanding Principal = 1,555,000 + 215,312 = 1,770,312 2. Divide Outstanding Principal by number of mortgages Over Max Mortgage = 1,7700,312 / 2 = 885,156 Therefore, $885,156 is greater than $750,000; so mortgage interest deduction is limited 3. Divide Max Mortgage by Outstanding Mortgage Principal Percent = $750,000 / $1,770,312 = .424 4. Mortgage Interest Deduction = Percent * Mortgage Interest Deduction = (.424 * (41,674 + 14,922)) = $23,997 ———————————— Other Info – If Married Filing Separate, cut amounts in half – Apply to primary and second residences (first 2 homes) only – Cannot deduct on third or more homes. – Can deduct property taxes on 3+ homes – If split mortgage interest between 2 or more person, and mortgage purchase amount is over limit, you still apply excess mortgage rules. Just because you split mortgage interest, it does not change excess mortgage rules. – (IRS Info) If split mortgage interest and your name is not on the mortgage interest statement (1098), you must: a. enter your portion of mortgage interest on Schedule A, line 8b, as “Home mortgage interest not reported to you on Form 1098” AND b. put name and address of person who did receive 1098. —————————- 1. 1098 Box 2: Outstanding mortgage principal is the Beginning Balance a. Beginning Balance (box 2) – Principal Paid (see statement) = ending principal balance ——LACERTE—— 1. 25 (Itemized Deductions) 2. After 2017 AND mortgage loan < $750,000 enter in Section Interest 3. Before 2017 AND mortgage loan < $1,000,000 enter in Section Interest 4. Otherwise, enter in Section Excess Mortgage Interest: a. Lender name, form (Ctrl+T), activity name or number, taxpayer (spouse, blank for joint), interest paid, home acquisition debt, etc. Excess Mortgage Interest, and with Points Mortgage Interest for excess mortgage (info) divide the maximum debt limit by your remaining mortgage balance, then multiply that result by the interest paid to figure out your deduction. |
| Mortgage Points | Schedule A ——LACERTE—— 1. Go to Screen 22, Depreciation. 2. Select Schedule A from the left panel. 3. Scroll down to Asset Information section. 4. Select Schedule A (points) from the Form (Ctrl+T) drop down menu.  5. Enter the Date Placed in Service (Negative Date = Various). 6. Enter the Cost or Basis –this is amount of loan 7. Select Straight Line (Method 91) from the Method. 8. Enter the Life or Class Life (recovery period automatic) –this is number of years to repay loan 9. Select 461=Sec. 461-Points from the Amortization Code Section (Ctrl+T) dropdown menu.  10. Enter the remaining balance as Current depreciation/amortization (-1=none) [O] (if this is the final year). To adjust the calculation of deductible points: 1. Go to Screen 25, Itemized Deductions. 2. Scroll down to the Interest section. 3. Enter the adjustment in Points Not on Form 1098 [A] (Ctrl + E). Enter an increase as a positive number, and a decrease as a negative number. |
| Multiple States – Credit to Other State (note: states return do not have to be filed if the taxpayer’s situation does not call for it, they only need to be located in the return for the state abbreviations to populate on the Details tab –Main Info, tab=State Info) Link: CA FTB – Other State Tax Credit Eight (8) States with No Income Tax; Therefore, No State Tax Return 1. Alaska 2. Florida 3. Nevada 4. South Dakota 5. Tennessee 6. Texas 7. Washington 8. Wyoming | Resident – is state where you live Non-Resident – is state in which you work or earn income To prevent double-taxing, the state where you live will usually give you a credit for taxes paid to the non-resident state. 1. Add Resident and Non-Resident Forms for each State the taxpayer paid taxes to – Go to Main Info, tab=State Info, Add Resident and Non-Resident States – Go to State Form (ex CA 540, CA 540NR) and enter info 2. After adding non-resident state, system auto-add state tax credit form; if not, add form. – search for: other state; another state, tax credit – example state credit form: CA Sch S, VT In-117, etc CA Resident who Paid Taxes to CA and Another State 1. CA Resident side: (a) You should have already added Form CA 540 (b) Add Form CA Sch S (other state tax credit), enter info: Tab=input, enter Income Items Desc –ex: wages, Rent,… enter Double taxed income by CA and Other State (usually amount is same for CA and Other State) (c) Form CA Sch S, Flow to CA 540, page 2, line 43 (Special Credits section), Credit Name=Other State, Code = 187 2. Another State (Non-Resident) side: (a) Add the other state Non-Resident State Form, enter info (b) Add the other State Form for “Taxes Paid to Another State”, enter info (c) Amount from Taxes Paid to Another State Form, should flow to Non-Resident State Form CA Non-Resident who Paid Taxes to CA and Another State 1. CA Non-Resident side: (a) You should have already added Form CA 540NR (b) Add Form CA Sch CA 540NR, enter info: —– (1) Page 1, Part 1, line 2a; line 5; line 6; line 7 —– (2) Make adjustments, if any, in remain parts and pages —– (3) If need to zero out CA Income, p1, Part II, line 1, Col E, click to enter 0 wages —– (4) to enter rental, s-corp, partnership income, p1, Section B, line 5 —– (5) to enter Net Operating Loss, use Form CA FTB 3805V; p1, line 23, click arrow, enter info (click arrow in year loss). CA FTB 3805V Flow to CA Sch CA 540NR p2, line 9 b2 —– (6) to enter Federal net operating loss, 1040, sch 1, p1, line 8a, Col A (c) Form CA Sch CA 540NR, Flow to CA 540NR, p2, line 40 (CA Regular Tax Before Credits) 2. Another State Resident side (Resident State): (a) You should have already added that State Form (b) Add that State Form for “Taxes Paid to Another State”, enter info (c) Amount from Taxes Paid to Another State Form, should flow to Resident State Form Go to that State Form to make sure taxpayer is getting credit for taxes paid to “Other State”. There should be an Other State Credit amount on the State Form. Google to see where to find on State Form. Example: Resident is CA; Non-Resident is AZ – For CA Resident side (a) Form CA 540 -CA Resident (b) Form CA Sch S -CA Credit for other state (c) Form CA Sch S, flow to CA 540, page 2, line 43 (Special Credits section), Credit Name=Other State, Code = 187 – For AZ Non-Resident side (a) Form AZ 140NR, enter non-resident info (b) Form AZ 309 Credit for Taxes Paid to another state (c) Amount from Form AZ 309, Flow to AZ 140NR Example: Resident is NY; Non-Resident is CA – For NY Resident side (a) Form IT-201 is NY Resident (b) Form IT-112-R is NY Credit for other state, p2, line 30 (c) Form IT-112-R, flow to IT-201, p2, line 41 (Resident Credit) – For the CA Non-Resident side (a) Form CA 540NR is CA Non-Resident (b) Form CA Sch CA 540NR, CA credit adjust for other state (c) Form CA Sch C54 540NR, Flow to CA 540NR, p2, line 40 (CA Regular Tax Before Credits) |
| Multiple States – Credit to Other State (Lacerte) | Lacerte auto calculate other state credit if return is for full year resident. 1. If not full year or Override: Goto 52 Other State Tax Credit 2. In addition to info for state, AGI and taxes paid to other state, you must also enter info in at least Double Taxed Income Item A, for info to show on CA Sch S (same for other states) Lacerte handle full year and part year resident differently, see Other State Tax Credit -Full Year Resident Other State Tax Credit -Part Year Resident |
| Multiple States – Tax Liability Paid to Other State | Tax Liability Paid to Other State: View other state tax return — Amount Taxes Paid= Amount Withheld minus Refund — Or, look for “Tax” amount Note: for California, see Sch S for formula / instruction on calculating the credit amount allowed by California |
| Multi – Other State Tax Credit | 2023 California 2022 California | What is California Group NonResident Tax Return |
| Net Operating Loss | Sample Worksheet | IRS Info | IRS Worksheet (page 5 how to figure NOL) ATX: NOL Worksheet – NOL Summary & AMT NOL Summary Lacerte: 15 Net Operating Loss Deduction – Can Carryback 5 years for tax years 2018, 2019, and 2020; otherwise no carry back. There are exceptions for farm and some insurance companies. – Can Carryover / forward indefinitely – NOL deduction is limited to 80% of taxable income 1. NOL Personal 1040. If Adjusted Gross Income is negative, then the negative adjusted gross income is the amount of your net operating loss. a. However, if you have capital losses, capital gain, pension, social security, dividends, taxable IRA distribution, etc. you need to calculate the amount of your NOL using the IRS worksheet. 2. You must keep track of your unused net operating losses. Usually there is a NOL worksheet where you can track net operating loss for each year. 3. To use some or all of your net operating losses, enter amount being used: a. Federal: 1040, Schedule 1, p1, line 8a. b. CA: 3805V, p1, line 23 (flow to Sch CA, p3, line 9 b2) c. ATX: Federal, click arrow d. ATX: State, click arrow in year of loss ——LACERTE info —— To use some or all of your net operating losses, enter amount being used: Federal: Enter in 15 (net operating loss) — flow to 1040, Sch 1, p1, line 8a 1. Must enter data in the following 3 fields. Enter as positive number. a. Year of Loss (ex: 2022) b. Initial Loss (amount) c. Carryover available in 2023 (year) 2. Click “Add” in left bottom to add more prior years losses State: Enter in 15 (same as Federal) — click on State (CA) Net Operating Loss — Form 3805V; flow to Sch CA p3, line 9 b2 1. In left menu, click California (or state) Net Operating Loss 2. Must enter: year of loss, initial loss, amt initial loss, carryover from, amt carryover from. (California follow same federal rules) 3. Click “Add” in left bottom to add more prior years losses |
| Net Operating Loss Calfornia | CA Net Operating Loss | CA Worksheet | CA Instructions Tax Years 2020 and 2021, California suspended the NOL carryover deduction. Both corporations and individual taxpayers may continue to compute and carryover an NOL during the suspension period. Tax Year 2022, net operating loss suspension has been repealed. Suspension does not apply: a. For individual taxpayers, if they have net business income or modified adjusted gross income of less than $1 million. b. For corporate taxpayers, if their income subject to California taxation is less than $1 million. 1. NOL Personal 1040. NOL = Adjusted Gross Income + Standard or itemized deduction. a. Note: CA reduces adjusted gross income by the standard or itemized deduction; which in essence lower the amount of your adjusted gross income; which result in lower net operating loss. b. Also, if you have capital losses, capital gain, pension, social security, dividends, taxable IRA distribution, etc. you need to calculate the amount of your NOL using the CA Worksheet. |
| NonProfit Non Profit Non-Profit | Search for Company on IRS Website |
| Non Residential Investment Credit | Form 3468 | Instructions | IRS Info |
| Own More that One Home | If home not a rental, report sale on Form 8949. IRS If you have more than one home, you can exclude gain only from the sale of your main home. You must pay tax on the gain from selling any other home. If you have two homes and live in both of them, your main home is ordinarily the one you live in most of the time. |
| Partnership (Form 1065) | video on 1065 Sample P&L and Balance Sheet (pdf | excel) Info Needed: 1. # Partners 2. Each Partner Ownership % 3. Each Partner Contribution Amount 4. Each Partner Distribution Amount 5. Profit & Loss (income and expenses); enter on Page 1 5. Balance Sheet (assets, liabilities, equity); enter on Page 5, Schedule L Completing Form 1065 1. Initial Filing – at top enter start and dates 2. If a person owns more than 50% complete Schedule B-1 (1065) 3. Page 1 is for income and expenses related to doing the business. Do NOT include income and expenses for real estate, interest income, dividends, royalties, etc. They go on separate part of 1065. 4. Meals – Page 1, line 20, top of page. 5. Non-deductible expenses flow to Page 4, line 18c 6. Other Expenses – Page 1, line 20 7. For Real Estate – Form 8825 (Schedule K, Page 4, line 2) 8. For Interest Income – Page 4, Schedule K, line 5 9. For Dividends – Page 4, Section K, line 6 10. For Royalties – Page 4, Section K, line 7 11. Charity Contributions – Page 4, line 13a 12. Investment Interest Expense – Page 4, line 13b Partnership Contribution Partnership Draw Under Distribution, Page 4, line 19 Schedule L, M-1, M-2 is NOT required to be completed, if: 1. total receipts less than $250,000 for tax year 2. total assets less than $1 million at end of tax year 3. K-1 filed and with 1065 return and furnished to partners before due date (including extensions) 4. Not filing or required to file Schedule M-3 Schedule L = Balance Sheet) Schedule M-1 = Reconciliation of Income Schedule M-2 = Analysis of Partner’s Capital Accounts Schedule L – Balance Sheet (page 5) 1. For Initial Year, beginning balance = 0; just starting; not rolling over anything from prior year 2. Enter info Other Info 1. Domestic LLC – formed in U. S. |
| Partnership (Schedule K-1 for 1040) | Schedule K-1 Flows to Sch E, Pg2 |
| Pay Online or Mail Check Mandatory Electronic Payment | California – requires you to pay ALL taxes due online once – you make an estimate or extension payment exceeding $20,000 – you file an original tax return with a total tax liability over $80,000 California send you a Mandatory Electronic Payments notice. – 1% penalty if you fail to comply with electronic payment requirement You can file for waiver of mandatory electronic payment (CA Form 4107), if – amount paid is not representative of your total tax liability – you did not make estimated tax or extension payment over $20,000 during current or previous taxable year – total tax liability in previous taxable year did not exceed $80,000 Federal – no mandatory online payment |
