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Ardennes posted:I doubt anyone here knows estate law but if an estate is the beneficiary of an IRA and it is liquidated, can the estate distribute the income to the heirs to offset the tax liability? I'm not disagreeing with the CPAs in here but you may also want to look into rollovers for the IRA account, unless the heirs of the estate need the money now. You can rollover the IRA into inherited IRA accounts for each beneficiary, which will means they get to defer some of the income tax on the IRA distributions. There are lots of little details and nuances but it's worth bringing up with the professionals helping the estate. If they've never heard of this then they are dumb and you should get new help.
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Apr 15, 2012 15:13
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AbbiTheDog posted:You need to be careful on reporting the sale. You need to report the full amount of the gross sale that's on the 1099-S, that's what the IRS computers tie to. Might need to "monkey" with the cost of sale to get the net gain that you need to pay tax on and adjust out the gain attributable to the home sale. When you say that the gross sale on the 1099-S ties to your return, what exactly do the IRS computers match the gross sale figure to? Thanks again.
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Apr 15, 2012 15:53
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Ardennes posted:Okay, so the heirs would have to had that income on their 1040s so the estate could claim that distribution of income. However, I expect most of the heirs/beneficiaries already submitted their 2011 taxes without any estate income. However, I heard that you maybe some times split up IRA income over 2-5 years even the estate is the beneficiary. When someone passes you can make an election to have an "off" year-end. For example - Bob dies in November. His estate/trust can elect to have a year end that ends on the last day of the month for the month that precedes his month of death (October). This means that the income that "flows out" from the trust/estate on the K-1 forms (generated by the 1041) would be picked up on the beneficiary's NEXT year tax return. Although not technically correct, and in some times costs more in tax than by doing in the correct way, some people want the tax to be paid at the 1041 level. The reason for doing this is that they don't think the beneficiaries can handle setting money aside for the income taxes they would pay, and want to just give them a "net" check so they don't need to worry about it. Edit: Good God, even I can't follow what I typed. Coffee hasn't kicked in yet. Let me know if you can't track some of this.
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Apr 15, 2012 16:45
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Well, looks like we're getting 3500 back this year. However, I'm considering a different approach for next year. I have a coworker who told me that he lists 8 dependencies (He's an accountant) because this is apparently the maximum the IRS will allow him to list, and the IRS doesn't check to see if these dependencies are real people. To me this makes sense, why loan the IRS my money tax free when I could be getting more back now and then earning interest on the money I decide to invest or use to pay off debt? I'd rather pay a little bit at the end of the year instead. However, he told me that we would have to pay 90% of what we owe before the end of the year or we could face an underpayment penalty. If I decide to go this route is there anything I should keep in mind? Something he may have overlooked?
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Apr 15, 2012 17:00
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Orange_Lazarus posted:Well, looks like we're getting 3500 back this year.
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Apr 15, 2012 17:05
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AbbiTheDog posted:When someone passes you can make an election to have an "off" year-end. For example - Bob dies in November. His estate/trust can elect to have a year end that ends on the last day of the month for the month that precedes his month of death (October). Okay, so what I am getting is that beneficiaries could put distribution income on their 2012 1040s, and that the estate 1041 for 2011 could claim zero income (?) on distributions? (Assuming the distributions are claimed to be done before May 2012?) I mean the estate did get income in 2011 (from the distributions), but the estate could deduct those distributions from claiming that income will flow to the beneficiaries? Income that will show up on their 2012 1040s? I understand that sometimes people want the estate to take the hit, but the tax liability is really pretty significant in this case. quote:I'm not disagreeing with the CPAs in here but you may also want to look into rollovers for the IRA account, unless the heirs of the estate need the money now. You can rollover the IRA into inherited IRA accounts for each beneficiary, which will means they get to defer some of the income tax on the IRA distributions. There are lots of little details and nuances but it's worth bringing up with the professionals helping the estate. If they've never heard of this then they are dumb and you should get new help. Well the issue is that the IRAs themselves had no beneficiaries and there wasn't trust so they had to be liquidated wholesale back in 2011. The estate had to gobble everything up because there was no mechanism to get the IRAs to the beneficiaries. Obviously it would have been the best solution, but the finances were just set up in pretty much the worse way possible. I mean the financial adviser told this person to put post-tax income into pre-tax traditional IRAs from what I understand, I don't know how that is legal. (Sorry, if I am monopolizing things)
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Apr 15, 2012 17:14
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Ardennes posted:Okay, so what I am getting is that beneficiaries could put distribution income on their 2012 1040s, and that the estate 1041 for 2011 could claim zero income (?) on distributions? (Assuming the distributions are claimed to be done before May 2012?) Holy smokes you got it. I'm surprised you could figure out what I was trying to type. For trusts/estates, the taxable income "latches onto" the property/cash distributions and != the value of what gets distributed. Since the IRA went into the trust/estate, you probably couldn't elect to annuitize the payments anyways without keeping the estate open for decades. If post-tax income went into a pre-tax IRA (and there are reasons for doing this, primarily to "stuff" more money into a roth IRA through a conversion at a later date) then look for Form 8606. This Form lists the "basis" into an IRA and would reduce the taxable portion of the distributions.
