When 1099-B is not received you choose option C but you can not details of individual trade? Premier desktop version

@pk?

Duplicate question. Please post your question only once. If you want to add more information or post a follow-up question, add a reply to your original question. Do not post separate questions about the same issue. When information is scattered in multiple threads it's confusing and hard to follow, and hard to see the whole picture.

@seccam ,  what I get from this tread is that 
(a) a US person, sold capital assets ( what type ?  if stocks are these also listed on US exchange or only in India?  etc. etc. ) in India  through local broker/investment house 

(b) Tax payer also has interest income from bank deposits ( savings / CDs or what ) in India.

Generally  these types of incomes are treated just as if these were domestic earnings i.e. Interest earnings ( even with absence of  1099-INT) are reported  just like if earned these in the US ; ditto for  dividends   ( no 1099-DIV and generally  these are  not qualified  dividends ) and for Capital assets  ( no 1099-B and therefore are assumed to be not covered i.e. no basis  reported to IRS by Broker ).

Reporting these types of incomes as "other" is not correct and the curative  would be to file an amended return correcting these errors -- IRS expects  incomes to be categorized  as per their  individual character.  For example in the case of US earnings, if you enter your interest income as "other"  and not  as interest, the Automatic Under Reporter would  recognize all the incomes reported  and send you CP2000  that you did not report interest earnings. .

 For Capital gains  ( i.e. stocks/bonds  sold in India ), you have report gross income, basis ( i.e acquisition cost including  any commissions  charged then  at then exchange rate) , acquisition date  and disposal date.  You must have records to prove this , in case challenged.  The US taxes are based on this  and is totally independent of India  tax laws.

Then if the taxes paid to India on all these  foreign earnings ( i.e. interest, dividend, net  sales profit  of stocks/bonds before taxes--- sales proceeds LESS  US basis plus any sales expenses/ commissions etc.  converted to US $ on the actual date monies made available to you or the sales date ) on form 1116 as foreign income and the foreign taxes paid against this  -- if you want foreign tax credit . Note that the available foreign tax credit for the year  is  multiplied by the ratio of foreign earnings  to world income --- thus  for US person with US income it is never 100%. .   I can provide details on this if you need.

I hope this clarifies  what you have to do  for the 2020 return and you must do for 2021.

Namaste (or Salam aliqum )

pk

For 2020 , I hired a EA (enrolled agent) tax preparer and she filed it as other income and added a statement saying 1. Foreign capital gains - $5000 and 2. Foreign interest income - $5000($ amount is just an example) 

Than she efiled - I forgot the software she used - and IRS accepted and there is no notice until now. Its been over a year no notice from IRS.

She also 1116- foreign tax credit form - but since there was no tax payable(her total income was less than std deduction) - no use of that credit which was about $800 

I thought I should do the same this year - declare as other income and give little explanation like she did - but you are saying that is not correct. 

By the way tax payer (my relative) is not residing in USA since May 2020 and she is senior citizen.  She has no income from USA at all ...not a $ worth of income from US sources.

Should we file 1040-SR (senior)? also I have turbotax premier CD software

@seccam ,

1.  because your  return ( or that of your relative ) is  filed under perjury jurat,  it is not material whether the EA chose  ( erroneously in me opinion) to enter the  barter/exchange/disposal of capital assets  and interest earnings  as "other" -- it is the taxpayer's responsibility to be truthful.  The fact that IRS has not flagged this  ( because there is no "information return" to corroborate ) does not mean it is correct.

2. Note that India uses inflation adjusted basis  for assets  where as US does not --- this means that  it is up to the taxpayer  to prove that the basis used for  US tax computation is correct -- cannot use  India's figures for  gain computation.  IRS expects that  the taxpayer has records to base the filings on -- else the basis is ZERO.

3. Agree  that if the taxpayer's taxable income ( AGI adjusted for deductions ) results in zero tax liability, then foreign tax credit  ( a non-refundable credit) will not allow for any allowable foreign tax credit but will be available for prior year or future  year adjustments ( when foreign income present ).

4. Are you saying that the  taxpayer is no longer a US person  ( not a citizen/ Green Card ) and not residing in the USA ? If so why is she filing since she has no US sourced/ connected income?  She does not get Social Security either ?

Having read through your response, and while I recognize that it is each taxpayer' choice as to how to file their return,  my position based on tax laws is still the same  -- amend the 2020 return and file 2021 properly.   I do not agree with your EA's  position. 

I apologize, if I sound not willing to compromise  my position--please forgive

Is there more I can do for you ?

pk 

1.No I respect your opinion about correct way to file taxes. Its just a headache to covert Indian data to US format and than report to IRS - each trade - that may be like more than 3000 trades.

2. She is still US citizen but not residing in USA since May 2020 and no income at all from US sources ..no social security nothing.

3. Since we could not use foreign tax credit - can we use this year (if she owes taxes- I have not calculated yet) or future years?

