H&R Poster

[nalawson]

I got a refund of 2800. Employer to refund $62 ,using ATX software.
Nancy

[S T]

Going to Add

Bees, I hope you give us credit for +/- $10 due to either hand calculations or software calculations.

We would hope that the software that we are using is right on the money, but I did find that maybe there could be a rounding factor.

The exercise is to see if we are applying the appropriate treatment of the income and deductions, correct?

Sandy

PS - I am sure we are all awaiting anxiously your post of the correct answer and the explanation. Actually this is a very good exercise, and maybe something to consider in the off season time for you to post a "tax puzzle" for us periodically. It keeps us on our "toes", or possibly points out our strong and/or weak areas.

We all certainly make enough posts on circumstances that we face.

[Black Bart]

Refund amount

$2,912 for me with ATX. If it's wrong, I'm firing myself and getting TT.

[Bees Knees]

The secret has already been given away. The correct answer…

Refund = $2,800

Form 1040 line amounts:

Line 7 = $103,000
Line 8a = $238
Line 9a = $301
Line 9b = $45
Line 13 = negative $399 or $398, depending on rounding
Line 22 = $103,141
Line 40 = $5,950
Line 42 = $3,500
Line 43 = $93,691
Line 44 = $20,200
Line 62 = $23,000
Line 65 = Zero
Line 73a = $2,800

Explanation:

Line 13

Wash sale rules apply. TTB page 6-9 says:

Wash Sales (IRC §1091)
A loss from the sale or trade of stock or securities
in a wash sale is not deductible. A wash sale occurs
when a taxpayer sells or trades stock or securities
at a loss and within 30 days before or after the sale:
1) Buys substantially identical stock or securities,
2) Acquires substantially identical stock or securities
in a fully taxable trade, or
3) Acquires a contract or option to buy substantially identical
stock or securities.
4) Buys substantially identical stock or securities in an individual
retirement account (IRA) or Roth IRA. (Rev. Rul. 2008-5)

Reporting a wash sale transaction. Report a wash sale transaction
on line 1 or 8 of Schedule D. Enter the full amount of the loss
in column (f). On the next line, enter “Wash Sale” in column (a),
and enter the amount of the loss not allowed as a positive amount
in column (f).

The taxpayer purchased 15 shares of LMN on 5/19/2002 for $3,018, or $201.20 per share.
The taxpayer sold 10 shares of LMN on 8/13/2008 for $1,215. Basis in those 10 shares equals $2,012. Realized loss = $797.
The taxpayer re-purchased 5 shares of LMN on 8/22/2008 for $1,220.

Since the taxpayer re-purchased 5 shares within 30 days of selling 10 shares at a loss, the loss attributable to 5 of the 10 shares is not allowed under the wash sale rules. The loss on those 5 shares is added back in the gain column of Schedule D, and also adds to basis in the remaining shares.

Line 40

TTB, front cover says:

Property tax. The standard deduction is increased up to $500
($1,000 MFJ) for property tax paid for non-itemizers.

The standard deduction for a single taxpayer in 2008 = $5,450, plus property taxes, limited to $500 = $5,950.

Line 65

Excess FICA withheld equals $62. However, the amount to enter on line 65 is zero.

TTB, page 3-10 says:

Employer error. If any one employer withheld more than
$ 6,324, the employer must correct the error. The taxpayer
cannot claim the excess on Form 1040. If the employer does
not correct the error, the taxpayer can claim a refund by
filing Form 843.

Thus, the taxpayer must get the $62 from either the employer, or by filing Form 843. The $62 does not add to the refund on the 1040. My original post asked:

What is his refund / balance due on the federal Form 1040?

Note

In reality, there is a greater than 87% chance the taxpayer would have never told us about re-purchasing 5 shares of stock within 30 days of selling 10 shares at a loss. And we probably would have never thought to ask about the wash sale rules.

Thus, the correct answer to any tax return depends on how much info the taxpayer reveals, and how much extra digging we decide to do. I do not ask about wash sales when a client gives me info on stock sales. In all my years, I can only think of one time I reported a wash sale, and that is because the broker’s supplemental information specifically mentioned the loss was not allowed under the wash sale rules.

It is also a fact that over time, the taxpayer’s memory of events changes. If the taxpayer came to you one year with a set of facts for you to prepare the return, and then went to another tax preparer the following year with incomplete or additional info, that tax preparer is going to claim you made an error, when in fact you prepared the return correctly given the facts you received at the time.

Thus, in my opinion, unless both the prior year tax preparer and the current year tax preparer do the same return at the same time with identical sets of facts, in all likelihood, there is going to be a different result.

[Bees Knees]

Does anyone want another one?

I can make it very tricky.

[JSLATER]

Bring it on.

[Black Bart]

Re-run

Does anyone want another one?

I can make it very tricky.

Well yeah, except I'm worried. I've already had to fire myself over the simple one (you had the edge on me with your one wash sale experience -- I've had none). If it's super-deep I may have to go into exile.

What about putting it on a new thread?

[S T]

Another Exercise

Bees, Another exercise would be good.

I did enjoy this one that was posted, and I did know about the "wash" sale as one of my clients sold out his entire portfolio in Nov 08 and the Broker repurchased in early Dec 08. Thank goodness I spotted it, as it made a difference of amount of capital gain loss which looks to be $20,000 rather than $100,000. No carryforward, as I have another capital gain transaction separate from investments to offset. My E&O carrier would have been rather upset me I do believe .

As Bees, stated for those that posted other amounts of refunds of $2,912, that was an amount that I arrived at without the "wash sale". So at least we all know our software is calculating correctly based on info inputted.

I guess we need more communication with the T/P and the Broker or the Brokerage House needs to be "marking" these transactions for us.

Sandy

[Bonnie]

Federal Refund is $2912 according to my calculations.

[Earl]

I too did my computation on paper without software and without using the tax tables which caused a portion of my discrepency. I also complete a tax return on paper using a program I made up prior to entering into my tax returm software. After completing software I check for discrepancies between the two answers and review for the correct solution.

[tacks]

bump

Interesting topic.

A few years ago, early in my career, i remember hearing of a preparer who was able to go back amend a return and get an additional refund for a return already filed. I was very impressed with this and thought it'd be great if i could achieve something like this.

I imagine that someone on this board is probably laughing while reading this. Because it's really far from uncommon. It can be very common depending on your customer base.

I guess what i struggle with is the fact that someone can make good $$$$ while failing to provide a truly quality service to their clients. While another might pull in much less revenue while ensuring that his clients get what is rightfully theirs. (btw, i'm basing my observations on a low income clientele.)