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Apr 15, 2012 18:14
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AbbiTheDog posted:Holy smokes you got it. I'm surprised you could figure out what I was trying to type. Yeah, I understand, the beneficiaries want to probably end probate this year and get their money and have things finished. Still, if the tax income latches on to the cash distributions, it is still possible to split up the tax liability before May 2012? Basically, can I make an strong enough argument to my relative to hold off on having estate accountant turning in the estate's 1041 2011 return because I think there are just major problems with how he is doing it? They want to get through probate, but like I was saying estate is going to probably take a massive hit if it is piled into one estate return, and if I can maybe get him to distribute some K-1s and redo the return, my relative could benefit. quote:If post-tax income went into a pre-tax IRA (and there are reasons for doing this, primarily to "stuff" more money into a roth IRA through a conversion at a later date) then look for Form 8606. This Form lists the "basis" into an IRA and would reduce the taxable portion of the distributions. I don't know if there were plans, but I didn't hear anything about them trying to convert them into a Roth IRA. I think the IRAs were sitting around for several years (losing value in high risk "black box" mutual funds) before the person died, the IRA had a death benefit through which restored most of their value. I will look into form 8606 although it might have to be backed up with some info that I don't know the beneficiaries will be able to find. They have her tax returns from the past decade through. Yeah, it is a mess, thanks.
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Apr 15, 2012 18:36
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I have an issue about whether or not my girlfriend needs to pay city taxes when she does not live in the city, when her employer did not withhold local taxes because the employer is not within the city, when her 1040 or state return does not list her address in the city but when the W2 issued by the employer lists her former address, which WAS in the city. Put another way, my girlfriend lived in City A in 2010 when she started Job A. She held Job A through 2010 and in to 2011. During 2010, she moved out of City A and started Job B, continuing to work at Jobs A and B at the same time. She never changed her address with Job A, so when she received her 2011 W2s she has her address in City A on her W2 from Job A and her new, correct address on her W2 from Job B. City taxes are not withheld from the paychecks of either Job A or B because neither employer is located in City A. What I'm worried about is the fact that the locality is going to see her out-of-date address on her W2 from Job A and assume she owed city income taxes when she did not live in the city or work in the city for either of her jobs. I can't figure out the answer here and I'm thinking that she should just pay the local income tax to avoid trouble, but that will cost her about $500 bucks and it doesn't seem like she should have to so I'd like to be more sure. What should I tell her?
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Apr 15, 2012 18:37
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Ardennes posted:Yeah, I understand, the beneficiaries want to probably end probate this year and get their money and have things finished. Still, if the tax income latches on to the cash distributions, it is still possible to split up the tax liability before May 2012? Basically, can I make an strong enough argument to my relative to hold off on having estate accountant turning in the estate's 1041 2011 return because I think there are just major problems with how he is doing it? Remind the trustee if there are any mistakes, they are liable for funding the estate to pay off any liabilities and see if that convinces them. Otherwise it's either A) shut up and take your money, B) Lawyer up and sue, which will cost a fortune and break up the family. Probate is only necessary if you can't re-title/distribute property without a judge banging the gavel, otherwise it's a waste of money.
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Apr 15, 2012 19:14
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Feces Starship posted:I have an issue about whether or not my girlfriend needs to pay city taxes when she does not live in the city, when her employer did not withhold local taxes because the employer is not within the city, when her 1040 or state return does not list her address in the city but when the W2 issued by the employer lists her former address, which WAS in the city.
