Tn Preparers, Please

[taxmom34]

client moved to tenn january, 2008 from florida.
originally from mass. sold commercial property in mass in 2007 on installment plan. interest on this installment this year is $20,000.
he will be taxed on mass return and from what i got from tenn site, he will file tenn also but will he get credit for taxes paid to mass on this same income? (i don't see it on what i downloaded, but i haven't read it all yet) . if not i can give him a credit on mass for what he has to pay to tenn.

[RitaB]

I don't know of any credit he can take on TN

client moved to tenn january, 2008 from florida.
originally from mass. sold commercial property in mass in 2007 on installment plan. interest on this installment this year is $20,000.
he will be taxed on mass return and from what i got from tenn site, he will file tenn also but will he get credit for taxes paid to mass on this same income? (i don't see it on what i downloaded, but i haven't read it all yet) . if not i can give him a credit on mass for what he has to pay to tenn.

Yikes! I don't know of any provisions for credits on TN return, but I've never had this situation. The instructions are pretty short. I think he's out of luck on the TN tax, here is a link to the form and instructions, the TN website is not the greatest, and you may have missed the actual instructions. I print them all the time for people who carry on: "There's no TN income tax!"

http://state.tn.us/revenue/forms/indinc/inc250.pdf

[DTS]

...he will be taxed on mass return and from what i got from tenn site, he will file tenn also but will he get credit for taxes paid to mass on this same income? (i don't see it on what i downloaded, but i haven't read it all yet) . if not i can give him a credit on mass for what he has to pay to tenn.

We he be able to get this credit if he's PY resident of either state? I did a check for you on TN, but could not see anything that would tell me. I did not check Mass.

D

[Snaggletooth]

Out of Luck

Taxmom - there is no provision to reduce the Tennessee Hall Tax for amounts paid to Massachussetts. If they were Tennessee residents, they are subject to this ridiculous tax on interest springing from a personal loan. I don't think tax-greedy MA will give a credit to this double-taxation on their return either since your client is not a resident of Mass. I'm sure you know MA taxation better than I do.

I would make these recommendations:

1) I would not show receiving this personal interest for the month of January 2008, since it was probably paid before moving to TN. If the residence was not established until March or April, I would not claim the interest until his residence in TN was established. That may not help much, but every little bit helps.
2) Don't forget the $2500 "standard deduction" for MFJ filers in TN. i.e. the first $2500 is exempt.
3) This being an installment sale, rest assured that ANY income resulting from the receipt of principle is not taxable at all to TN, even though to MA. Capital Gains is not taxable to TN. In fact, nothing is except certain interest and dividends.
4) Consider restructuring the loan. Replace with another agreement with higher principle and lower interest. There may be a capital gain on the front end in 2009 taxable to MA but not to TN. Then there will be less interest in the future to have to report to both states. If the buyer is deducting the interest, however, he won't want to agree to it.

[RitaB]

Good job, Mr. Snaggletooth

...If they were Tennessee residents, they are subject to this ridiculous tax on interest springing from a personal loan...

Yeah, and don't forget about dividends and capital gains distributions. It IS ridiculous.

Awesome recommendations, by the way.

[taxmom34]

TN return

client has to file tenn because of interest income from installment sale. $20,000, does tenn have quarterly estimated payments or do residents just pay up in april? in reading two page of instructions from their website. there is a penalty for delinquent taxes at 5% per month (when does it start?) they moved to tenn in january 2008. but no mention of quarterly payments. i will need to give client estimates this year, if possible.

[RitaB]

TN estimated payments are not required

But your client can "prepay" by filing the extension request and indicating the amount he's prepaying. Tax is not deliquent until April 16. See page 5:

http://state.tn.us/revenue/tntaxes/indincguide.pdf

None of my clients prepay, they just cough up the tax with the return. Hope this helps.

[Snaggletooth]

Quarterly estimated tax

Although the form contains a pigeon hole for it, estimated taxes are not required. Our state is just so happy as a pig in slop to get money on personal interest I suppose they haven't gotten ornery with estimated taxes yet. But if you're going to extend, better pay up in the process. In fact, there are no interactive formulas, phase-outs, or calculations involving the Federal return, so it should be so direct that an extension is not necessary.

All that is necessary is to know the interest and dividends, and how each is either taxed or exempt. If unsure, post the source of the income and Cooper or myself will let you know. The interest on the personal loan that you mentioned is taxable here.

[taxmom34]

thanks

thanks guys, sure appreciate it. now i need for them to mail me their stuff, and a rush to get it back to them by april 15. BTW, mass will give them a credit for what they have to pay to TN.

[RitaB]

Most Welcome

When I actually know an answer, I'm just thrilled to share! Ha!

Is the MA return just the biggest PITA ever, or what?! Maybe it's just me, but I just did one, and if I never do another one, that's just peachy.