| Payment Plan Installment Agreement Installment Payments | IRS 1. IRS Apply Online | Fee Info 2. Form 9465 (also in ATX) – use to request a monthly installment plan if you cannot pay the full amount you own 3. Form 433-D (also in ATX) – used to finalize an approved installment agreement and authorize payments by direct debit. — If you can pay full amount within 120 days of filing your taxes, do NOT fill out this form. Instead, call IRS 800-829-1040 to inform while payment will be late and you plan to pay balance in full within 120 days. — IRS guarantees installment plan will be approved if a. you owe less than $10,000 b. you have not asked for installment plan in past 5 years c. you can pay the amount in full within 3 years d. you can prove you are not able to pay balance in full — If you already making payments to IRS (already have payment plan), call IRS to discuss your options 3. Form 433-D is the direct debit installment agreement form that is used to establish the actual agreement once the IRS has approved the payment plan. 433-D allows IRS to take payments directly from a taxpayer’s bank account California 1. CA Apply Online | Fee Info 2. $34 setup fee, must pay via auto withdraws |
| Payroll Expenses Employer Payroll Expenses Payroll Deductions Deduct on Schedule C, 1120, 1120-S, LLC | Sample Employer portion of payroll expenses are deductible Wages paid are also deductible Get info / documents for 1. W-3 transmittal of wage and tax statement 2. 940 employer annual federal unemployment (FUTA) tax return 3. DE 9 – 4 quarters, EDD quarterly contribution return and report of wages Add the Following to get total Deductible Payroll Expense: 1. Social Security tax withheld – from W-3, box 4 2. Medicare tax withheld – from W-3, box 6 3. FUTA tax before adjustments – from 940, line 8 4. Unemployment Insurance – from DE 9, EDD quarterly, for each quarter 5. Employment Training Tax (ETT) – from DE 9, EDD quarterly, for each quarter Deduct Payroll Expenses on – Schedule C – line 23 – 1120 – line 17 – 1120-S – line 12 – LLC – using form 1065, line 14 Deduct Wages on – Schedule C – line 26 |
| Payroll Taxes | Federal Income Tax 1. Employee pay 2. Employee complete form W-4 to determine amount to withhold FICA (Federal Insurance Contribution Act) 1. is the combined Social Security and Medicare tax rates 2. Employer and Employee pay equal share of taxes 3. Employer portion of FICA is a deductible business expense 4. Employer cannot deduct employee portion as business expense 5. People exempt from FICA include international students, scholars, professors, teachers, trainees, physicians, researchers, … FUTA (Federal Unemployment Tax) 1. Paid by employer (employee does not pay this tax) 2. 6% on first $7,000 per year 3. If taxpayer state has State Unemployment tax, then FUTA rate drops to 0.6% on first $7,000. Business receives credit up to 5.4% of FUTA taxes paid. 4. Maximum employer pay is $420 per year per employee SUTA (State Unemployment Tax) 1. Also known as state unemployment insurance (SUI) 2. Purpose is to fund state’s unemployment insurance 3. Each State determine employers rate SUTA for California California has four state payroll taxes (info): 1. Unemployment Insurance (UI) – employer pay; each employer has their own rate. new employer rate is 3.4% for first 2 to 3 years 2. Employment Training Tax (ETT) – employer pay; a. If your UI reserve account balance is positive (zero or greater), you pay an ETT of 0.1 percent. If negative you do not pay ETT; it is 0.0%. 3. State Disability Insurance (SDI) – employee pay 4. Personal Income Tax (PIT) – employee pay; a. Also called State Income tax b. rates are based on employees’ tax W-4 and DE 4 forms. c. tax range from 1% – 12.3% (see rates) d. there is no maximum amount State Income Tax 1. Employee pay 2. Some States do not have state income tax Form 941 – Employer’s Quarterly Federal Tax Return 1. Report income taxes, Social Security tax, or Medicare tax withheld from employee’s paychecks. 2. Pay the employer’s portion of Social Security or Medicare tax. Form 940 – Employer’s Annual Federal Unemployment (FUTA) Tax Return 1. Report your annual Federal Unemployment Tax Act (FUTA) tax. 2. Most employers pay both a federal and a state unemployment tax. Only employers pay FUTA tax. Do not collect or deduct FUTA tax from your employees’ wages. —— 2024 —— – Social Security (12.4%): Employer: 6.2% Employee: 6.2% a. Max Wages = 168,600 – Medicare (2.9%): Employer: 1.45% Employee: 1.45% – Additional Medicare (0.9%): Employee only 0.9% when wages exceed $200,000 in a year – FUTA: Employer: 6% on the first $7,000 – SUTA California (info): 1. CA SUI (state unemployment) paid by employer = from 1.5% to 6.2%. The taxable wage limit is $7,000 per employee per calendar year. Each employer has their own rate. new employer rate is 3.4% for first 2 to 3 years 2. CA ETT (employment training) paid by employer = 0.1%; max $7,000 per employee per calendar year 3. CA SDI (state disability) paid by employee = 1.1% 4. CA PIT (personal income tax) paid by employee = range from 1% – 12.3%. (see rates) —— 2023 —— – Social Security (12.4%): Employer: 6.2% Employee: 6.2% a. Max Wages = 160,200 – Medicare (2.9%): Employer: 1.45% Employee: 1.45% – Additional Medicare (0.9%): Employee only 0.9% when wages exceed $200,000 in a year – FUTA: Employer: 6% on the first $7,000 – SUTA California (info): 1. CA SUI (state unemployment) paid by employer = from 1.5% to 6.2%. The taxable wage limit is $7,000 per employee per calendar year. Each employer has their own rate. new employer rate is 3.4% for first 2 to 3 years 2. CA ETT (employment training) paid by employer = 0.1%; max $7,000 per employee per calendar year 3. CA SDI (state disability) paid by employee = 0.9% 4. CA PIT (personal income tax) paid by employee = range from 1% – 12.3%. (see rates) |
| Penalties Tax Penalties | Failure-to-file penalty: This penalty for 1040 returns is 5% of the tax due per month, up to a cap of 25% overall, with additional fees piling up after 60 days. Failure to file penalty applies to all tax returns – 1120, 1120S, 1040, …Failure-to-pay penalty: This penalty is 0.5% for each month, or part of a month, up to a maximum of 25%, of the amount of tax that remains unpaid from the due date of the return until the tax is paid in full. |
| Power of Attorney (POA) | IRS Form 2848 & Instructions | Sample Enter Info for 1. Taxpayer 2. Representatives 3. Acts: Example: — Description =Income, — Tax Form =1040, OR 1120 for a company — Years =2022, 2023. 4. Part II: Designation: c = (enrolled agent), — Licensing Jurisdiction =IRS, — License =enrolled agent number. — Must sign and date Designation Letters a = Attorney (enter two letter state where admitted to practice) b = Certified Public Accountant (enter two letter state where license) c = Enrolled Agent (enter enrollment card number) e = Full-Time Employee (enter title or position e.g., Tax Accountant) h = Unenrolled Return Preparer – (enter PTIN) Unenrolled Return Preparef — an individual other than an attorney, CPA, enrolled agent, enrolled retirement plan agent, or enrolled actuary who prepares and signs a taxpayer’s return as the paid preparer, or who prepares a return but is not required to sign Wage and Income Transcript – request unmask (un-redacted) copy CA Form CA 3520-PIT (Individual and Fiduciary) CA 35220-BE (Business Entity) ——Lacerte—— 1. 65.2 Power of Attorney |
| Print Return Taxpayer Copy Signatures | ——LACERTE—— Default Settings: Settings, Option (or Primary Options) , Items to Print – on left select type of copy; on right select forms to print Client Copy – Go to Print, Tax Return, Client copy Signatures – Go to E-File, Step1, Print Efile Signature Documents Mail Copy – Print, Tax Return, Government Filing Copy a. must uncheck efile in Client Info. If e-file Is checked, return will not be printed. b. also see how to paper file return |
| Prior Year Comparison Compare to last year | ——LACERTE—— 1. 48 (Prior Year Summary) — shows last year’s info 1. Settings, Options, Tax Return, 2-Year Comparison set to Yes 2. Forms, Tax Summary. If no data from prior year, only current year info is shown |
| Profit and Loss Balance Sheet | Sample Profit & Loss and Balance Sheet (pdf | excel) |
| Qualified Business Income QBI | 1040, p1, line 13 (Form 8895 or 8895-A) Info | IRS Info The qualified business income (QBI) deduction, also known as Section 199A, allows owners of pass-through businesses to claim a tax deduction worth up to 20 percent of their qualified business income. Rental Property (see info) ??? Always select for rental property; sometimes business. To claim a QBI deduction, an investor must have an interest in a rental real estate enterprise that collects rent, keeps detailed books, and provides at least 250 hours of rental services per year. Business 1. K-1 1. If K-1 has data in section 199A then it’s QBI. ——LACERTE—— For Rental (Sch E): 18, Section Qualified Business Income Deduction, last item in list – Business is a qualified trade For Business (Sch C): 16, Section Qualified Business Income Deduction, last item in list – Business is a qualified trade For Partnership, S-Corp – info Any business can be a qualified business except: (1) C Corporation, (2) Person performing services as an employee QBI – more info A tax deduction that allows eligible self-employed and small-business owners to deduct up to 20% of their qualified business income on their taxes. 2023 Total taxable income must be under – $364,200 married filing joint; $182,100 all other 2022 Total taxable income must be under – $340,100 married filing joint; $170,050 all others |
| Qualifying Widower | 2023 – name changed to Qualifying Surviving Spouse. Same rules that applied to qualifying widow(er) filing status, applies to qualifying surviving spouse status. 1. In year spouse died, you can file as married filing joint; if you do not remarry. 2. For the two years following the year of death, surviving spouse can us Qualifying Widow. |
| Real Estate | Fixed Asset – Example Building, Land, Refinance Primary and Secondary Residence Both treated same way on taxes. You can write off mortgage interest and property taxes for both primary and second residences. Three or More Residence You cannot write off mortgage interest or property taxes for your third or more personal residences. Dividing Expenses If rental is used as personal and rental, divide according to usage. See IRS Publication 527 Residential Rental Property, Page 16 Duplexes You live in one unit and rent the other. Certain expenses apply to entire property such as mortgage interest and real estate taxes. You divide according to personal and rental space. If they are equal, you divide interest and property taxes equal. Half record on Schedule A, and half on Schedule E. Mortgage Insurance Premium For Primary Resident; you can no longer claim deduction for 2022. See IRS Publication 936 (2022), Page 1 (prior years, enter Schedule A, line 8d) Mortgage Interest You can deduct home mortgage interest on the first $750,000 ($375,000 if married filing separately) of mortgage debt. Homeowners who bought houses before December 16, 2017, can deduct interest on the first $1 million of the mortgage. Home Equity Loan Interest No matter when the indebtedness was incurred, you can no longer deduct the interest from a loan secured by your home to the extent the loan proceeds weren’t used to buy, build, or substantially improve your home. Split Real Estate Sales Proceeds Proceeds from real estate sale are split between parties. Therefore, cost basis, depreciation, improvements, etc. should be split accordingly. Depreciation Recapture You can’t avoid depreciation recapture, even if you don’t claim depreciation. IRS Code Section 1250 states that depreciation must be recaptured if it is allowable for the property. |
| Real Estate 1099-S Only One Person Receive 1099-S from Real Estate Sale; when proceeds from the sale were split (same applies to other investments) | Real estate property was sold and the proceeds were split between two or more people. However, only one person received the 1099-S, with the entire sales proceeds listed. Issue The Escrow / Title Company use one social security number to report the sale. Thereby, one 1099-S is issued. Solution IRS Website 1. Report full amount of the sale (enter full amount from 1099-S) report full amount, so IRS do not issue a letter saying you under reported income. 2. You can enter a credit adjustment (enter as negative number and put description as “Nominee Adjustment”) 3. Issue 1099-S to the other person(s) and file the 1099-S and 1096 with IRS NOTE: A spouse is not required to file a nominee return to show amounts owned by the other spouse. ——————— The person whose SSN is used can “nominee” the correct portion to the other person / spouse by using the instructions below. Nominee returns. Generally, if you receive a Form 1099 for amounts that actually belong to another person or entity, you are considered a nominee recipient. You must file a Form 1099 with the IRS (the same type of Form 1099 you received). You must also furnish a Form 1099 to each of the other owners. File the new Form 1099 with Form 1096 (this is a transmittal for the 1099) by mailing to the Internal Revenue Service Center for your area. On each new Form 1099, list yourself as the payer and the other owner, as the recipient. On Form 1096, list yourself as the nominee filer, not the original payer. The nominee is responsible for filing the subsequent Forms 1099 to show the amount allocable to each owner. The forms filed with the IRS should be the red copy so if you don’t have a color printer, go to the IRS website and order the forms here: Click here to order forms or publications from the IRS. The income will be reported based on the type such as interest, dividends, capital gains, etc. |