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Apr 15, 2012 19:32
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AbbiTheDog posted:Remind the trustee if there are any mistakes, they are liable for funding the estate to pay off any liabilities and see if that convinces them. Otherwise it's either A) shut up and take your money, B) Lawyer up and sue, which will cost a fortune and break up the family. Well, I am not personally involved as far as money, to be honest I am looking this stuff but because I would really feel bad if this person got screwed by incompetency of the estate CPA/lawyer. They are also the trustee/executor, which is kind of why it I want to get this straight so they aren't screwed from both sides. Right now they fatigued from the process and they want to "throw up their hands" but I am advising them thats a really bad idea. It might seem silly because I am not financially benefiting but I just don't want to someone train wreck themselves. Yeah, I don't think there is any disagreements on distributions between the beneficiaries themselves. I honestly don't know the probate judge needs to look at it, maybe it is just state/county law. Ardennes fucked around with this message at 19:38 on Apr 15, 2012 |
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Apr 15, 2012 19:32
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So I've just realized that for years I think I haven't filled out any city tax paperwork, and it seems that I should have. However, our city tax is a flat rate, and I definitely didn't qualify for any deductions, so I probably don't actually owe anything because it was just taken out of my paycheck correctly. If I don't owe anything, what are the penalties for not having filed the paperwork?
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Apr 16, 2012 11:31
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I know this was earlier in the IRA conversation but I think thisArdennes posted:Well the issue is that the IRAs themselves had no beneficiaries and there wasn't trust so they had to be liquidated wholesale back in 2011. The estate had to gobble everything up because there was no mechanism to get the IRAs to the beneficiaries. is not correct. I'm not dogging on you Ardennes, but the IRAs could have been rolled over to inherited IRA accounts for each heir of the estate. The estate did not have to take a lump-sum distribution from the IRA account and distribute out that distribution. If it is possible to unwind that lump-sum distribution, the executor should probably try to do that. It is probably too late, though - unless I misread your post, and the lump-sum distribution hasn't happened yet. If it hasn't happened yet, don't let it. Also, I think the easiest way to think about income taxation of estates is to remember that the estate is a pass-through taxpayer. Any income that the estate holds onto for the year will be taxed to the estate. Income that the estate receives, but passes on to the heirs, will be taxed to the heirs and not to the estate. Not everything the estate receives is income - but a lump-sum distribution from the decedent's IRA is income. Ardennes I think that you may be worrying a little too much. Whether the estate pays the tax on the income or passes the income out to the heirs to be taxed at their level, the income tax is only going to be paid once. Abbi's point about the basis is important, though, because it sounds like the decedent's basis in the IRA should be higher than a typical basis, so the amount of income tax should be lower on the lump-sum distribution to the estate. Ardennes posted:Basically, can I make an strong enough argument to my relative to hold off on having estate accountant turning in the estate's 1041 2011 return because I think there are just major problems with how he is doing it? You can probably make a good argument for not rushing the filing. As Abbi mentioned earlier, the estate can elect a fiscal year that runs from the day after the decedent's death. The fiscal year can run until the end of the calendar year or can run the full twelve months. If the executor elects a fiscal year running into the next calendar year, the beneficiary gets to count any distributions of income as occuring in that next calendar year. So if your decedent died this year on March 30, 2012, the executor picks a fiscal year that runs April 1, 2012 through March 30, 2013. The executor makes the distribution during this fiscal year, but it won't get picked up on the beneficiary's return until 2013, which means the beneficiary pays tax in 2014 when filing her 2013 tax return. NOTE: the selection of a fiscal year is made on the estate's income tax return, so make sure the executor has made a conscious decision about whether to elect a fiscal year or not, before filing the return.
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Apr 16, 2012 14:57
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entris posted:I know this was earlier in the IRA conversation but I think this is not correct. I'm not dogging on you Ardennes, but the IRAs could have been rolled over to inherited IRA accounts for each heir of the estate. The estate did not have to take a lump-sum distribution from the IRA account and distribute out that distribution. It happened, and there really wasn't much I could do about it. I am not directly involved in the estate or an heir, and if I was I would have done something about it but the executor signed off on it. quote:Also, I think the easiest way to think about income taxation of estates is to remember that the estate is a pass-through taxpayer. Any income that the estate holds onto for the year will be taxed to the estate. Income that the estate receives, but passes on to the heirs, will be taxed to the heirs and not to the estate. Not everything the estate receives is income - but a lump-sum distribution from the decedent's IRA is income. Well the issue is that the lump sum distribution rocketed the income of the estate several higher brackets, while otherwise if beneficiaries paid the tax it would be quite a bit less since it is from I hear it going to be split several ways. I mean if the tax return is sent, and the account hands about half the estate to the federal government/state government income tax (not exaggerating) it is kind of the worst possible event for them. quote:You can probably make a good argument for not rushing the filing. As Abbi mentioned earlier, the estate can elect a fiscal year that runs from the day after the decedent's death. The fiscal year can run until the end of the calendar year or can run the full twelve months. If the executor elects a fiscal year running into the next calendar year, the beneficiary gets to count any distributions of income as occuring in that next calendar year. Yeah, right now I am trying to get them to look over the return and discuss things with the accountant, including issuing K-1s and changing the return to reflect the income passing to the heirs. I will also mention picking a fiscal rather than calender year. (Although the estate attorney said a "pass-through" wouldn't be possible, although I don't see why it wouldn't be) However, since I am not directly involved, I can't call the guy and since I don't live over there I really can't sit in at a meeting. I am told my members of my family that the "guy is professional and intelligent" and that I shouldn't question him. However, from what I have been reading both here/other places, it just seems fishy especially since you would think he would be trying any way to mitigate taxes and would be in constant contact with the executor before the estate return is filed. However, this guy doesn't even return calls from the executor. So really the only thing I can say is not to sign the return until this stuff is at least explained or investigated further. The CPA needs to at least explain this stuff to his client or in the case the client's representative why the estate has to take the full brunt of the income tax hit.
