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Filing a 1041 - AMT adjustment question
Old 01-10-2019, 12:17 PM   #1
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Filing a 1041 - AMT adjustment question

I'm considering doing the taxes for my MIL. They appear to be pretty simple, and her tax guy (a holdover from when they had a business and more complex taxes) charges what I consider to be a very high fee, $1,850. I have their 2017 tax forms and documents, so I'm trying to recreate them with the 2017 TaxAct online program. I got things entered in short order, and the tax due and most numbers matched, but some intermediate numbers (Sched B L9,11,13, and the AMT adjustment Box 12A,B,J on the K-1) were different. But I'm stuck on these differences - the 1041 from the tax guy includes Schedule I, but I don't see that on my TaxAct account (maybe it is hidden until I pay to file?)

Some background: When my FIL passed in 2014, I helped my wife, MIL and family in settling the estate. We got everything but her local bank checking/savings consolidated at Fidelity, so things are pretty simple now. It looks like:

A) Deceased FIL trust (listed as a "Simple Trust" on the filed 1041). Some stocks, a stock fund and a bond fund. All divs, interest and cap gains distributions are distributed to my MIL's local bank account. MIL is the trustee, and the sole beneficiary for the K-1.

B) Living MIL trust. One small stock holding and a bond fund. All divs, interest and cap gains distributions are distributed to my MIL's local bank account. Add in SS, a pension, and the K-1 from her deceased husband's trust, and her taxes are simple - standard deduction.

C) MIL's inherited IRA. I have her estimated State & Fed taxes withheld from her RMD, any remainder goes to her account at Fidelity.

I just can't follow where the differences come from and how the numbers flow through to these lines, TaxAct seems to be hiding this from me. There just are not that many numbers to enter, just the divs/int/gains from that Fidelity account, plus the deduction for IL State taxes paid. Other than this, it seems so simple that I really hate to turn it over to a tax guy for $1,850. And it takes almost as much work to gather and document all the forms to give to the tax guy as it is to just enter them in the tax program (except for this one catch). OTOH, not to be morbid, but MIL is not in good health, so it's not like we would be paying this amount for the next 20 years. I'm tempted to just let sleeping dogs lie.

Is there something obvious I'm missing? Should I pay to consult with a different tax guy, saying I just want to review these numbers with him, to check the first guy, and have him explain? I'm torn between status quo, and saving $1,800 for MIL (plus I sure would like to actually understand this).

Thoughts?

Somewhat separately (or maybe not?), as I reviewed this, I realized the tax guy really didn't have the documentation he would need to actually know for certain what was distributed from my FIL's trust (that would only be on the account statements, not the 1099s that we gave him). It appears he assumed all divs/int were distributed, but that the cap gains were not (but they actually were). That seems to match what is expected from some of what I've read. And it works to our benefit (very slightly). Even though trusts are taxed at higher rates and lower bracket points than 'single', this small amount is taxed at a lower rate in the trust than if it was added at the top at my MIL's marginal rate.

So I suppose those distributions should match, but the numbers are small, I'm not going to look into filing an amendment, and I may not worry about it going forward. And I don't see how this could account for any differences, since I entered it into TaxAct the same way.

(I hate taxes!) TIA - ERD50
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Old 01-10-2019, 01:34 PM   #2
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Are you both filing the same AMT method? There is a simplified and the long way. In general if you ever used the long way, you always will (can be changed with IRS approval)
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Old 01-10-2019, 01:43 PM   #3
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The rate seems very high - by at least 2X. Is he a CPA and is that why he justifies this rate? Could you get away with a bookkeeper or Tax firm with less educated staff? Shop it around and you might be able to cut the bill in half or more.

Regarding not being able to re-create the tax forms: I have twice experienced slight differences when my taxes are filed and paid what the gov't calculates. Usually ends up in ~$50 being owed or refunded. The first time my old tax guy (CPA) couldn't explain, but would "look into it" at an hourly rate. I declined and moved to a new tax guy (non CPA). Found out the new guy was 1/4th the cost. Then a few years ago a similar thing (difference btw his filing and gov't calculation) happened with the new guy. Either paid the difference (or cashed the check - can't remember which) and moved on.

I mention this for 2 reasons. First, different softwares may calculate taxes somewhat differently. Yep, doesn't make any sense, but I experienced it. Second, prices for this service vary widely.

Good luck!
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Old 01-10-2019, 01:49 PM   #4
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Quote:
Originally Posted by bingybear View Post
Are you both filing the same AMT method? There is a simplified and the long way. In general if you ever used the long way, you always will (can be changed with IRS approval)
I don't know. How can I tell? I'm just following TaxAct directions. I did try clicking “Distributions”, review 'trust accounting income', adjustments - but that didn't seem to lead me anywhere.

The filed form has a 3 page Schedule I, mostly blanks. There are entries on lines:

Part I: 1, 3, 25, 26, 28, 29 .
Part II: 30, 35, 37,38,40,42, 43, 44.
Part III: 45, 47.
Part IV: 64.
Part V: 70.

I'm lost.

-ERD50
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Old 01-10-2019, 01:56 PM   #5
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Quote:
Originally Posted by HarveyS View Post
The rate seems very high - by at least 2X. Is he a CPA and is that why he justifies this rate? Could you get away with a bookkeeper or Tax firm with less educated staff? Shop it around and you might be able to cut the bill in half or more.

Regarding not being able to re-create the tax forms: I have twice experienced slight differences when my taxes are filed and paid what the gov't calculates. Usually ends up in ~$50 being owed or refunded. The first time my old tax guy (CPA) couldn't explain, but would "look into it" at an hourly rate. I declined and moved to a new tax guy (non CPA). Found out the new guy was 1/4th the cost. Then a few years ago a similar thing (difference btw his filing and gov't calculation) happened with the new guy. Either paid the difference (or cashed the check - can't remember which) and moved on.

I mention this for 2 reasons. First, different softwares may calculate taxes somewhat differently. Yep, doesn't make any sense, but I experienced it. Second, prices for this service vary widely.

Good luck!
Yes, I looked him up, he is a CPA. That was probably good when they had the business (some 20+ years ago!). He probably just charges the same, assuming my MIL won't question it.

I just don't feel confident taking this on myself, with the numbers not matching (though as you say, may just be the way different software works). As they say, 'no good deed goes unpunished'....

But I might try someone more local to me who I could sit down and review it with.

-ERD50
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Old 01-10-2019, 03:32 PM   #6
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Perhaps consider posting on the fairmark.com tax forum in the appropriate
subforum. tax help>fairmark forum when you get there
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Old 01-10-2019, 04:15 PM   #7
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You might redo the tax calcs with a different tax program, Turbotax for example. If both it and TaxAct agree, I'd guess the accountant did something differently.
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Old 01-10-2019, 04:33 PM   #8
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Originally Posted by kaneohe View Post
Perhaps consider posting on the fairmark.com tax forum in the appropriate
subforum. tax help>fairmark forum when you get there
Ahhh, yes, I do recall finding some good info at fairmark. I'll give that a try. Thanks.

-ERD50
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