Talking with TaxSpeaker: Video 58
1. I have a client that has a very profitable S-Corp. He is not a specified service business. His taxable income is over $500K and over the QBID income threshold. He pays substantial wages from the S-Corp, so he is able to take the QBID on the full S-Corp profit. He also has a building that he rents to the S-Corp. Since this building is rented 100% to the S-Corp, it is a self-rental and qualifies for the QBID. The only problem is that the QBID is limited to the 2.5% of the unadjusted basis of the building. Is there any way to allocate some of the S-Corp wages to the self-rental building QBID calculation to allow more of a QBID? If not, is there any way to increase the QBID on the self-rental profit?
2. I have a client with a daughter that graduated high school in May 2018. She started college in the Fall 2018 but withdrew in 1 week. The tuition was refunded. No credit. This is the easy part. She registered at a community college close to home for Spring 2019. Her parents paid the tuition when it was due in December 2018. The 1098-T correctly has $4,232 in Box 1 and Box 7 is checked. So far so good. The problem I have is there is no check in Box 8. I believe the college is correct in not checking the box per the instructions for the 1098-T. This student was not a half-time student during 2018. However, she is a full-time student for the Spring 2019. We know that tuition paid in 2018 for the Spring 2019 qualifies for the AOTC. Considering she was not a half-time student for any academic period in 2018, does this disqualify her for the 2018 AOTC? It would be unfortunate to lose this $2,500 credit due to the institutions requirement to have advanced payment in December 2018.
3. Taxpayer entered into purchase contract for primary home on December 7, 2017 and it was ratified by both parties on the same day. The contract stipulated settlement date of December 29, 2017 but due to unforeseen circumstances and delay from lender, the settlement was postponed to January 5, 2018. Total loan amount was $1,040,000. Does taxpayer meet exception to qualify pre December 16, 2017 mortgage limit or up to $1,000,000? Thank you in advance for your reply!
4. How are Social Security payments to children reported? Can you review the circumstances under which a child could receive benefits?
5. I have a Florida S-Corp client that does consulting work remotely from Florida for clients in various states. He never physically visits the client in the different state to do his work. He also has a California employee that does the same work. California is requiring my client to file a California S-Corp return because of the employee. The California agent said that my client doesn’t have a non-resident individual filing requirement, as he doesn’t have assets or homes located in California. Do you agree that my client doesn’t have non-resident individual filing requirement?
6. Our Office had previously prepared taxes for a client tax years 2016 - 2017 (MFS). According to her, she forgot about the taxes until April 13, 2019. Being a simple return, according to her, she went online and filed it herself and marked (MFJ) by mistake. This generated a bill of back taxes to her husband of about 50,000.00 on Federal and 55000.00 to VA State. Her Husband became disabled in 2008 and had not filed a tax return since then. Due to the situation that this was done in error, can we amend this return to MFS along with an injured spouse form?
7. We have inherited some returns lately where the clients have quite a few rental properties (30+) in a partnership and another large group on their personal return. The prior CPA firm grouped all partnership owned properties onto one column on the 1065 and all the individually owned properties onto one column on Schedule E. Is this an acceptable reporting method? It didn’t look like it based on the form instructions, but this isn’t the first time we’ve seen it. In the past we’ve always reported by property for all our clients. In this case, we were considering continuing with the prior method they had used (reporting all properties combined under one column) to stay consistent or should we switch to splitting everything out by property. If we did that is there any disclosure or additional things we would have to file since we’re changing from one schedule to 30+?
8. I have a question, which I think I know the answer to. May clergy or church employees choose to “tithe” pre-tax, that is set aside a portion of their income to go directly to the church? For example the wage is set at $20,000, but the minister chooses to only receive $18,000. Are taxable wages $20,000? Is there any scenario, such as the denomination “requires” 10% tithe, in which $18,000 would be taxable wages?
9. Could you please explain why S-Corporation self-employment health insurance should not be a deduction for qualified business income on the 1040 level, but should be a deduction for qualified business income when from a partnership. Why the difference when in both cases the insurance deduction is taken on the entity level as wages/guaranteed payments, resulting in non-trade or business taxable income to the shareholder/partner? I’m not trusting tax software and not sure which is correct?