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Apr 16, 2012 15:26
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Ardennes posted:Well the issue is that the lump sum distribution rocketed the income of the estate several higher brackets, while otherwise if beneficiaries paid the tax it would be quite a bit less since it is from I hear it going to be split several ways. I mean if the tax return is sent, and the account hands about half the estate to the federal government/state government income tax (not exaggerating) it is kind of the worst possible event for them. The trust and estate income tax rates are highly "compressed" and it doesn't take long to be taxed at the highest rates. The whole system is designed to intentionally have the estate/trust "shove out" income to individuals as fast as possible.
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Apr 16, 2012 15:29
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entris posted:Abbi's point about the basis is important, though, because it sounds like the decedent's basis in the IRA should be higher than a typical basis, so the amount of income tax should be lower on the lump-sum distribution to the estate. *sniff* I can feel the love. Come here, man! 
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Apr 16, 2012 15:30
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AbbiTheDog posted:*sniff* I can feel the love. Come here, man! It's the time of year where we all get sleep deprivation drunk. I LOVE YOU MAN.
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Apr 16, 2012 15:52
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furushotakeru posted:It's the time of year where we all get sleep deprivation drunk. I LOVE YOU MAN.
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Apr 16, 2012 15:59
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scribe jones posted:if you claim more exemptions from withholding (not dependencies) then less money will be withheld from your paychecks. but you still need to pay a reasonable amount throughout the year (based on a couple of safe-harbor rules, of which the 90% rule is one) or else pay a penalty come 4/15. there are various withholding calculators that will help you with this. Then I'm assuming I'm probably paying something like 300% if I continue to list 0 dependencies? If I take more than I'm supposed to during the year am I automatically penalized or do I just need to send the government a check before Dec 31st? I'm going to assume there's also nothing illegal or immoral about listing 8 exemptions? The accountant who told me about what he does seems like an upstanding guy most of the time. Sephiroth_IRA fucked around with this message at 16:14 on Apr 16, 2012 |
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Apr 16, 2012 16:10
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scribe jones posted:yeah. "sleep deprivation" drunk. that's the ticket. Well my client brought me vodka filled chocolate balls the other day. It would be rude not to eat them.
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Apr 16, 2012 16:14
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furushotakeru posted:Well my client brought me vodka filled chocolate balls the other day. It would be rude not to eat them. We've got frozen margaritas in the freezer already. This last week sucks balls. IF YOU KNOW YOU OWE MONEY FOR THIS YEAR, WHY DID YOU WAIT UNTIL APRIL TO BRING ME YOUR DOCUMENTATION? It's not like the tax deadline is a surprise each year.
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Apr 16, 2012 16:26
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AbbiTheDog posted:We've got frozen margaritas in the freezer already. This last week sucks balls. And yet somehow it always seems to sneak up on me 
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Apr 16, 2012 23:23
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What the best/most interesting gift you guys have gotten from a client?
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Apr 17, 2012 00:28
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quote:What the best/most interesting gift you guys have gotten from a client? Porn.
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Apr 17, 2012 00:45
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This was kind of answered in the OP, and it might have been answered more clearly in the thread, but when I'm making quarterly estimated payments for 1099 income, do I HAVE to follow 1040-ES, or can I just ballpark my own figures? The reason is I will have lots of 1099 this and next quarter, but after that I will (hopefully) have W-2 income (of a completely unknown amount). Whereas 1040-ES seems to assume that everything is constant and spreads the payment amounts out. I'd rather just make quartlpayments of like 30% of my 1099 income now, and not have to try to estimate what my future income will be or base it on last years (which was a different situation).
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Apr 17, 2012 00:49
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evensevenone posted:This was kind of answered in the OP, and it might have been answered more clearly in the thread, but when I'm making quarterly estimated payments for 1099 income, do I HAVE to follow 1040-ES, or can I just ballpark my own figures? The reason is I will have lots of 1099 this and next quarter, but after that I will (hopefully) have W-2 income (of a completely unknown amount). Whereas 1040-ES seems to assume that everything is constant and spreads the payment amounts out.