| Real Estate 1099-S Input for 1040 | 1040: for 1099-S sample documents from atx input 1. Use Fixed Asset to report sale – enter full sale price as on 1099-S (instructions: sale of rental property #78) 2. On form 4797, input tab, enter info for Nominee (person who received half of the sales proceeds). All amounts will be entered as negative number, cause you want these amounts subtracted from full sale price. Description: Nominee Adjustment enter all other info (enter amounts as negative numbers) |
| Real Estate 1099-S From IRS Website | IRS Website Nominee/middleman returns. Generally, if you receive a Form 1099 for amounts that actually belong to another person, you are considered a nominee recipient. You must file a Form 1099 with the IRS (the same type of Form 1099 you received) for each of the other owners showing the amounts allocable to each. You must also furnish a Form 1099 to each of the other owners. File the new Form 1099 with Form 1096 with the IRS Submission Processing Center for your area. On each new Form 1099, list yourself as the “payer” and the other owner as the “recipient.” On Form 1096, list yourself as the “Filer.” A spouse is not required to file a nominee return to show amounts owned by the other spouse. The nominee, not the original payer, is responsible for filing the subsequent Forms 1099 to show the amount allocable to each owner. |
| Real Estate – California Real Estate Withholding | See CA Form 593 (completed prior to sale); same amount should be on Escrow Settlement Statement Enter withholding – CA 540, p3, line 73; select 593 enter info – enter withheld amount on line 6. |
| Real Estate – Convert from Residential to Rental Convert Primary House to Rental Convert to Rental Convert Home to Rental | When you change from personal use to rental use: Basis for Depreciation = Lesser of (a) fair market value OR (b) adjusted basis on date of conversion a. Fair market value. Value of property on date you changed it to a a rental. b. Adjusted Basis on Date of Conversion. This is, your original cost or other basis of the property, plus the cost of permanent additions or improvements since you acquired it, minus deductions for any casualty or theft losses claimed on earlier years’ income tax returns and other decreases to basis. |
| Real Estate – Effect on Medicare Part B and Part D (from Social Security) | The gain from real estate sale can increase your income, which will cause you to pay more for Medicare Part B and D. See Social Security, Income-Related Monthly Adjustment Amounts (IRMAA). SS review and adjust accordingly each years, or you can file Form SSA-44, or appeal online. |
| Real Estate in Living Trust | more info What tax return must be filed after a Revocable Living Trust is formed? Answer: NONE, as long as both spouses are alive. The income from the revocable (living) trust is to be reported on the personal income tax returns of the Trustors (persons who formed the trust). The IRS and California taxing authorities do not recognize a living (revocable) trust as a separate taxpaying entity as long as both Trustors are alive. Thus, in a typical living trust situation entered into by a married couple, the income generated by the trust assets are reported on the Trustors’ personal income tax returns, exactly as before the trust was formed. For example: Before the trust was formed, John and Jane Doe, the Trustors, had $100 in dividends from their Charles Schwab brokerage account which was reported on their personal returns and they received a form 1099 under the husband’s social security number. After the trust is formed, the Charles Schwab account is still under the husband’s social security number but the name on the account is changed to John and Jane Doe, Trustees. The form 1099 for the $100 in dividend income will be show the husband’s social security number but with the recipient name as John and Jane Doe, Trustees. The Trustors will report the $100 dividend income on their personal joint return. Answer after one spouse passes away, two sets of returns might be due. First, individual income tax returns are due for the year in which a person dies, even if he or she does not live until the end of the year. Second, in addition to the individual tax returns, fiduciary income tax returns, forms 1041 federal and 541 for the state are due for the portion of the trust belonging to the spouse who passed away, if that portion is set up in a separate trust. Typical revocable (living) trusts will require that the trust assets be divided into the living (surviving) spouse’s half and the deceased spouse’s half. The de-ceased spouse’s portion of the trust changes into a permanent (“irrevocable”) trust and at that point the IRS and State tax authorities recognize that irrevocable trust as a taxpay-ing entity with its own tax ID# and it must file its own tax returns. After the year of death, the surviving spouse continues to file individual tax returns under his or her social security number. Also, the irrevocable trust files its own tax returns for as long as the irrevocable trust is in existence. If there is no separate trust required, then no fiduciary returns are due. |
| Real Estate Purchase – Primary or Second Home Purchase Primary or Second house | Can Deduct Mortgage Interest and Property Taxes paid at closing of escrow. Deduct on Schedule A Nothing else to report on taxes. Keep Escrow closing statement, so when you do sell, you can write closing costs that you paid. If this is your third or greater house, you CANNOT deduct mortgage interest and property taxes for third or greater house. |
| Real Estate Purchase – Rental Purchase Rental Property | Sample Document: Settlement, Basis, Fixed Asset, (example client: Brian Nurre) Purchase Process 1. Get copy of Buyer Escrow Settlement Statement 2. Add allowable closing cost on escrow statement 3. Get copy of property tax statement (from assessor website) 4. Calculate Cost Basis for Depreciation for Building and Land from property tax statement. Note: you first calculate percent for land and building 5. Improvement should be added as fixed assets 6. Fixed Assets (see sample docs): Land: Category = N-Nondepreciable; Sub-Category=Land; Balance Sheet = Land 7. Put Expenses and Revenue on Schedule E |
| Real Estate – Rental Rental Income Barter Income Labor for Rent Renting Real Estate | Not For Profit Rental If you don’t rent your property to make a profit, you can deduct your rental expenses only up to the amount of your rental income, and you can’t carry forward rental expenses in excess of rental income to the next year. However, you can deduct all property taxes and mortgage interest without limitation. Receive Property or Service as Rent – instead of receiving money; in this can you include the fair market value of the property or service in your rental income. |
| Real Estate – Renting Part of Your House | You live in your house, and you also rent out rooms / areas in your house. Use Schedule E Check box on line 8 -active participation, line 17 -property is part personal and part rental, line 18 – qualified business Checking box on line 17 lets you enter deductions for rental portion of your house. Direct are expenses for the rooms / areas rented Indirect is for total house. System will calculate deduction based on usage percent for rental. Mortgage Interest and property taxes, enter on schedule E in Indirect column. Mortgage interest and property taxes will flow to schedule A – look for interest or taxes… from Schedule E |
| Recovery Rebate | 1040, line 30 No Recovery Rebate Credit for 2022 |
| Refinance Primary Residence | – Can only deduct: PMI, Points, and Real Estate Taxes – Deduct Points over life of new loan – Cannot deduct: Title, Escrow, Appraisal, inspection, legal, lender fees, credit check, etc. – When sell, can deduct closing cost; so keep closing docs |
| Refinance Rental Property | – Schedule A Deduction: Real Estate Taxes, Mortgage Interest. From year end statements – Must Amortize Closing Costs; not depreciate them. Amortize closing costs over life of loan (not over life of real estate, 27.5 years). Closing costs are added to cost basis via amortization deduction. Refinance Closing Costs to Amortize – Points, Discount Points, Origination Fees (also called Points) – Lender Fees – Loan Processing Fee – Loan Tax Service – Appraisal that is required by Lender – Title, Escrow, Settlement Fees – Recording Fees – Transfer Fees – Attorney, Legal, Advisor Fees – Inspection, – credit check … same allowed when purchasing real estate |
| Refund –State CA | 1040, Sch 1, p 1, line 1, click arrow (or enter in 1099-G, line 2) |
| Refund – Fed Apply to Next Year | 1040, p2, line 36 |
| Refund – CA Apply to Next Year | CA540, p4, line 98 |
| Rental Property | Use Sch C for short-term rental; e.g. AirBnB Use Sch E for rentals > 30 days Sch C, flow to 1040 line 8 (or 1040, Sch 1, p1, line 3) Sch E, flow to 1040 line 8 (or 1040, Sch 1, p1, line 5) – Sch C income is subject to self-employment taxes – Sch E income is NOT subject to self-employment taxes – Generally, Schedule C is used when you provide substantial services (i.e. hotel like services; ex: cleaning, food delivery, etc.) in conjunction with the property, OR the rental is part of a trade or business as a real estate dealer.” |
| Rental Property -Used as Business and Personal | Sample On Schedule E Personal part flow to Schedule A – mortgage interest and property taxes 1. Check Box 17 – property is part personal and part business 2. Enter % used for Business (rented out) 3. Enter full rental income (no need to split) 4. Expenses Direct Expenses: enter amounts related to the part of the house that is rented out. Ex: repairs done to rental part only; advertise for renters, clean rental part only, commission, management fees, etc. Indirect Expenses: enter amounts related to whole house. Ex: property taxes, insurance, utilities (unless there are separate meters), HOA, legal and professional fees, etc. 5. % for Personal portion of Property Taxes and Mortgage Interest will flow to Schedule A. So you should NOT enter property taxes and mortgage interest on schedule A. 6. Depreciation Expense – business percent set in Fixed Asset, so amount shown on Schedule E has already been portioned accordingly between business and personal. 7. Expenses in #19 is for business (rental portion) Direct Expenses Direct expenses are those expenses that are paid only for the business part of your home. For example, if you pay for painting or repairs only in the area used for business. Indirect Expenses Indirect Expenses are those expenses that are paid for keeping up and running your entire home. Examples of indirect expenses generally include insurance, utilities, and general home repairs. Since these are expenses you would pay for the entire home, these are considered indirect expenses. |
| Rental Property Prior Year Unallowed Losses | Form 8582 Sch E, p1, bottom tab= click loss limitation, ck ‘X’ at top of page to enter prior year At-Risk or Passive Carryover amounts ——LACERTE—— Info 1. Go to Screen 18, Rental and Royalty Inc. (Sch. E). 2. Select the appropriate activity. 3. Go to section Prior Year Unallowed Passive Losses. 4. Enter amounts in the Regular > Operating field and AMT > Operating, as applicable. 5. Make sure the activity isn’t marked Delete this year in the General Information section. |
| Renter Tax Credit | No Federal renter tax credit. Credit for State only. Most credits require property owner to have paid their property taxes 2023 – view each state requirement California Flow to 540, p3, line 46 1. Paid rent in California for at least half the year 2. Income: a. $50,746 or less (single or married filing separately) or b. $101,492 or less (married filing jointly, head of household, or qualified surviving spouse) 3. Didn’t live with someone who can claim them as a dependent 4. Weren’t given a property tax exemption during the tax year 5. You get a. $60 if you’re single or married filing separately b. $120 if you’re married filing jointly, head of household, or qualified surviving spouse ——LACERTE—— 1. Go to 53 (other credits) 2. In left section, select California Other Credits 3. Check box “Qualified renter” 4. Lacerte will determine amount of credit based on tax return info 5. Credit Flow to 540, p3, line 46 |
| Resident Non-Resident Part-time Resident Part-year Resident | Lacerte – 55 (Part-Yr, Nonres. Info) California – Form Sch CA-NR 1. Part-year Resident (lived in CA any 183 days, 6 month; cummulative; not consertative) a. pay tax on all worldwide income while you were a resident of California. b. pay tax on Income from California sources while you were a nonresident 2. Non-Resident a. pay tax on your taxable income from California sources |
