Tuesday, December 20, 2011


Tuesday was a day off for me.  I returned to the “classroom” on Wednesday morning for “The Essential 1040”.  The attendance was more than three times what is was on Monday – as today’s session included both “tax update” and “ethics” components.

Unfortunately, because we must now be force-fed 2 hours of “ethics” at just about every day-long tax seminar, the much more important “tax update” portion was limited to 6 hours – really 5 hours when you consider that a CPE hour is only 50 minutes long.  So discussions of what is new for 2011 in terms of COLAs, items from tax laws that became effective in 2011, new developments from rulings and Tax Court decisions, new forms and changes to existing forms, and what is no longer allowed for 2011 were to some extent rushed through so they did not eat into the “sacred” 100 minutes.  Luckily there were no new tax laws passed in 2011 (thanks to the idiots in Congress being unable to get anything of substance accomplished), and all “extenders” had been passed in 2010.

Here are some of the items of interest that were mentioned –

·      Because of the new reporting requirement involving Form 1099-K the income lines on Schedules C and E and corporate and partnership returns have been adjusted to include a separate line for 1099-K income.  This caused some concerns for some tax preparers and tax bloggers, myself included, as well as for credit card companies and other third-party payers.

Apparently the IRS listened to these concerns, and the final instructions for these schedules and returns for 2011 tell us to enter “0” on these lines (Schedule C instructions say “For 2011, you are not required to report income received via merchant card or third party network payers, so enter zero on line 1a and report all income, regardless claimed on Line 1b.”)

·      The four-year limit for claiming an American Opportunity Credit for college tuition and fees includes any tax years in which the HOPE Education Credit was claimed.

·      If you pay legal fees related to collecting Social Security disability benefits you can claim a deduction on Schedule A, subject to the 2% of AGI exclusion, for a portion of the fees paid (or withheld).  As Social Security benefits are not fully taxable you must pro-rate the legal fees based on the taxable and non-taxable portions of the benefits received.   At the very most only 85% of the fees are deductible.

·      You can use money from a Coverdell Education Savings Account to pay for elementary and secondary education (K-12).

·      If you do not have any dependent children you cannot claim an Earned Income Credit if you are age 65 or older.

Consider a married couple where the husband is age 66 and the wife is age 64.  Their only other income besides non-taxable Social Security benefits is $5,000 in W-2 income earned by the husband as a “greeter” at the local Wall Mart.

Even though the husband is over age 65, because they file jointly and the wife is under 65 they can claim an Earned Income Credit on their federal tax return.

·      You can no longer claim a tax credit for purchasing a hybrid car, regardless of the make or model.  This credit expired on December 31, 2010, and was not extended.  For 2011 there are only two types of vehicles that qualify for an Alternative Motor Vehicle Credit – a qualified fuel cell vehicle and a vehicle converted to plug-in electric drive.

The last day of classes was the annual “Beyond the 1040”.  The topic for the day was “Schedule A”.  The book did not include Casualty and Theft Losses or Gambling Losses, but our instructor did briefly cover these topics.

No matter how long you have been in the business a full day line-by-line review of Schedule A (or for that fact Schedule C or D or E) is good to do every now and then.  I “wrote the book” on Schedule A (click here), and I welcomed a day of review to see if there was anything that I missed in my text.  I actually did note a few minor items that I need to check to see if I covered properly and completely in my Guide.

No need to discuss any of the Schedule A items we discussed here.  You can always purchase my Guide!  

The location aside, it was good education.  The instructor, an EA who had also taught last year’s symposium, was well-informed and entertaining.  In addition to preparing 1040s she also raises horses (I guess she really likes to shovel manure).

The theme of the three days I attended (and I expect also the day I passed on) turned out to be, as I have said many, many times before here and elsewhere, the correct answer to just about every tax question is, “It depends!”


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