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Apr 17, 2012 01:53
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Admiral101 posted:Porn. Wow...can't top that. Here's what we've gotten so far: Homemade wine Pistacchio nuts One of those edible arrangements 5-6 of those "snack food" baskets Donuts Candy Nothing too out of the ordinary this year.
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Apr 17, 2012 02:01
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I was living in VA at the beginning of the year when I started working at a temp agency. By the end of the year, I was living in MD. The entire time I was working in DC (which is where their main office is as well). When I started my taxes, I was thinking I'd have to file a nonresident form for DC, but when I looked at my W-2 I see the state listed in 15 is VA. Fiddling with the temp agency site, I see withholding under VA ("primary") and 0 withholding for DC ("secondary"). Please tell me if my current assumptions are correct: 1) I do not have to file nonresident DC. 2) I will have to file a nonresident VA form to account for the portion of the year where my I earned through them while residing in MD. Apologies for being tax-stupid. 
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Apr 17, 2012 02:38
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Small White Dragon posted:What the best/most interesting gift you guys have gotten from a client? Solar powered samurai toy that fans itself when exposed to light.
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Apr 17, 2012 03:07
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sorry, nvm
The American Dream fucked around with this message at 16:51 on Apr 17, 2012 |
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Apr 17, 2012 16:42
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furushotakeru posted:Solar powered samurai toy that fans itself when exposed to light. You should start a webcam for this.
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Apr 17, 2012 17:10
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What do you guys do when a last-minute filer walks in today?
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Apr 17, 2012 17:42
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furushotakeru posted:I'm not prying, just observing that at least 8 out of 10 times someone asks for a tax attorney referral it is something that I can easily handle. I filed an extension for 2010 because I tried to do my taxes myself and I am an idiot. I'd had 0 witholdings, and probably only made 30k between my two jobs (both in NY), but the way I was calculating it it seemed I owed an additional $500. This seemed wrong to me, so I filed an extension, and sent in a check for what I calculated I owed, which I thought was a gross overpayment. I planned on going to a CPA, having them take a look and getting everything straightened out. Never did that, now I got a "CP59" from the IRS saying that I need to file. Is this something a CPA should handle, or should I find a tax attorney? Am I going to face any penalties, even though the government has had the money for 12 months now?
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Apr 17, 2012 19:00
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Chef Bromden posted:I filed an extension for 2010 because I tried to do my taxes myself and I am an idiot. I'd had 0 witholdings, and probably only made 30k between my two jobs (both in NY), but the way I was calculating it it seemed I owed an additional $500. This seemed wrong to me, so I filed an extension, and sent in a check for what I calculated I owed, which I thought was a gross overpayment. I planned on going to a CPA, having them take a look and getting everything straightened out. Never did that, now I got a "CP59" from the IRS saying that I need to file. Is this something a CPA should handle, or should I find a tax attorney? Am I going to face any penalties, even though the government has had the money for 12 months now? You filed an extension for Tax Year 2010 in April 2011 but did not actually put your 1040 return paperwork by October 2011? I'm sure an EA like furushotakeru can help you, so no, you don't need a tax attorney.
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Apr 17, 2012 19:07
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Mandalay posted:You filed an extension for Tax Year 2010 in April 2011 but did not actually put your 1040 return paperwork by October 2011?
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Apr 17, 2012 20:34
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Chef Bromden posted:Correct. I got a promotion and had a lot of stuff going on in 2011. I bumped it down my priority list because I had already given them the money, and my understanding was that any interest would be interest on the outstanding balance, which should have been zero. You seem to have a good understanding of how it works. But yes any tax pro should be able to help you with this (just not today  )
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Apr 17, 2012 21:41
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AbbiTheDog posted:Send a letter with a copy of your federal taxes explaining it. They'll correct the issue and get back. Hey this was pages ago, but they just now got back to me - I tried calling for an update but it was busy signals for a week - everything worked and the deficiency is corrected, so thanks a lot!
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Apr 17, 2012 22:06
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Giant Isopod posted:Hey this was pages ago, but they just now got back to me - I tried calling for an update but it was busy signals for a week - everything worked and the deficiency is corrected, so thanks a lot! 
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Apr 17, 2012 23:44
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furushotakeru posted:You seem to have a good understanding of how it works. But yes any tax pro should be able to help you with this (just not today Thanks guys! I'll update when i find out how everything comes out.
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Apr 17, 2012 23:55
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