| Restricted Stock Unit (RSU) and Stock Grants | RSUs and stock grants are essentially compensation, you’ll usually see it reported automatically on your W-2 in box 14. This amount should also be included in the wages (box 1) of your W-2. Box 14 is used by employers to list various items and there is not a standard list of codes, you can use the options for “Other Not Listed Here” in place of RSU Gain. Example: Suppose you have $200,000 reported in Box 1 as wages and $12,345 reported in Box 14 labeled as RSUs. The $12,345 has been included already in the $200,000 amount, so you don’t have to add the RSUs in Box 14 to your wages when you file your taxes. 1. You pay taxes at ordinary income tax rates when your RSUs vest and become fully liquid. This is because your RSUs count as taxable income in the year they vest and become fully liquid. Are RSUs income? As far as the IRS is concerned, yes. It might be helpful to think of any fully vested RSUs you receive as no different than your salary compensation, at least for tax purposes. Just as you must pay ordinary income taxes on your salary, you must also pay ordinary income tax on your RSUs. So, just like your regular salary income, RSU income is subject to payroll taxes, including Social Security and Medicare taxes, and any state and local payroll taxes as well. Your company is required to withhold income tax and payroll tax on this income. 2. You will pay taxes at the capital gains tax rate on any appreciation in the stock price from the time the stock was acquired to the time you sold it. Once your RSUs convert into shares of common stock, you can choose to either hold or sell them. Should you sell them, you will owe taxes on the difference in value from the time you acquired them to the date on which you sell them. RSUs – Determine Cost Basis Note: 1099-B may have cost basis = 0, in this case you must determine the cost basis. Cost Basis is the price the shares cost for normal market buyers the day they vested into your name. I.E., market value of the shares when they become fully vested (shares put in your name). RSUs – Taxed as Ordinary Income (form W-2, box 14, amount already included in wages, box 1) Since RSUs are considered income, same as salary, and are reported on W-2, employer may have done extra withholding to pay the taxes. If not, you pay taxes same as you pay taxes on salary. RSUs – Taxed as Capital Gain (form 8949 / Sch D; if 1099-B has cost basis = 0, determine cost basis as indicated above) When you sell RSUs, and you have a profit (gain), you pay taxes on the gain. If you had the RSUs for less than a year, your capital gain rate will be higher, than if you held the RSUS for over one year. If you sell the stock at a higher price than its fair value at the time of vesting, you’ll have a capital gain RSU – Dividends You might also receive dividends on your RSUs. A dividend is a payment made to shareholders from company profits. Any dividends you receive on RSUs are considered employee income and should only be reported on your W-2. List them on your Schedule B with your tax return with a note that you’ve included them as wages if you receive a 1099-DIV for the value of your RSU dividends. |
| Retained Earnings on Balance Sheet | Retained Earnings (RE) are the accumulated portion of a business’s profits that are not distributed as dividends (or distribution) to shareholders, but instead are reserved for reinvestment back into the business. Retained Earnings = Beginning Period Retained Earnings + Net Income or Loss – Cash Dividends (or distributions) – Stock Dividends Notes 1. Distributions can be owner’s draw on balance sheet 2. Retained Earnings balance may not always be a positive number, as it may reflect that the current period’s net loss is greater than that of the retained earnings beginning balance. Alternatively, a large distribution of dividends that exceed the retained earnings balance can cause it to go negative. More Info |
| Retirement Accounts Rollover | IRS: Chart | Info |
| Retirement Account Rollover – Indirect | Indirect Rollover – Person withdraw money from their retirement account; then deposit that money back into the account or deposit money into a different retirement account. … if money is re-deposited within 60 days,, then the money is not taxed … all money, including money withheld for taxes must be deposited If person receive a 1099-R that says the withdrawal amount is taxable, to make it non-taxable: Enter in ATX: on 1099-R, box 2a, part where it says “Rollover amount included in 2a” |
| Retirement Account Rollover – Direct | Direct Rollover – company rolls the money to another account, You do not touch the money. |
| Retirement Account Rollover – 60 Day Rule | The 60-day rollover rule allows you a 60-day window in which to deposit IRA rollover funds from one account to another if you choose an indirect rollover option. If you don’t meet this deadline following an indirect rollover, then taxes and penalties can apply. |
| S-Corp Form 2553 | Sample – Late Form Election – want to back date s-corp – Language when want to have S-Corp to have been established in a previous year. NOTE: It cannot go back more thatn 3 years and 75 days. |
| S-Corp S-Corp Basis Formula | Info: Owners Draw, Distribution, – The S-Corporation must file 1120-S – Must file 2553 with IRS to elect to be an S-Corp (and get EIN) – An LLC can elect to be taxed as S-Corp by filing Form 2553 – Once select S-Corp tax status, you must be S-Corp for 5 years – Payroll is required for S-Corps Basis financial contributions + plus ordinary income – losses – distributions OR contributions + profits – distributions – If don’t know basis, calculate based on prior years Distributions 1120S, tab= line 16 d – distributions Flow to Sch K-1, K-1 Stmt; and Form, line 16 D – money that was generated by the business, and that money is given to the owner(s) for their personal use – Assets (typically cash) that are taken out of the business for personal use or expenses that are not business related. – Earnings by S corporations that are paid out or “passed through” to shareholders and only taxed at the shareholder level. – Payout of your business’s equity to you and other owners – Personal expenses are considered distributions Partners 1. Partners Receives K-1 1120-S (distribution) and/or W-2 (salary) K-1 flows to Sch E, Pg2 2. Distribution must be tracked. At end of year must report on K-1, line 16, with reference of code D. It does not flow to 1040 as ordinary income. 3. If distributions exceed the shareholder’s basis in the stock, the excess is reported on Schedule D and Form 8949 (capital gain) – as excess distributions. S Corporation Total Distributions Reported 1. on Form 1120-S, page 5 Schedule M-2, line 7. 2. All owners will be issued a Schedule K-1 at the end of the year detailing their share of activity from the S Corporation, including distributions on line 19. If an owner has basis to receive a tax-free distribution it is added to net income on their tax return. If the owner does NOT have basis, it will be treated as a capital gains distribution reported on Schedule D. Dividend distributions Reported on Form 1099-DIV, and on Schedule K, Line 17c. Loan repayments Reported on Schedule K, Line 16e, and on each individual shareholder’s Schedule K-1, line 16, with a reference code of “E.”. |
| S-Corp General Info | S-corp is a legally separate entity from its owner. S-corps provide you with a layer of protection for your personal assets in the event that your business can’t pay its debts or your business is sued. You should have revenue of $60,000 to $70,000 year to justify setting up a S-Corp; because of the setup and ongoing fees involved — corporate tax return, payroll, bookkeeping, etc. While partnerships and limited liability companies (known as LLCs) require certain owners and partners to pay self-employment taxes, an S-corp does not. Instead, employees of S-corps have employment taxes withheld from their paychecks. One of the primary benefits of an S-corp is tax savings. With a C corporation, profits are reported on the company’s tax return and then again on shareholders’ tax returns as dividends. This means the profits are taxed twice. However, an S-corp doesn’t pay federal corporate taxes; instead, it passes its profits or losses onto the shareholders to file on their personal tax returns. S-Corp owners / shareholder can pay themselves a salary or take a distribution. The primary difference between a salary and distributions is that distributions are not subject to employment taxes. However, they are considered part of a shareholder’s personal income for tax purposes. These distributions are tax-free until they exceed a shareholder’s stock basis; beyond that point, they are taxable. |
| S-Corp K-1 Global Info Settings | sample |
| S-Corp Debt Basis | Similar to stock basis. To calculate a debt basis, you take the original amount the stockholder loaned to the corporation and increase his or her basis for that loan and any additional loans he or she provided. Then, the debt basis will decrease when the corporation pays off any of that debt or if the stockholder’s share of the corporation’s losses is larger than his or her shares. The proper order for determining a debt basis is the following: 1. Begin with the original loan granted to the corporation 2. Increase basis by the loans made to the corporation, including interest 3. Decrease basis by any payments the corporation made on the loan 4. Decrease basis by any losses or deductions that were larger than the shareholder’s basis of shares. A few things to keep in mind when calculating a debt basis: • A basis can never be decreased to an amount below zero. • Losses can be carried over into future years • If no debt exists at the beginning of the year, then the basis amount at the beginning of the year is zero, which can then be adjusted by any losses or deductions from previous years. |
| S-Corp Stock Basis S-Corp Basis | IRS | Sample Increase / Decrease Example Calculations Shareholder starts with their initial capital contribution (investment) to the S corporation or the initial cost of the stock they purchased (the same as a C corporation). That amount is then increased and/or decreased based on the pass-through amounts from the S corporation. I.E., stock basis decrease by certain business losses or increase through business income and contributions. How to calculate shareholder basis for an S Corporation Think of your stock basis like a bank account. You can’t take out more money than you have — the stock basis must always remain above $0. Typically, your initial stock basis is what you paid in cash for shares in the S corporation. You might have inherited the stock or received it as a gift; in that case, the initial deposit will be the stepped-up basis or the carryover basis, respectively. 1. Start with your initial capital contribution or cost of the purchased stock. 2. Add your ordinary income from Box 1. 3. Add other taxable income from Boxes 2-12, such as interest income, ordinary dividends, or short- and long-term capital gains. 4. Add tax-exempt income in Box 16A and 16B. This income includes distributions from Roth IRAs and Roth 401(k)s, municipal bonds, and most benefits from company health insurance plans. 5. Add excess depletion in Box 15C. This box is primarily used by companies in the oil and gas industry that use natural resources. Once you’ve added those, it’s time to subtract any losses. 6. Subtract separately stated loss items in Box 2-12S. 7. Subtract nondeductible expenses in Box 16C, such as everyday travel and entertainment expenses. 8. Subtract non-dividend distributions in Box 16D. 9. Subtract depletion for oil and gas in Box 17R. You’ll now have your stock basis before loss and deduction items. 10. If you have a loss in Box 1, subtract it from the current total. 11. You’ll also need to subtract any charitable donations. |
| Sale Real Estate – Primary, Second, or Rental Costs | Rental Sale Form (tax calculation for form 4797, Sch D) Example Allowable Closing Costs IRS Examples Cost Basis after Refinance – When you refinance, cost basis is still original purchase price; NOT refinanced price. You can NOT add refinance fees to cost basis. Allowable Closing Costs … Real estate broker commissions, finder or referral fees … Owner’s title insurance premiums … Closing agent fees (title, escrow or attorney closing fees) … Attorney or tax advisor fees related to the sale or purchase … Recording and filing fees, documentary or transfer tax fees … Property Taxes … Mortgage: Interest, Recording Cost, Statement Fee, Payment Shortage NOT Allowed Closing Costs … Pro-rated rents … Security deposits … Utility payments … Property taxes and insurance … Associations dues … Repairs and maintenance costs … Insurance premiums … Home Warranty … Loan acquisition fees: points, appraisals, mortgage insurance, lenders title insurance, inspections and other loan processing fees and costs Loan Costs: NOT included in cost basis Capital Improvements: Replaced roof, driveway, bathroom; added bedroom, etc. Original Purchase Closing Costs Allowed (add to basis) – same as selling costs allowed, plus – Charges for installing utility services – Surveys – Transfer or stamp taxes – Any amount the seller owes that you agree to pay, such as back taxes or interest, recording or mortgage fees, cost for improvements or repairs, and sales commissions. Section 1250 Commercial building and residential rental Section 1245 Furniture, fixtures, equipment Section 1252 Farm Land Section 1254 Oil, Gas Geothermal Section 1255 Cost sharing payment |
| Sale Real Estate – 1031 Exchange | Form 8824, (create 4797 if have a gain); CA Form 3840 Relinquished Property 1. Cost Basis = Purchase Price + Purchase Closing Costs + Capital Improvements – Depreciation 2. Realized Gain = Sale Price – Cost Basis 3. Unrecaptured Section 1250 Gain = Depreciation 4. Capital Gain = Realized Gain – Depreciation 5. Taxes Owe = (Capital Gain * Capital Gain Tax Rate) + (Depreciation * ordinary income tax rate (or max 25%)) ——LACERTE—— Like Kind Exchange |
| Sale Real Estate – Inherited Property | Sample Form 8949, tab=Input (enter same as stock sale. 1099-B) (a) Description of property = property address (b) Date acquired = date acquired / inherited (c) Date Sold or disposed = escrow closing date (see 1099-S; seller should have gotten this document from escrow) (d) Proceeds = property sale price (e) Cost or other basis = purchase price OR stepped-up basis (stepped-up basis is market value of the property at time of owner’s death) (e) Selling expenses = expenses paid to sell property; e.g., commission, escrow fees, closing cost seller paid for buyer, … (see above: Sale of Real Estate – Primary, Second, or Rental) (f) Form 8949 code = E (selling expense or option premium not on 1099-B or 1099-S) Gain or Loss flow to Schedule D |
