IRS/CO Deduction/Credit Reminders

Under the SilGro home page for Alan Silverstein and Cathie Grow
Last update: January 31, 2018 -- Email me at ajs@frii.com

This is a brief reminder list of in-scope client potential tax deductions and credits that are easy to overlook for various reasons, at least through TaxWise Online (TWO). Look elsewhere for details about each one.

Federal:

• Earned income credit for people 25-64 without qualifying children. (Apparently TWO misses this unless you do the EIC calculations.)

• Pension exclusions on 1099-R (scroll down), such as for retired public safety officer health insurance (Exclusion Worksheet line 4, get value from interview, might not show on 1099-R), and using Simplified Method for pensions with cost basis, usually meaning: 1099-R 2a "taxable amount" blank and/or 2b "taxable amount not determined" checked, unchecked "IRA/SEP/Simple" box, and a basis value in 9b "total employee contributions".

• Scholarships treated as ordinary income, at least partially, if not earmarked for tuition only, to support education and earned income (refundable) credits in excess of any additional income tax. See also tax alert VTA-2015.04 and this IRS fact sheet.

• Long term care (LTC) insurance premiums, if qualified, deductible on Schedule A within limits.

Colorado state:

Mostly be sure to skim the Form 104 Subtractions section, and Form 104CR, for situations applicable to the client that TWO might otherwise miss. In particular it's easy to miss:

• Submit documentation where required; see instructions.

• Google search to find "FYI Income" documents (referenced in Form 104 instructions) by number.

• Standard deduction is fully allowed for the state if the addback (Form 104 line 2) of federal itemized state income or sales taxes pushes the Schedule A total below the standard deduction level. (Check that TWO handles this correctly; see worksheet in Form 104 instructions.)

• US Government Interest (Form 104 line 6) such as on treasury bills (including some mutual funds), often based on a percentage provided unofficially by the asset custodian.

• Roth conversions are included in pensions/annuity exemptions (Form 104 lines 7,8) for taxpayers age 55+; see FYI Income 25 page 2. (If you enter the 1099-R correctly (even though it has no apparent tax impact), TaxWise does the right Colorado exemption.)

• Tuition program (like 529 plan) contributions (Form 104 line 10).

• Charitable contributions over $500 (Form 104 line 11) if taking federal standard not itemized deductions. (List contributions in the TWO Schedule A details page and they should transfer.)

• Colorado Child Care Expenses (Form 104CR lines 1-4) if receiving federal EIC/EITC.

• Tax paid to another state (Form 104CR lines 9-16). (Check that TWO handles this correctly. Submit other-state return to Colorado per instructions.)

• Long-term care premiums if qualified (Form 104CR line 25). (Submit year-end statement.)

• Property Tax Credit (Form 104DR, filed separately) for low-income elderly.