Level 7

Question

Reduce tax liability- K1 Capital Gains

Forum|Forum|2 years ago
September 19, 2023
3 replies
38 views

Client owed $6,312. Paid in $5,799. Total tax liability was $12,111.

Single. No Dependents.

On the K1 it showed net short term capital gains of $2,869

and net long term capital gains of $24,751

SS $21,948

W2 $46,870

Gains $27,620

Dividends and interest $1,402

= $97,840

Is there anything that can be done to reduce taxes owed? She only paid in on her w2. Client does not want to owe again this year like last year.

Thank you

ProSeries Professional

This topic has been closed for replies.

ljr

Level 9

I don't even know where to start with this email. You should not have to ask this type of question - this is the questions that your clients ask you. My suggestion to you is to go work for someone who can mentor you and teach you. We can only help you so much. As for the answer to your questions:

1) have taxes withheld from social security

2) increase the withholding on her W-2

3) make estimated tax payments based off the dividends and capital gains.

4) proseries estimated tax worksheet will help you and tell you what the estimates should be based on the current year.

Good Luck.

MGC94Author

Level 7

So, I did tell her to take out taxes from SS and increased WH on w2.

She wants to know if there is something she can do with the K1 gains. I guess this was her first year with a gain like that.

Yes, I do know about estimated tax payments.

Ps. I wish there was someone to mentor me.

qbteachmt

Level 15

"She wants to know if there is something she can do with the K1 gains."

You explain how she pays taxes because she benefits from the activity.

"I wish there was someone to mentor me."

You can research "Safe Harbor." A client like this likely should be using Safe Harbor for estimates.

And make sure to learn, and then explain, the difference between "owing taxes" and "owing a balance" because everything here shows you are not clearly defining the conditions and that will matter for your client.

Don't yell at us; we're volunteers

dkh

Level 15

Does the client normally have capital gains on their K1 ? Will the transaction(s) that happened in 2022 that resulted in the capital gains happen again in 2023 ?

Is the W2 withholding enough to cover the tax on the SS income?

MGC94Author

Level 7

in 2021 there was no gains on the K1.

I do not think she really knows about the K1 at all.

I did tell her to increase SS withholding and w2 withholding

dkh

Level 15

I do not think she really knows about the K1 at all.

Hard to do tax planning if the client doesn't know what income to expect from their K1.

abctax55

Level 15

Sell the investment? That'd prevent any future K-1's & income.😉

But I betcha this is a trust, and your client is clueless as to 'why' s/he gets a K-1 (and also why those mysterious distributions show up... see Susan's comment).

edit... altho, how does one get to the point of collecting SS and not being aware of a K-1/distributions??? I do have ONE client that is this clueless.

HumanKind... Be Both

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