| Sale Real Estate – Investment / Rental Property | Rental Sale Form (tax calculation for form 4797, Sch D) Report Sale on form 4797 – If have fixed asset already, do convert / disposition – If no fixed asset, add form 4797; tab= input – calculate depreciation, for depreciation recapture tax. Internal Revenue Code Section 1250 states that depreciation must be recaptured if depreciation was allowed or allowable. So, even if you don’t claim the annual depreciation expense on rental property that you’re legally entitled to, you’ll still have to pay tax on the gain due to depreciation when you decide to sell. Cost Basis = purchase price + selling closing costs + initial purchase closing costs + improvements Depreciation calculation (depreciation building, not land) ——LACERTE—— Rental with multiple depreciate assets (bulk); takes few minutes to update form 4797 There are several ways to dispose of activities in Lacerte, but for assets reported on Screen 22, Depreciation, the easiest way is to enter them as a Bulk Sale: 1. Go to Screen 22, Depreciation. 2. Select the primary asset that you want to dispose of (For example, a Rental Home) .  3. Scroll to General Disposition Information section. 4. Enter the Date sold, disposed, or retired (MANDATORY). 5. Enter the Basis Adjustment (if applicable). 6. Enter the Expenses of sale (if applicable).  7. Scroll down to the Sale of Asset (4797/6252) section. 8. Enter the Sales Price (-1 = none). This is the total sales price for all the assets included in the disposition.  9. Locate the Miscellaneous subsection. 10. Enter a 1 or 2 in 1 = complete disposition of passive activity, 2 = partial (triggers 8582).  11. Select the next Asset that you want to dispose of (For example, Land). 12. Scroll down to General Disposition Information section. 13. Enter the Date sold, disposed, or retired (MANDATORY). 14. Select the main asset from the Bulk sale (multi-asset) disposition: select the asset containing dispositions amount (Ctrl+T) from the dropdown menu. Don’t enter any sales information on this asset.  15. Repeat steps 11–14 for all assets associated with this disposition. 16. View form 4797 for amounts. It takes a few minutes for 4797 to update. See Generating Form 8582 Passive Activity Loss Limitations for an Individual Return for more information. |
| Sale Real Estate – In Trust | File 1041 Return and report sale of the house on Form 8949, which flow to Schedule D. If there are beneficiaries, a K-1 is created for each beneficiary, reporting their share of the sales proceeds. The Exception to having to file a 1041 for real estate in a trust is if the trustors (grantor trustors) is alive. For married couple, both persons must be alive at time of sale. In this case, sale is reported under SSN and is filed on 1040 personal tax return, using Schedule D (8949). When one spouse dies, the portion of that spouse’s assets in a revocable living trust become irrevocable. The trust must file a Form 1041 for that year, reporting and paying taxes on the income from the deceased spouse’s portion of the assets. This is typically half the trust’s assets. Afterward, the irrevocable trust will file a return, subject to the income level requirements, every year. ——LACERTE—– 1041 Sale of home |
| Sale Real Estate – In Irrevocable Trust | File 1041 Return and report sale of house on Form 8949, which flow to Schedule D. Placing a home into an irrevocable trust can protect it from creditors and litigation, but when the home is sold, someone will have to pay the capital gains on the sale. Although irrevocable trusts are great for distributing assets to beneficiaries, they are also responsible for paying capital gains taxes. |
| Sale Primary Residence | Form 8949, tab=Sale Principal Resident Input, 1=Y so flow to Sch D (1040) for State: CA, flow to CA sch D (540) CA Withholding (from 592-B or 593): CA 540, line 73 ——LACERTE—— 1. Sale of home on individual return (1040) – no depreciation, no business use of home. Also, instructions for sale of home with reduced exclusion, and sale of home with business use. Note: Form 593 (CA Withholding statement) won’t be generated with the individual return. These inputs will create an electronic copy of the form to be included in the e-filed return. If this return must be paper filed, please include a copy of the original 593 received by the taxpayer 2. Sale of home used also as rental – taxpayer lived in home 2 of past 5 year, so taxpayer get the $250,000 or $500,000 exclusion Sale of Home with No Depreciation, No Business Use 1. Go to Screen 17, Dispositions 2. Enter the sale information in the grid: a. Description of Property b. Date Acquired c. Date Sold d. Sales Price e. Cost or Basis f. Expense of Sale (if applicable) 3. Scroll down to the Sale of Home section 4. Check the box labeled Sale of home (MANDATORY to compute exclusion) 5. Check the 2 year use test met (full exclusion) box Note: If no capital gain, Schedule D is not created unless you have set the Settings Option to force Schedule D; OR, you can check box “Received Form 1099-S” in Sale of Home section. Sale of home with Business Use IRS Publication 523 – Selling Your Home 1. If home office is part of the home’s living area, and you did not take deprecation, treat as regular home sale. 2. If you no longer have home office and did not have home office in year you sold home, and you did not earn any business or rental income, and you use as primary residence for last 2 out of 5 years, then treat as regular primary house sale. 3. Per Lacerte – IRS regulations indicate that if the residential and non-residential sections are within the same dwelling unit (such as an office in the home), and no depreciation is claimed, Reg. 1.121-1(e)(1) doesn’t apply. If Reg. 1.121-1(e)(1) doesn’t apply, you’ll need to enter the sale as two separate transactions: 1. Divide the sales price, selling expenses, cost basis, and maximum exclusion between the part of the home used for personal purposes and the part used for business or rental. 2. Go to Screen 17, Dispositions. 3. Create a property for the personal part of the home: a. Enter the sale details for the personal part. b. Under the Sale of Home section, check the box for Sale of Home. c. Enter the amount of exclusion allocated in Exclusion (-1 to recognize full gain)[O]. 4. Create a second property for the business/rental part of the home: a. Enter the sale details for the personal section. b. Scroll down to the Form 4797 section. c. Enter the amount of Depreciation allowed (-1 if none, triggers 4797). d. Under the Sale of Home section, check the box for Sale of Home. e. Check the box for Business use in year of sale. f. Enter the amount of Depreciation allowed after May 6, 1997. g. Enter the amount of exclusion allocated in Exclusion (-1 to recognize full gain)[O]. If Reg. 1.121-1(e)(1) applies to your client, follow the steps for a Sale of home with no depreciation or business use, above. Sale home with Reduced Exclusions 1. Go to Screen 17, Dispositions 2. Enter the sale information in the grid: a. Description of Property b. Date Acquired c. Date Sold d. Sales Price e. Cost or Basis f. Expense of Sale (if applicable) 3. Scroll down to the Sale of Home section 4. Check the box labeled Sale of Home (MANDATORY to compute exclusion) 5. Check the box Sale due to change in health, employment or unforeseen circumstances a. This box must be checked to calculate the reduced exclusion. For more information, see IRS Publication 523. 6. Enter the number of days the taxpayer used the property as a main home in Days Used as Main Home 7. Enter the Days Property Owned 8. Under Business Use, enter the Number of nonqualified use days after December 31, 2008, if any. Nonqualified use typically includes any time the home wasn’t used as a principal residence. |
| Sale Second Residence | IRS Second Home Sale Form 8949, tab=input, flow to Sch D. Do not put on principal resident for State: CA, flow to CA sch D (540) |
| Sale Real Estate Owned by Multiple People | Sample –individual and estate owners Example 2 people owned house. Each person reports their share of the sales proceeds and the cost basis. Determine sales proceeds and cost basis for the whole house, then each person reports 50% of sales proceeds and 50% of the cost basis. Each person also pays taxes on 50% of the gain, if any. |
| Sale Real Estate as Installment | Form 6252 If property sold as a loss, then you cannot use installment method. If property is investment or business, you can deduct loss in the tax year of sale. You must report interest income received from monthly payments on 1099-INIT |
| Sale Real Estate owned by Estate or Trust | Must file 1041 Return (Trust and Estates), and report the sale on the 1041 return. |
| Sale Real Estate owned by Partnership between an Individual and an Estate | If not a rental property, Individual report sale on Form 8949 as a residence. Estate must file 1041 Return and report the sale on the 1041 return. Each should receive 1099-S, which shows their portion of the sales proceeds. |
| Sale Real Estate Withholding – CA | California Withholding – CA 540, p3, line 73 – add form 593 or 592, enter info, withheld amount on line 6 – Or, Add form: CA WHWKST (withholding worksheet) Note: don’t add form CA 593, it is for you to fill-out and give to escrow company before the sale. CA Real Estate Withholding (CA 593) – online form and instructions CA Real Estate Withholding (CA 593) – Sample: No Exemption CA Real Estate Withholding (CA 593)- Sample: Primary House Sale |
| Sale Real Estate Withholding – CA Fill-out for Escrow Company | For Seller to Give to Escrow Company – Add Form 593, enter info, print for client. (you need to calculate estimate taxes) – CA online form and instructions |
| Sale Rental Property – Using Fixed Assets | taxpayer should have 1099-S, AND if California property and CA 593 Using Fixed Assets Instruction on ATX support website – bulk sale 1. Add property Record: Click on building, Disposition, Sale/Abandonment, Ck Box Bulk Disposition, Add New, Enter Info for sale, (desc =what you call the sale, enter sale price, …) type =section 1250; click ok, click ok. 2. Assign property record to build, land, any other assets click building, Disposition, Sale/Abandonment, Bulk Disposition, select property created in step 1. click land, Disposition, Sale/Abandonment, Bulk Disposition, select property created in step 1. Repeat for each asset related to rental property being sold Click ‘View Bulk Disposition” to see all assets Click on 1040 or any another screen, program will create Form 4797, if there is a gain –takes few minutes to create Form 4797 Fixed Assets (taxpayer should have 1099-S, CA 593) Instruction on ATX support website – bulk sale 1. Add property Record: Click on building, Disposition, Sale/Abandonment, Ck Box Bulk Disposition, Add New, Enter Info for sale, (desc =what you call the sale, enter sale price, …) type =section 1250; click ok, click ok. 2. Assign property record to build, land, any other assets click building, Disposition, Sale/Abandonment, Bulk Disposition, select property created in step 1. click land, Disposition, Sale/Abandonment, Bulk Disposition, select property created in step 1. Repeat for each asset related to rental property being sold Click ‘View Bulk Disposition” to see all assets Click on 1040 or any another screen, program will create Form 4797, if there is a gain –takes few minutes to create Form 4797 |
| Savings Bond Interest | Sch B Interest and Dividends or 1099-INT, 3b; flow to Sch B |
| Schedule A Deductions Other Schedule A Deductions | Claim of Right Section 1341– If you paid back income of $3,000 or more reported in a previous year, due to having been paid in error, you can deduct that amount in the current tax year. Also known as a “claim of right,” it is a credit for taxes paid on wages not ultimately received from the previous year. |
| Schedule C | Set Initial Return Initial return show on Schedule C, line H 1. ATX: tab=Data, H check box “If you started or acquired business….” 2. Lacerte: 16, General Information Section, check box “First Schedule C filed for this business” Set Final Return Final Return – This is NO final marking that shows on Schedule C 1. ATX: tab=Data, at top, check box “Check if complete disposition of passive activity” 2. Lacerte: no place to set Loss Carryover – There are no loss carryover, because any loss is used to reduce taxable income |
| Schedule E Schedule E Unallowed Losses Carryover Schedule E Carryover Losses | Sample See Form 8582 for prior year unallowed losses for rental property Adjusted Gross Income Dictate Loss Amount 1. If your adjusted gross income (line 11 of IRS Form 1040) is less than $100,000, you are able to take the loss reported on line 26 of Schedule E up to a maximum amount of $25,000 annually. 2. If your adjusted gross income is between $100,000 and $150,000, the maximum $25,000 is slowly phased out. |
| Schedule K-1 Filing Schedule K-1 File type File Schedule K-1 Schedule K-1 IRA IRA K-1 IRA Schedule K-1 | Do you need to enter (report on 1040) Schedule K-1 for: 1. Partnership – YES 2. S-Corporation – YES 3. Trust – YES 4. IRA, Roth IRA, SEP – NO (IRA sample) 4a. K-1 for any IRA account, you don’t need to enter 4b. See Part II, I1 type is IRA and I2 box is checked (name is IRA) 4c. if distribution was taken from IRA, them K-1 must be reported 5. Limited Liablity Company (LLC) – YES 6. Individual – YES Schedule K-1 should be sent to every unit holder (individual or business). |
