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Late Input Form and Instruction Changes

irs taxesLate Input Form and Instruction Changes

The large number of changes needed to implement the recent tax law has caused late changes to the input forms after proforma and supplies were printed. In addition, some additional instructions are needed in some cases to

address changes in required or additional input.

The latest versions of updated input forms are available at exactax.com. If you print blank supplies, we strongly suggested that you always print from exactax.com to ensure that you have the most current version.

 

Screen 1040, Form [1]: Dependents over age 23 don’t qualify as 'students'. If the dependent over age 23 qualifies as an Other dependent, change the dependent code from '1' to '3'. Dependents over age 23 and marked as a child who lived with you (code 1) will not qualify for the Other Dependent Credit.

 

Note: a warning diagnostic will print on Form PI when an over-age student is proformaed. ExacTax Audit will not automatically change the relationship code.

 

The system will automatically treat dependent children age 18 and under with Dep Code 2 (Children who didn’t live with this client due to divorce/separation) entered in the Dependent information, Form 1040, zip 65, as qualifying dependents for purposes of the credit for Other dependents (ODC). Although a child must meet the residency requirement to be considered a qualifying child for the child tax credit, they do not need to meet the residency requirement to be considered a qualifying relative for the credit for other dependents. An FYI diagnostic will be triggered to review the Dep Code for these dependents, if necessary. Prior to 1/31/19, dependents entered with Dep Code 2 were not automatically counted as qualifying dependents for the credit for other dependents. For more information on the special rules for children of divorced or separated parents, see the Form 1040 instructions.

 

Screen Rent-2, Form [31B]: Checkbox zip 50 was added to print the Section 199A safe harbor declaration. Checkbox zip 51 was added to indicate the rental is a specified service trade or business.

 

PRR Form [99]: Zip 28 was labeled as 'Gross taxes' before limitation but is now the net deductible taxes after the 10K/5K limit, plus Other taxes. The Taxes section on the Form 99 has been reformatted to reflect the change.

 

Note: The portion of DMV fees that are deductible as personal property taxes should be entered on Screen A [70A], zip 21 and not in Other Taxes, zip 23. Incorrect entries in zip 23 may cause the allowed taxes to be overstated.

 

Depreciation Forms [50], [51] and [52]: A Yes/No box was added to the top margin of these forms to request the printing of the Qualified Property Report. This statement is not a required statement and is only included in the Preparer and Client copies. This optional report lists all of the assets that are used in the computation of qualified property for that activity. Qualified Property is only used in the QBID computation for incomes over 157,500/315,000.

 

Note: Since this field was not included on most printed proforma, you can write ‘199A’ and draw a box with ‘Y’ in it at the top of the form. This only has to be done once per activity, not on every form 50, 51 or 52. For example, if there are 2 rentals, you would only need to mark the first Form 50 in each rental.

 

Form [52], Form 8829 and Home Office Worksheet: The carryover of unallowed operating expenses, casualty loss and depreciation did not print in most cases. The amounts are still present and will be used in the OIH computation. If you reenter the numbers, your numbers will be used.

 

Screen Educate, Form [60B] zip 10: Due to the IRS change to Form 1098-T, Tuition Statement, there is no longer a box to report the amount of tuition billed for, only for the payment received. Make your entries only in the field Payment Received for Qualified Tuition. This change also affected the printing of the institution ID, name and address on the input form but has no effect on the actual print on Form 8633.

 

Screen A, Form [70A] Deductible refinancing points paid, zip 45: The columns for Total points, Current amort and prior amort printed incorrectly, but the data in the system is correct. The revised Form 70A now has an additional column for the Unamortized balance which automatically computes based on the Total Points entered.

 

Screen 2106, Form [72] with an office in home going to (state) Schedule A: When 2106, zip 7 is checked, (State use only), and there is an office in home attached, the mortgage interest and property taxes will not flow to the federal Schedule A or to the state itemized deductions. When zip 7 is unchecked, then the full amount of mortgage interest and property taxes will carry to the federal Schedule A and to the state itemized deductions.

 

Screen 982, Form [96B]: Zips 14, 15, 18 and 19 have been added and 12, 13, 16 and 17 relabeled to separate Pre-2018 and Post 2017 Net operating loss attributes.

 

Screen MortgInt, Form [70D]: New input fields added and worksheets updated.

 

With the 1/31/19 update, several changes were made to the home mortgage interest calculations and related data entry on Screen MortgInt [72D]. You should only use the latest version of input Form [72D].

 

The following fields have been added to Screen MortgInt for 2018:

 

  • If refinanced debt, date of initial loan, zip 5 – If the taxpayer refinanced a home on or after 12/16/17, enter the date of the initial loan in this field. The system uses this information to determine the correct qualified loan limitation for 2018.

  • Interest paid on home equity debt NOT used to buy/build/improve home, zip 40 – Under the Tax Cuts and Jobs Act (TCJA), no deduction is allowed for the interest from a loan secured by a home to the extent the loan proceeds were not used to buy, build, or substantially improve the home. Enter the amount of home mortgage interest that was NOT used to buy, build or improve the home in this field. The system subtracts this amount from the Interest payments made in 2018 as reported on Form 1098, zip 10 to determine the eligible interest paid reported on Home Mortgage Limit Worksheet A, line 13.

  • Home equity debt NOT used to buy/build/improve home, zips 41, 42 Beginning & Ending Balance – Enter the beginning and ending balance for loan proceeds NOT used to buy, build or improve the home. The amounts entered here will not be used to calculate the qualified loan limit, however, principal payments for a mixed-use loan are first applied to home equity debt not used to buy, build or improve the home, then to grandfather debt, then to acquisition/improvement debt. If all or a portion of the home equity loan was used to buy, build or improve the home, enter the balance in the Home equity debt used to buy/build/improve home, zips 23, 24. This debt is treated as home acquisition/improvement debt for purposes of computing the qualified loan limit.

  • Home Mortgage Limit Worksheet A has been updated for 2018 to match the revisions to the worksheet in IRS Publication 936, Home Mortgage Interest Deduction. The updates to the worksheet reflect the revised qualified loan limits created by TCJA for mortgages taken out on 12/16/17 or later ($750,000/$375,000MFS). Mortgages taken out prior to 12/16/17 remain subject to the original qualified loan limits ($1,000,000/$500,000MFS). As the loan limits are now date specific, UltraTax/1040 will issue a critical diagnostic if the Loan origination date field is blank on Screen MortgInt [72D].

  • The Mixed Use Mortgage Worksheets are also updated for 2018. Average balances calculated on the Mixed Use Mortgage Worksheets are used to determine the overall qualified loan limit on Home Mortgage Limit Worksheet A.

  • The Home Mortgage Interest Allocation Worksheet is still undergoing changes. Complete calculations will be provided on a future update.

1065, Screen Partner Information [10A]: For eFile, the person designated as the partnership representative must have a phone number.