Hello. I am confused on something. I'm doing a client's tax return and they gave out at least $20,000 in charitable contributions, but it doesn't make no difference on their refund! Just to confirm, charitable contributions can only be used if they itemize? Does that apply to mortgage interest as well? I've done a few returns were mortgage interest is very high, and no difference. Thank you in advance.
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Last edited by mvp2885; 03-03-2019, 03:55 PM. -
The two items you mention are entered the same way as in prior years but with 2018 applicable updates/changes.
NOTE”. for 2018 update/changes see TTB starting at 1-10 and IRS website regarding Standard Deducion and Itemized Deductions.Always cite your source for support to defend your opinion -
Are you preparing returns for others for a fee?Comment
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What do you mean by no difference? If actually itemizing, charitable donations and mortgage interest do make a difference. If taking the standard deduction, then they do not make a difference.Comment
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Wondering the same thing... This is basic tax return knowledge. Filing Status? Total Tax before you put the contributions in? Total itemizations before and after contributions?Originally posted by kathyc2 View Post
ChrisComment
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Perhaps OP means "makes no difference" because the software is defaulting to the standard deduction, since TP's deductions do not exceed the standard (for MFJ). And yes, charitable contributions and mortgage interest are only deductible if you itemize.Originally posted by Lion View PostLast edited by Burke; 02-13-2019, 11:10 AM.Comment
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May be my age is showing, but I don't think anyone who can not calculate a basic return (w-2's, non CG rate investments, itemized deductions) with a calculator, pencil and paper has no business in holding themselves out to the public as a tax professional. If a person could do that they would easily know that "entering" the 20K charity with no change to refund means either Sch A total is still under standard deduction, or liability was already zero with standard deduction.Originally posted by spanel View Post
I fear we are going to have a generation of "tax preparers" who will become as dependent on software as teenagers working fast food that can not make change without the aid of a cash register.Comment
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The Original Poster is new to the Forum and looking for suggestions/recommendations for reference material.
Many Posters and Reply Posters were in that position and still today ask for suggestions/recommendations for reference material.
To the Original Poster, keep getting familiar with the area of taxation and don't get disappointed. The TaxBook "Deluxe Edition Plus" is a great tool for reference.Always cite your source for support to defend your opinionComment
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i understand this is a new preparer and even us old timers don't know everything. However, not understanding why a charitable donation or mortgage interest does not change the refund is extremely basic. I certainly wouldn't want a "mechanic" working on my car if they have to go online and ask how to drain the oil. Same concept here. I can not understand why someone would take on someone's finances if they are not qualified to do so. Since Congress or most states refuse to require preparers to prove even a basic understanding of preparation to be a tax preparer, I guess we are left with caveat emptor. Again, my opinion is that if a person cannot prepare a basic return without a computer, they should not be in the business unsupervised.
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Charitable deductions are also limited to 60% (formerly 50%) of AGI (there are more rules for different types of contribs). So that could be a factor. As for the OP, the reference to mortgage interest seems garbled, at least it makes no sense to me. If one is going to ask a question here, they should at least (try to) ask it clearly. Giving some example numbers that illustrate the question is often quite helpful to see what the confusion or question really is."You said it, they'll never know the difference. Come on, we'll paint our way out!" - Moe HowardComment
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Yeah, good point. This is probably a situation where someone who earns $33,333.00 decided to donate $20,000 to charity.Originally posted by Rapid Robert View Post
"Dude, you are correct" Rapid RobertComment
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Not as uncommon as you might think. I have a client whose retirement income is moderate, but he is wealthy with assets and contributes heavily to charity. He exceeds the 50% threshold every year and has had carryovers for all the years I have done his return. Maybe this increase to 60% will free up some of those. I have tried to get him to directly contribute his RMD's both to reduce the reportable income (and tax due) on his return and keep the charitable carryovers from increasing so much.Originally posted by Dude View Post
Yeah, good point. This is probably a situation where someone who earns $33,333.00 decided to donate $20,000 to charity.Comment
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Most professions these days are regulated in some manner and involve required education, training, licensure and ongoing CE.
A tax return is a significant document in people's lives, although many people do not think of it this way - they just look for the refund.
To allow anyone to hang out a shingle for income tax preparation without testing for at least minimal competence is just not a good idea.
Sitting in a CE classroom each year, passively listening (or maybe not) to instruction is not the same as demonstrating minimal competence
Had thought the RTRP testing was a good idea. Sorry to see it was struck down. Couldn't understand why. Hope they can bring it back.
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Yes, so this community is definitely not helpful at all (most). My question was in regards to if the taxpayer needs to itemize in order for any charitable contribution or mortgage interest to make a difference on his refund or tax liability. The taxpayer had written contemporaneous receipts written notices from various charities about his donations. He earned close to 180k. I just passed parts 1, 2, and 3 of the SEE, and ready to become an enrolled agent (pending IRS approval), but the responses I received were "how can you not know that." Or "what are you doing in this field, if you don't know that, then get out." Only one person answered my question, thank you Burke. I'm 100% sure when everyone first started they "knew it all." Right? I also hold a Masters degree in accounting and studying for the CPA, but it's my first time getting in to the realm of tax prep, I've done close to 250 tax returns so far this season, and have been reviewed by my direct manager and have had only 2-3 that have came back to me where I did a minor mistake, although they were not e-filed yet, so the errors were promptly corrected.
Maybe I should of worded my question differently, but I'm a little appalled at the responses, and no one knows how hard I've worked and accomplished to get to where I am, and to get responses as I did, truly made me feel "dumb." My next question is about S-corps, but being that I have to be an "expert" to ask questions around here, I am not even sure I will use this community anymore. Thanks for the few that were nice.Last edited by mvp2885; 03-03-2019, 04:01 PM.Comment
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Try it on paper to see where the numbers flow. When you see that itemized deductions can increase the total itemized deductions but NOT increase the standard deduction, you will see that you received accurate answers in this thread.Originally posted by Lion View Post
Be aware that not all mortgage interest might be deductible, even when itemizing, due to TCJA. (Or, on prior years, due to AMT.)
And, if you have a state(s) that has decoupled from the federal, you might see the results of the two deductions you asked about on the state return(s) even when they do not help the standard deduction on the federal.
As a mother, I suggest you be nice to us if you want us to help you.
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