| Schedule K-1 Schedule K-1 Multiple States | For 1065 and 1120-S UBIA of Qualified Property = Section 199A unadjusted basis Schedule K-1 include info for other states. 1. You may need to report that income by filing non-resident returns in those states. 2. Generally, you’ll need to file a nonresident state return if you made money from sources in a state you don’t live in. Some examples are: a. Out-of-state rental income, gambling winnings, or profits from property sales b. S Corporation or partnership income c. Beneficiary income from a trust or estate d. If your employer withheld taxes for the wrong state 2. You can also file nonresident return if you had a loss. So losses can be carryforward. Lacerte -see Schedule K-1 carryford loss: US, General Info 3. You can also check Schedule K-1 to see if taxes were withheld. If they were you may not have to file. |
| Schedule K-1 Unallowed Losses | Sample Form 8582, page 2 Lacerte: 20.1 (Passthrough K-1s) go to section Prior Year Unallowed Passive Losses |
| Schedule K-1 1065 Schedule K-1 Codes K-1 Codes 1065 1065 Codes K-1 Partnership | 2023 – 1065 Codes now part of IRS Instruction book 2023 – IRS / HTML / search for code Line 13 Codes – Lacerte — Check K-1 doc for the type of deduction. — Then enter in K-1 Code drop menu — Note: K-1 doc may have code AE with name portfolio deduction. So, in Lacerte, in K-1 Code drop menu, you will select “L – Deduction – Portfolio” — For California, for Portfolio deduction, check that deduction flow to Sch CA, page 6, line 21 Line 20 Codes – Lacerte Line 20 AB (section 751 gain or loss) — partner’s share of gain or loss on sale of the partnership interest — if amount is not accounted for elsewhere on K-1, may need to enter in Dispositions screen. see instructions on K-1. — if need to enter in Dispositions, see lacerte info here Line 20 AG (deals with 163j limits) 2023: If average income for last three years is less than $29 million, don’t need to enter AG Line 20 AJ (excess business loss limitations, report on form 461) for explanation see / same as: K-1 1120-s, Box 17 AJ 2023: Excess Loss Limitation Greather than $289,000 ($578,000 married filing joint) ——LACERTE—– 1. Partner’s Share of Liability = Enter NonRecourse, Recourse in 26 (Share of Liabilities) 2. Print Instruction Booklet and Codes a. From the Setting menu, select Options. b. Select the Items to Print tab. c. Under Copy in the left navigation panel, select Addtl K1 Package. d. Check the box next to Schedule K-1 Instructions. |
| Schedule K-1 1120-S Schedule K-1 Codes K-1 Codes 1120-S 1120-S Codes K-1 S-Corporation | 2023 – 1120-S Codes not part of IRS Intsruction book Line 16 code C (or line 14, code C) – Enter this amount only if there are foreign taxes on the K-1. Otherwise do not enter. ????? Line 17 V – Qualified Property: Enter in UBIA |
| Schedule K-1 1120 Schedule K-1 Codes K-1 Codes 1120 1120 Codes K-1 C-Corp | 1120, C corporations don’t issue K-1s to shareholders. Instead, they’ll issue a Form 1099-DIV when dividends are paid. |
| Scholar Share 529 (ScholarShare) | Info Related to CA Investment account that offers tax benefits when used to pay for qualified education expenses for a designated beneficiary. Report withdrawals as income on, 1040, Schedule 1, p1, line 8z … report on the beneficiary’s or the account owner tax return If distribution subject to 10% penalty, the additional tax must be reported on 1040, Schedule 2, p2, line 17z ??? … Money grows tax deferred … Withdrawals from a 529 plan are fully tax-free when used to pay for qualified education expenses. Example: anything a student needs to attend an accredited college, university or vocational or technical school; covers tuition, room and board, books, equipment, computer expenses. … You cannot use a 529 plan to buy or rent a car, maintain a vehicle, or pay for other travel costs. |
| Second House Second Home | Second Residence Tax Deductions More Info 1. Mortgage Interest – can only claim deduction for two homes regardless of how many properties you own. 2. Property Taxes – can claim deduction on as many properties as you own. a. The property tax deduction limit is $10,000 per tax return for individuals and joint filers, and $5,000 for married couples filing separately. 3. Home Equity Loan Interest 4. Energy Efficiency |
| Self Employment Taxes | Self Employment Calculator Sch SE, 1. Pay taxes on full amount; flow to 1040, Sch 2, p1, line 4 2. Deduct half of taxes paid; flow to 1040, Sch 1, p2, lineb15 Who Pay – How Calculate (IRS Info) a. You must pay self-employment tax, if you had net earnings from self-employment of $400 or more. b. You pay self-employment tax on 92.35% of your net earnings. c. Formula: (net earnings * 92.35%) * 15.3% If net earnings above threshold, you pay additional medicare taxes 2023 Rates 15.3% for individuals earning up to $160,200 Include: a. Social Security 12.4% (6.2% employee AND 6.2% employer) b. Medicare 2.9% (1.4% employee AND 1.45% employer) 2023 Additional Medicare Tax Rate 0.9% (employee pay; employer do not pay) Threshold (you pay additional when net or earned income exceeds): $250,000 Married Filing Joint $125,000 Married Filing Separate $200,000 all others Self Employment Pays Into Social Security when you file your tax return with a Schedule SE, it reports your self employment net earning to social security. Lacerte – Suppress Self Employment for Schedule C 1. Goto Screen 16, Other Information, check box “Not Subject to self-employment tax |
| Self Employment Taxes – CA | Deduct half of taxes paid (from Sch SE): flow to Form CA SCH CA (540), p2, Section C, line 15 |
| Service Animal | Deduct on 1040, Schedule A Service pets fall under medical expenses. What can you write off? nearly all pet-centric expenses, including: – Food – Grooming – Training – Purchase price – Vet bills – Boarding |
| Signature Authorization E-File Signature Efile Signature Electronic Signature esignatures | States that require their own signature authorization when e-filing 2023 List | Lacerte List |
| Social Security Form SSA-1099 | Sample 1, Sample 2 Enter Total Additions amount California does NOT tax social security; IRS DOES tax social security https://www.ssa.gov/benefits/retirement/planner/taxes.html IRS Taxes Combined income = total income that is taxable + tax exempt interest + one-half of social security benefits total income that is taxable — include pensions, wages, interest, ordinary dividends, and capital gain distributions. Income in this situation is not reduced by any deductions, exclusions, or exemptions. OR, can calculate Combined income as: Your adjusted gross income + Nontaxable interest + ½ of your Social Security benefits Combined income also referred to as provisional income. Filing Status is Single, Head of Household or Surviving Spouse 1. Combined income less than $25,000, social security benefits not taxed 2. Combined income between $25,000 and $34,000, up to 50% of social security benefits may be taxed. 3. Combined income greater than $34,000, up to 85% of social security benefits may be taxed. Filing Status is Married filing Joint 1. Combined income less than $32,000, social security benefits not taxed 2. Combined income between $32,000 and $44,000, up to 50% social security benefits may be taxed. 3. Combined income greater than $44,000, up to 85% of social security benefits may be taxed Example: Bruce and Kathy are both under 65. They file jointly, and both receive Social Security benefits in the current tax year. Ath the end of the year, Bruce received $7,000 in social security benefits and Katy received $3,000. Bruce also received wages of $30,000 and tax-exempt interest of $500. To calculate combined income for the married couple, take the total amount of social security benefits received ($10,000) and divide it in half ($5,000). Add the taxable wages and tax-exempt interest to the halfed social security benefity to receive a total of $35,500. This is higher than the base amount of $32,000, so Bruce and Katy will be taxed on 50% of the social security benefits ($5,000). If social security is your only income, and you have no dependents for child tax credit, then no need to file a tax return. However, you may want to file to claim any federal or state rebates; like stimulus. |
| Social Security – Higher Income Beneficiaries IRMAA Medicare Parts B and D Effected by Gain from real estate sale | Higher Income Beneficiaries – If you have high income; or you sale real estate, stock or other assets that causes your income to increase, you may have to pay more for Medicare Part B and D. Social Security checks your tax return for your income. Income-Related Monthly Adjustment Amounts (IRMAA) is where Social Security determines what you pay for Medicare Part B and D. Social Security review your income each year, and adjust accordingly. You must wait until you receive a letter from Social Security, then you can file an appeal with Form SSA-44, or appeal online. Note: Your appeal must be based on one of the reasons listed by Social Security, otherwise, don’t waste your time. Your appeal will not be granted. |
| Social Security – Medicare Part B and D Premiums | Calculate Medicare Part B Premiums 2022 calculations 2023 calculations Medicare Part B premiums are calculated based on your income. More specifically, they’re based on the modified adjusted gross income (MAGI) reported on your taxes from two years prior. This means your 2022 Medicare Part B premium may be calculated using the income you reported on your 2020 taxes. If your reported income was higher than a certain amount, you’ll pay a higher premium. This is known as the Medicare IRMAA, or the income-related monthly adjustment amount. |
| Social Security – Repayment of Benefits | Info Your gross benefits are shown in box 3 of Form SSA-1099 or Form RRB-1099. Your repayments are shown in box 4. The amount in box 5 shows your net benefits (box 3 minus box 4). Use the amount in box 5 to figure whether any of your benefits are taxable. |
| Social Security Medicare Parts B and D Effected by Gain from real estate sale | The Gain from real estate sale can increase your income, which will cause you to pay more for Medicare Part B and D. See Social Security, Income-Related Monthly Adjustment Amounts (IRMAA). SS review and adjust accordingly each years, or you can file Form SSA-44, or appeal online. |
| State | ——LACERTE—— Delete State 1. 1 (Client Information) 2. Top-left Menu panel, select state; then click Delete button Hawaii (HI) 1. Form N-311 = Client Info, section Hawaii Info (at bottom of screen), check box “TP-Food/Excise and Low Income Household…” (client Mamo Aki) |
| State Income Tax Refund -Taxable | If you did NOT itemize deductions on your federal tax return last year, do not report any of the refund as income. If you itemized deductions last year and then received a refund of state or local taxes, you may have to include all or part of the refund as income on your return this year. Report on Form 1099-G, line 2 and 3 |
| State Taxes Paid in Previous Year | Must itemize in order to deduct in current year. 1040, Sch A, lines 5 and 6 Max Sch A, Taxes deduction is $10,000; if married filing separately it is $5,000 – include state and local sales tax (SALT), income, and property taxes |
| Stepped Up Basis – On Death Alternate Valuation | Stepped-Up Basis Cost basis is “reset” as if the taxpayer purchased the asset on the date of death. Any gains that might otherwise have been included in taxable income are erased. Alternate Valuation Date If you elect alternate valuation, cost basis for the assets are generally valued as of six months after the date of death. However, if an asset is sold, exchanged, distributed to a beneficiary, or otherwise disposed of within six months of death, cost basis is valued as of the date it is disposed of. |
| Student Loan Interest 1098-E | 1040, Sch 1, p2, line 21 LACERTE 1. 24 (Adjustment to Income) 2. Enter in Total qualified student loan interest paid a. enter all student loan amounts here 2023 1. $2,500 max deduction 2. deduction phase out start with MAGI over $155,000 married filing joint; $75,000 all others 3. complete phase out (no deduction) with MAGI $185,000 joint filing; $90,000 all others 4. per tax cuts and jobs act, can exclude cancelled student loan debt from income if loan have a provision that states that part of the debt will be canceled if the student works for: a. for certain period of time, b. in certain professions, and c. for any of a broad class of employers. d. Also, if student loan debt is forgiven because the student died or have permanent and total disability, the cancelled debt is excluded from income. |
| Tax Summary Page – ATX | Tax Bracket = range of incomes taxed at given rates, which typically differ depending on filing status Average Tax Rate = Total Tax paid divided by Taxable Income |
| Tax Statistics | IRS Website |
| Taxable Income | = Adjusted Gross Income (AGI) minus either the standard deduction or total of itemized deductions, whichever is greater. and minus qualified business income deduction, if applicable. Taxable income is used to determine your tax bracket. Note: personal and dependent exemptions, which may have lowered your taxable income, were eliminated from 2018 through 2025 by the Tax Cut and Jobs Act. |
| Time Share Vacation Rental Vacation Home | – You can deduct property taxes paid for time share on –bSchedule A, other investment property – You can NOT deduct HOA, cleaning, maintenance, etc. |
| Trust (1041 – Fiduciary) | IRS Info | IRS Definitions Enter Beneficiaries: Sch K-1, tab=input Enter Distribution Amount: 1041, p2, lines 9 and 10 (distribution should be done according to trust documents) Print K-1 for Beneficiaries: Print, select Sch K1 (1041) in Federal Forms (and state form is applicable) Set Print Parameters: Sch K-1, tab=global info |
| Trust Entities Types | Decedent’s Estate Qualified Disability trust Bankruptcy Estate -chapter 7 Bankruptcy Estate -chapter 11 Pooled Income Fund |
| Trust – Simple Trust | A simple trust must distribute all its income currently. Generally, it cannot accumulate income, distribute out of corpus, or pay money for charitable purposes. If a trust distributes corpus during a year, as in the year it terminates, the trust becomes a complex trust for that year. Whether a trust is simple or complex determines the amount of the personal exemption ($300 for simple trusts and $100 for complex trusts), that applies in calculating the tax owe. |
| Trust – Complex Trust | A complex trust is any trust that does not meet the requirements for a simple trust. Complex trusts may accumulate income, distribute amounts other than current income and, make deductible payments for charitable purposes under section 642(c) of the code. |
| Trust – Grantor Trust | A grantor trust is a trust over which the grantor has retained certain interests or control. The grantor trust rules in IRC 671-678 are anti-abuse rules. They prevent the grantor from taking tax advantages from assets that have not left his or her control. The anti-abuse rules treat the grantor as owner of all or a portion of the trust. The grantor is subject to tax on trust income so treated even if he or she does not actually receive the income |
| Trust Distribute Gain from Sale of California Real Estate | CA Franchise Tax Board | (800) 852-5711 If Trust distributes the income from the gain on the sale of California real estate, then the trust is also required to distribute the withholding. 1. Trust Distribute Gain from Real Estate Sale (Gain and Withholding Credit should be listed on Schedule K-1 (541)) … Trust receives form 593 (CA real estate withholding) … Trust decides whether to distribute or retain gain from real estate sale. … If Trust distributes gain, trust must also distribute withholding. … Trust file Schedule K-1 (541) with CA FTB AND Trust send copy to beneficiaries (beneficiaries keep copy for their records, beneficiaries do not send form to ca ftb) 2. Trust Distribute Withholding (Allocate Withholding) … Executor or Trustee file Form 592 with CA Franchise Tax Board … Executor or Trustee file Form 592-B with recipients (beneficiaries) 3. If you efile form 541, you can include the forms if your software allows you to do it. Trust Forms you can e-file: CA FTB Include 593, 592-B, K1, … Schedule K-1 (541) Column (b) shows amounts from your federal Schedule K-1 (Form 1041), beneficiary’s Share of Income, Deductions, Credits, etc. Column (c) shows the difference between federal and California amounts. Column (d) shows your total amounts using California law by combining column (b) and column (c). Column (e) shows your income and loss from California sources. |
| Trust Distribute Withholding from Sale of Real Estate | CA FTB – Withholding Questions: Phone: 916-845-4900 Takes 10 weeks for FTB to process 592, 592-B, 592-PTE forms Real Estate Withholding Withholding Info Withholding with Trust on Title 1. CA WHWKST – enter amount withheld from sale of real estate (from form 593) 2. CA 541, line 31 – enter amount withheld from sale of real estate (must equal amount entered on CA WHWKST) 3. CA Sch K-1 (541) … tab=Global, line 13, enter amount withheld from sale of real estate (must equal amount entered on CA WHWKST) … tab=form, line 13, withheld amount should be what each beneficiary is getting (divided among beneficiaries) 4. CA 592 (form and instructions | online instructions) (a) enter amount withheld from sale of real estate (must equal amount entered on CA WHWKST) (b) Part I – Withholding Agent Information If your entity is an S corporation, partnership, LLC, estate, or trust that received payments or distributions that were withheld upon by another entity and you are flowing through the withholding credit to your S corporation shareholders, partners, members, or beneficiaries, enter YOUR entity’s name (not escrow company) in the business name field, and the ID number, and address in the designated areas. … enter the total number of payees … How to File CA 592 1. Mail 592 only (do not include 593 or 592-B) (and form 592 has less than 250 payees) Withholding Services and Compliance MS F182 Franchise Tax Board P.O. Box 942867 Sacramento, CA 94267-0651 If you have 250 or more payees on 592 form, you will have to submit form 592 online, Secure Web Internet File Transfer (SWIFT). 2. FTB will already have 593, because 593 was sent in by escrow company. FTB will connect the 593 to your 592 using FEIN, SSN, etc. You can call FTB to confirm they received 593 and the withholding amount on the 593. 3. Your 592 has the payees (beneficiaries) and their Tax ID. FTB will connect the 592 to the payee tax return. Payee (beneficiary), resident and non-resident, must file a tax return. 4. You issue 592-B to each payee (beneficiary). Then, payee must include this info on their tax return. Payee do not have to include the 592-B form, just the info. FTB already have the info from the 592. (c) Part II Type of Income If trust is withholding agent and this is for distribution, the type of income is trust distribution. (d) Part III Tax Withheld … Schedule of Payee: Total Income = total amount withheld Amount of Tax Withheld = amount withheld for that payee 5. CA 592-B (Sample | form and instruction) (a) add a 592-B for each beneficiary. … Enter amount each beneficiary is getting (amount withheld from sale of real estate; divided by the number of beneficiaries) … Must equal amount on CA Sch K-1 (541), tab=form, line 13 for each beneficiary … All 592-B should total to CA 592 (b) Part I – Withholding Agent Information same as entered in CA 592 (c) Form 592-B must be completed and provided to each payee by: January 31st following the close of the calendar year for residents or nonresidents. 6. CA 592-PTE (form – sample) Must complete and mail to FTB. This forms states how to FTB should distribute funds. (a) on top line, only need to enter the number of payees. Leave all other boxes unchecked. (b) Part I – is the trust (or business, person that is distributing money to beneficiaries. (c) Part II – is the company that collected the money. On last line, “Amount of Tax Withheld”, is the total amount of money withheld. (d) Part III – is the total amount of money withheld (e) Schedule of Payees are the beneficiaries. Total beneficiaries amount must equal to amount in Parts II and III. |
| Unemployment | California does NOT tax unemployment; IRS does tax it |
| Union Dues | ——LACERTE—— Screen 25 (Itemized Deductions), Section =Misc. Ded |
| Unreimbursed Employee Expenses | Schedule A – State Use Only ——LACERTE—– 1. Open Screen 25, Itemized Deductions. 2. In the Section list, click Misc. Ded. (Subject to 2% AGI Limitation). 3. If the taxpayer is not filing Form 2106 to report expenses, press CTRL+E on Unreimbursed Employee Expenses (Not for Use with Screen 30). 4. In the Description column, enter the type of expense. 5. In the Amount column, enter the taxpayer’s unreimbursed employee business expenses. 6. Repeat steps 3 and 4 for each expense to report. 7. Click OK when finished. |
| Vacation Home – also rented on Schedule E | ——LACERTE—— Vacation home that you also rent out. Income and expense reported on Schedule E |
| Vehicle Vehicle Info | Lookup Vehicle Info by VIN # – Department of Transportation Lookup VIN – website Vehicle Weight Curb weight is the total weight of a vehicle including standard equipment and required fluids, such as motor oil, transmission oil, coolant, AC refrigerant, and in some cases, a full tank of gas. Gross vehicle weight (GVW) is curb weight + passengers and cargo. GVWR (Gross Vehicle Weight Rating) refers to the maximum weight a vehicle is designed to carry, including the net weight of the vehicle with accessories, plus the weight of passengers, fuel, and cargo. The GVWR is a safety standard used to prevent overloading. Find Vehicle GVWR Look for a sticker on the inside of the driver’s side door. Here you should find the curb weight and GVWR. Curb weight is the total weight of a vehicle including standard equipment and required fluids, such as motor oil, transmission oil, coolant, AC refrigerant, and in some cases, a full tank of gas. Some people refer to curb weight as wet weight. Gross vehicle weight (GVW) is curb weight + passengers and cargo |
| Vehicle – Electric Vehicle Tax Credit | Flow to 1040, Schedule 3, line 6f 2023 Form 8936 | 8936-A or Schedule A (Form 8936) | video instructions 1. Complete Part I (see lines for adjusted gross income 2023 and 2022) 2. Check income limits (part II for business and part III for personal) a. Lacerte – must check “yes” to business/invest/personal … not for resale. Otherwise it will not flow to schedule 3 3. For Personal, complete Part III. a. line 9. max credit is $7,500 — check amount vehicle qualify for b. line 13. show credit to flow to Schedule 3, line 6f 2022 Sample Form 8936 | Instructions / PDF Instructions Form 8936, Part 1, Line 4b – Enter 100% unless the vehicle was a vehicle with at least four wheels manufactured by Toyota, Tesla, or GM (Chevrolet Bolt EV, etc.). Credit is nonrefundable, so you can’t get back more on the credit than you owe in taxes. You can’t apply any excess credit to future tax years. IRS Info on Vehicle Tax Credit – new, used, personal, business |
| Vehicle – Electric Vehicle Tax Credit – New Vehicle | New Veicle – Calculate Credit and See Requirements Starting January 1, 2024 – when purchasing new or used electric vehicle, 1. You MUST get a letter from car dealer stating that Tax Credits were approved. I.E., dealer must initiate and approve tax credit with IRS before purchase. 2. You will need letter to claim EV credit on tax return, OR you can claim EV credit at dealer, when you purcase the vehicle and lower the price of your purchase. Credit Amount Purchased In or After 2023 – Max $7,500 new EV credit or – Max $4,000 used EV credit (30% of sale price with max credit at $4,000) See Note above regarding Starting January 1, 2024 Note: 1. Lookup Tax Credit Amount – FuelEconomy.gov, select option on right side of screen. 2. Starting January 1, 2024, consumers can transfer the credits to a car dealer, effectively lowering the vehicle’s purchase price. Does Vehicle Qualify for Credit 1. Is the car made in North America? Lookup – Final Assembly In North America – Enter VIN (no year), click “Show All Vehicle Details”, select show 100 entries, look for Plant Country. If country is USA, Canada or Mexico, then vehicle is considered made in North America Note: If electric vehicle purchased after 8/16/2022, the credit is available to vehicles that were “final assembly in North America“. 2. Does the starting MSRP fall below the $55,000 cap for cars and $80,000 cap for new trucks and SUVs? – MSRP is the retail price of the vehicle sugested by the manufacturer, including options, accesories, and trim, but exclude destination fees. Therefore, it isn’t necessarily the price paid. 3. Have a gross vehicle weight rating of less than 14,000 pounds 4. Is your income level below the caps? 2023 & 2024 (amounts are same for both years) New Vehicles – modified adjusted gross income limit $300,000 for married couples filing jointly $225,000 for heads of households $150,000 for all other filers you can use either modified adjusted gross income from the year you take delivery of the vehicle or the year before, whichever is less. The credit is non-refundable and the excess can not be applied to future tax years. 5. Does the vehicle battery meet the standards for North American materials and assembly? battery capacity of at least 7 kilowatt hours Lookup Electric Vehicle Battery KWh (kilowatt) hours – Electric Vehicle Database The Treasury Department has released a frequently asked questions page on the new law’s provisions. The IRS has a FAQ sheet as well. |
| Vehicle – Electric Vehicle Tax Credit – Used Vehicle | Used Vehicle – Calculate Credit and See Requirements Starting January 1, 2024 – when purchasing new or used electric vehicle, 1. You MUST get a letter from car dealer stating that Tax Credits were approved. I.E., dealer must initiate and approve tax credit with IRS before purchase. 2. You will need letter to claim EV credit on tax return, OR you can claim EV credit at dealer, when you purcase the vehicle and lower the price of your purchase. Credit Amount Purchased In or After 2023 – Max $7,500 new EV credit or – Max $4,000 used EV credit (30% of sale price with max credit at $4,000) See Note above regarding Starting January 1, 2024 AND, 1. Nonrefundable credit and excess credit cannot be applied to future tax years 2. Purchase used electric vehicle from licensed dealer for $25,000 or less Is your income level below the caps? 2023 & 2024 (amounts are same for both years) Used Vehicles – modified adjusted gross income limit $150,000 for married couples filing jointly $112,500 for heads of households $75,000 for all other filers |
| Vehicle Donation | If value > 500 … complete Form 8283 … should have received 1098-C … also need date vehicle purchased If value < 500, enter as non-cash donation on Schedule A |
| Vehicle Expenses | Business owners and self-employed workers will report actual car expenses on Schedule C. Employees job expenses use Form 2106, State only. There is no longer a Federal deduction unless you are a qualified employee or eligible educator. There is a limit of $10,000 ($5,000 if Married Filing Single) on the amount of sales tax you can claim in 2018 to 2025. The $10,000 limit applies to the total amount a taxpayer can claim for real property taxes, personal property taxes, and state and local income taxes (or general sales tax if elected). |
| Vehicle – Luxury Vehicle | Depreciation Limits 2022 Depreciation Limits 2023 |
| Vehicle Mileage | 1. Report mileage on Fixed Asset with vehicle purchased for business 2. Report on Sch C when vehicle used for business and personal; vehicle not purchased for business 3. To take business mileage deduction, you must have miles. You cannot just write off expense e.g. Gas, insurance,… without any mileage. If you did not drive any place, there is nothing to write off. 4. Communting Miles. Any expenses related to commuting between your home and regular workplace are generally considered personal and nondeductible. IRS Commuting Rule 2024: Ensuring Mileage Deduction Compliance | Everlance ——LACERTE—— Vehicle NOT being Depreciated 1. 30 – Vehicle/Employee Business Expense 2. Bottom Tab =2106 3. Add Activity (note 2106 used by other forms, ex Sch C), so need to add activity 4. Set Form (Ctrl+T) = Schedule C (if rental, select Schedule E; if employee select From 2106, if self employed select Form 2106/Schedule SE) 5. Set Activity Name of number, select from drop menu 6. Vehicle Expense Section = enter mileage and expenses – still need to add to depreciation (22) screen (lookup why) Vehicle IS being Depreciated 1. 22 – Depreciation (or click Depreciation button at top of screen) 2. Enter info 3. Check if need to enter in sections AMT and Book Depreciation 4. Section Additional Info: Enter Percent of business use 5. Section Automobiles and Other Listed Property: check box if vehicle over 6,000 pounds, check box accordingly for Use of Vehicle, enter auto mileage, actual vehicle expenses. Listed Property – property used for both person and business. Ex: vehicle (except those over 14,000 lbs), computer, equipment, etc. Your business must use property more than 50% to claim expensing elections, bonus depreciation or Modified Accelerated Cost Recovery System (MACRS) depreciation. If Business use is less than 50%, you must claim depreciation basedon business use percent and you must use straight line depreciation under Alternative Depreciation System (ADS) |
| Vehicle Sales Taxes Auto Sales Taxes | If purchase vehicle for business, you can deduct sales taxes on Schedule C. Vehicle business use must be > 50%. If vehicle for personal use, deduct on Schedule A, Line 5a, ATX: go to Schedule A, line 5a, click arrow. Lacerte: go to 25 (Itemized Deduction), Section: Taxes; Section: Sales and Use Taxes; Field = Sales tax on autos not included above. |
| Vouchers – Payment Voucher | Individual: Federal: 1040-V State: CA FTB-3582 Corporation (1120 S and C) Federal: No voucher State: CA 1. Go to CA 100-ES, paper check; Tab = Record; Tab=Voucher Or, CA 100-ES, Tab=Voucher Trust Federal: 1041-V State: CA FTB-3843 |
| Vouchers – Estimated Tax Payment | Individual: Federal: 1040-ES (1040, p2, line 26) State: CA 540-ES (CA 540, p3, line 72) Lacerte: 1. 7, or from menu — Payments & Penalties, 2024 Estimated Taxes. 2. Estimate options = select 6 – “Greater of 100% of 2024 tax or 100/110% of 2023 tax” 3. Estimate threshold = enter 1 Corporation Federal: 1120 Lacerte: 1. 10, or from menu — Payments & Penalties, Estimated Taxes. 2. Go Section 2024 Estimated Taxes Trust Federal: 1041-ES State: CA: 541-ES |
| W-2 W-2 Multiple States W-2 Statutory Employee W-2 Box W-2 Boxes | Boxes and Codes Box 10 – Dependent Care – Form 2441 Employer paid or incurred these benefits for taxpayer. Must get receipts from taxpayer that total to amount in box 10; to make sure money spent on child / dependent care Box 13 – Statutory Employee – an individual contractor that is treated like an employee; and employer is not required to withhold taxes from their earning. — if box is checked, enter info in W-2 screen and enter wages on Schedule C — Lacerte: in W-2 screen enter wages & other info. AND, select schedule C from drop menu. Wages auto flow to Schedule C. In Schedule C enter any expenses Box 14 – CA SDI – Form W2, click Summary tab Flows to Sch A, line 5a, click arrow, line 16b, click arrow -show W2 summary tab — Note: line 16b = deductible state and local taxes, CA state disability insurance, paid family leave 2024 CA SDI Rate = 1.1%; no wage limit, all wages taxed 2023 CA SDI Rate = 0.9%; wage limit $153,164; max withhold $1,378 2022 CA SDI Rate = 1.1%; wage limit $145,600; max withhold $1,602 Box 12a Code J – on a W-2 indicates that the taxpayer has a third-party-provided sick pay plan. Amount for Code J is not taxable, so no need to enter the amount. I.E., If the taxpayer received a Form W-2 with only third-party sick pay in box 12 noted by Code J, do not report the information on the tax return. Third-party sick pay reported in box 12 with Code J is not taxable. ——LACERTE—— W-2 has Multiple States – see info 1. Enter employer Name, if spouse W-2, if W-2 has Retirement Plan 2. In top grid, click States, add each state listed on the W-2; then check box to select each state on W-2 3. Click Wages (paper icon), enter wage amount for each state on separate line, select state, AND a. If wages are taxed by Federal and State do NOT enter anything for Source; leave Source blank. b. If wages are taxed by that State only, select “S” in source c. If wages are taxed by Federal only, select “N” in source d. Check each State return to confirm only that State’s wages are taxed e. NOTE: Do NOT enter States and amounts in Section “State and Local”; for State wages, if different 4. In top grid, click Federal Withholding (usually just one federal withhohlding) 5. In top grid, enter Social Security withholding, Medicare wages, Medicare withholding (usually just one set of amounts for each). 6. In top grid, click State withholding (paper icon), enter withholding amount for each state, select state, and select “S” in source. Do same thing for Local withholding and SDI. —————————– Info from Lacerte 1. Go to 10 (wages), in top grid, enter employer; then starting with wages column, click paper icon, enter each state on separate line. 2. If Double Taxed Income — set source for the wages that apply to state only. Source: S =wages are for State only; N =wages for Federal only; blank wages for Federal and State Note: Double Taxed Income is all income taxed by one state, and part of that income is also taxed by another state. 3. Separate Taxed Income is wages and withholding listed as separate amounts. Do same steps as above, except do not set source; leave source blank. Because you are entering wages for each state. |
| W-2 Box 12 Codes | A – Uncollected Social Security tax or Railroad Retirement Tax Act (RRTA) tax on tips. — flow to Form 1040 Schedule 2, line 13 B – Uncollected Medicare tax on tips. — flow to Form 1040 Schedule 2, line 13 C – Taxable costs of group-term life insurance over $50,000 (included in W-2 boxes 1,3 (up to Social Security wages base), and box 5); Taxable costs are information only D – Elective deferral under a Section 401(k) cash or arrangement plan. This includes a SIMPLE 401(k) arrangement. You may be able to claim the Saver’s Credit, — Form 1040 Schedule 3, line 4. E – Code E includes elective deferrals under a Section 403(b) salary reduction agreement. You may be able to claim the Saver’s Credit, — Form 1040 Schedule 3, line 4. F – Elective deferrals under a Section 408(k)(6) salary reduction SEP. You may be able to claim the Saver’s Credit, — Form 1040 Schedule 3, line 4. G – Elective deferrals and employer contributions (including non-elective deferrals) to a Section 457(b) deferred compensation plan. You may be able to claim employer contributions the Saver’s Credit, — Form 1040 Schedule 3, line 4. H – Elective deferrals to a Section 501(c)(18)(D) tax-exempt organization plan. You may be able to claim the Saver’s Credit, — Form 1040 Schedule 3, line 4. J – Nontaxable sick pay (information only, not included in W-2 boxes 1, 3, or 5) K – 20% excise tax on excess golden parachute payments. Include this tax on Form 1040 Schedule 2, line 17k, enter the total amount of the tax L – Substantiated employee business expense reimbursements (nontaxable). You may need to file Form 2106, Employee Business Expenses. This amount is reported on that form on line 7. See Form 2106 Instructions for details. M – Uncollected Social Security tax or RRTA tax on taxable cost of group-term life insurance over $50,000 (former employees only). Include this tax on Form 1040 Schedule 2, line 8, identify as “UT”. N – Uncollected Medicare tax on taxable cost of group-term life insurance over $50,000 (former employees only). Include Medicare wage tax on Form 1040 Schedule 2, line 6. P – Excludable moving expense reimbursements paid directly to a member of the U.S. Armed Forces (not included in Boxes 1, 3, or 5). Use Form 3903, Moving Expenses, to figure your moving expense deduction and report on Form 1040 Schedule 1, line 14, assuming you qualify. Q – Nontaxable combat pay. See the instructions for Form 1040 or Form 1040-SR for details on reporting this amount. R – Any employer contributions to your Archer medical savings account (MSA). Report on Form 8853, Archer MSAs and Long-Term Care Insurance Contracts, line 1. S – Employee salary reduction contributions under a Section 408(p) SIMPLE. (Not included in Box 1). You may be able to claim the Saver’s Credit, Form 1040 Schedule 3, line 4. See Form 1040 Instructions for details. T – Employer Provided Adoption benefits (not included in Box 1). Complete Form 8839, Qualified Adoption Expenses, to compute any excludable amounts. V – Income from exercise of non-statutory stock option(s ) (included in Boxes 1, 3 (up to Social Security wage base), and 5). See Publication 525, Taxable and Nontaxable Income, for reporting requirements. W – Employer contributions (including amounts the employee elected to contribute using a Section 125 cafeteria plan) to your health savings account (HSA). (Not included in Box 1, 3, or 5.) Report on Form 8889, Health Savings Accounts (HSAs). Y – Deferrals under a Section 409A nonqualified deferred compensation plan. Z – Income under a nonqualified deferred compensation plan that fails to satisfy Section 409A. This amount is also included in Box 1 and is subject to an additional 20% tax plus interest. See Form 1040 instructions, Schedule 2, line 17h, Other Taxes, for more information. AA – Designated Roth contributions under a 401(k) plan. Roth contributions are not deductible; however, you may be able to claim the Saver’s Credit, Form 1040 Schedule 3, line 4. See Form 1040 Instructions for details. BB – Designated Roth contributions under a 403(b) plan. Roth contributions are not deductible; however, you may be able to claim the Saver’s Credit, Form 1040 Schedule 3, line 4. See Form 1040 Instructions for details. DD – Code DD includes cost of employer-sponsored health coverage. Information only. EE – Designated Roth contributions under a governmental 457(b) plan. This amount doesn’t apply to contributions under a tax-exempt organization Section 457(b) plan. Roth contributions are not deductible; however, you may be able to claim the Saver’s Credit, Form 1040 Schedule 3, line 4. See Form 1040 Instructions for details. FF – Permitted benefits under a qualified small employer health insurance reimbursement arrangement. Information only. GG – Income from qualified equity grants under Section 83(i). Information only. This amount is includible in gross income from qualified equity grants under section 83(i)(1)(A) for the calendar year. This amount is wages for box 1. HH – Aggregate deferrals under Section 83(i) elections as of the close of the calendar year. |
| W-2 Correcting | IRS Instructions | Sample Forms If mistake made on W-2, corrected form must be submitted to Social Security Administration. Two Sets of forms must be submitted. 1. Set one shows incorrect info 2. Set two shows correct info |
| W-2 and Schedule C W2 and Schedule C | I received income on w-2, and I have a business. 1. You will report W-2 on wages; and expenses on Schedule C |
| W-9 | IRS Form |
| Watermark | If supress printing SSN, watermark will show in return?? |
| Withholding for 2023 | 6.2% Social Security tax on first $160,200 of employee wages (maximum tax is $9,932.40; i.e., 6.2% x $160,200) 1.45% Medicare tax on first $200,000 of employee wages 2.35% Medicare tax on all employee wages in excess of $200,000 (regular 1.45% Medicare tax + 0.9% additional Medicare tax) CA SDI = 0.9% (.009); wage limit $153,164 |
| Where to File Return | California: IRS website By State: IRS website |
| Error: 8Z: CA Sch CA (540) | There is an item on 1040 that did not carry over to CA 540. ANS: add item to CA 540; 8Z will say what item is |
| Error: CA FTB 3519 PIT | If setting amount to 0, can discard form If payment, enter estimate payment on CA540, p3, line 72 |
| Error: 1040 EdEXP | 1040 EdEXP optimization has been selected, but has not been processed. Need to enter info from 1098-T. If no 1098-T, discard form |
| System not showing correct standard deduction (or itemized deduction) | Make sure you check box that no one can claim you as dependent – Main Info, at bottom of Individual Filer Information section, check box “If someone can claim you as a dependent, do not check the box” |
| For 1041, Schedule E Not Showing Depreciation. | You have a Fixed Asset with current year depreciation. However, the depreciation is not showing on Schedule E or on form 4562 (depreciation). Answer – have to do override – Go to Form 1041, tab = Depreciation – In section Depreciation and Amortization Allocated, override the amount on Line 2 -Depreciation and amortization allocated to beneficiaries; set amount to 0% – Verify amount on Line 3 changes to 100% for Fiduciary Schedule E, Line 18 will now show the depreciation |