4. By the way - Do we must give our phone number and driving or other state ID to file return using Turbotax permier CD version?

what will happen if we don't give state ID details ?

maybe she had no requirement to file a return because her gross income was less than her standard deduction. it's hard to tell because the tax laws say in determining gross income you take into account capital gains but not losses.  can't say if she's allowed a FTC carryover. There are special rules for computing it when you have foreign long-term capital gains.     form 1116 instructions https://www.irs.gov/pub/irs-pdf/i1116.pdf    .the IRS accepting the return means nothing only that they got it not that they approve it.  because of the omission and misreporting of data the IRS might have 6 years to send a notice requesting the missing info or to audit the return. doesn't matter that she no longer resides in the US. as long as she does not renounce her US citizenship, the US taxes her on her worldwide income. 

since she has foreign accounts she may need to file annual FBAR reports.

penalties for failure to file can start at $1,000 per violation and go up from there depending on the factors involved. 

see this link

https://www.irs.gov/newsroom/understand-how-to-report-foreign-bank-and-financial-accounts  

as far as you preparing her 2021 return using the EA method, you can do what you want. It's for the IRS to find that rules have been broken  and assert any penalties that apply. do note that her return is filed under penalties of perjury

1. If IRS find Rules are broken i.e. Return is not filed correctly (i.e. individual capital gain related trade is not reported ) what is the penalty?

Yes penalty of perjury but she is not lying or hiding - its just not giving full details because of difficulty to convert all those 3000+ trades to US equivalent. 

2. She had been filing FBAR without fail so that should not be issue.

3. She does not need to file 8938 because her total assets is way below required  threshold.

4. We want to file like how IRS requires it but can you me idea how to convert those trades to IRS acceptable format? They are in Rupees and also Indian tax year is March to April  

You get a lower tax rate on capital gains held more than one year, as opposed to "Other Income".

Otherwise, your tax return is fine, so if you're happy, do not amend.

1. I am using premier version of TT - desktop windows type -  and I dont see any option to add a third party designee - how do I add such ?

2. Also she has little capital gain from US and Robinhood has sent 1099-B with option A checked but there is only $0.46 (yes 46 cents) entry for  Wash sale loss disallowed (W) - so if I enter that - I have to send a statement via mail so can I choose to avoid that mentioning that ..because if I don't mention this 0.46$ entry - it does not ask me to send anything.

3. When I was doing foreign credit worksheet - it asked if this is your 1st year you are eligible to make the simplified foreign tax limitation election for AMT purposes -------Choose the best answers and there are 3 options 1. This is the 1st year  I am eligible 2. I made election in 2020 or previous year 3. I chose not to use this election prior year --- most likely I have made election in 2020 but how do I confirm ?  In 2020 - I filed 1116 and claimed $800 foreign credit but total income was not taxable so it was not used.  

4. For foreign interest income I have 2 options - I can add as if I have received 1099-INT(which I have not because Indian banks don't issue those) or I can report it as other income - I am already reporting  foreign capital gains as other income (because its too complicated to convert to US required format) - so how should I report foreign interest income? 

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@seccam wrote:

1. I am using premier version of TT - desktop windows type -  and I dont see any option to add a third party designee - how do I add such ? 

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A third-party designee can only be entered in forms mode. It's on the Federal Information Worksheet, near the end of Part VI, at the bottom of page 2.

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@seccam wrote:

2. Also she has little capital gain from US and Robinhood has sent 1099-B with option A checked but there is only $0.46 (yes 46 cents) entry for  Wash sale loss disallowed (W) - so if I enter that - I have to send a statement via mail so can I choose to avoid that mentioning that ..because if I don't mention this 0.46$ entry - it does not ask me to send anything.

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You can omit the 46 cents wash sale loss. If you entered it, it would get rounded to zero.

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@seccam wrote:

4. For foreign interest income I have 2 options - I can add as if I have received 1099-INT(which I have not because Indian banks don't issue those) 

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That is the correct way to enter it, as if you got a 1099-INT. You only have to enter the payer's name and the amount of interest (in U.S. dollars).

Can u please respond to this ?

1. When I was doing foreign credit worksheet - it asked if this is your 1st year you are eligible to make the simplified foreign tax limitation election for AMT purposes -------Choose the best answers and there are 3 options 1. This is the 1st year  I am eligible 2. I made election in 2020 or previous year 3. I chose not to use this election prior year --- most likely I have made election in 2020 but how do I confirm ?  In 2020 - I filed 1116 and claimed $800 foreign credit but total income was not taxable so it was not used.  

2. Also, I am doing this for a relative who is not good with English and is out of USA currently. So I got a CAF no. when she was in USA which was issued in 2018 so I think its still valid but how do I confirm that its still is? and if it is can I efile on her behalf using this CD version of TT ? what additional step I have to take to notify that I am filing on her behalf as CAF/POA

3. If POA is not valid any more what is the other best route to file for her - please note she is not in USA so she can not sign and mail  ? @pk @Mike9241 @Anonymous_ 

4. Btw - we are not worried about declaring as other income (so higher tax ) because her total income is less than std deduction but only filing because want to carry forward foreign tax credit (she paid tax to Indian govt)

@seccam , have gone through the whole thread and in general I see the following ( and  hopefully this will answer all your various questions).

1.Because you are filing for a citizen relative whom is abroad, if you e-file, provide all the details  ( satisfy efiling identity  requirements  -- state issued ID or driver's license etc  and either electronic signing PIN --- most  professional software auto generate this based  on SSN  --- it is what was used the year before  ( see the federal carryover worksheet  from 2020 ) to keep TurboTax happy, you should be able to file .  

2. To e-file you have two choices  -- either it is self-prepared  ( TurboTax ) or you have to enter your CAF and also be certified  as a producer/ transmitter of e-files.  Many of us prepare returns for our children and file through TurboTax as self-prepared with no issue . We just make sure the taxpayer has gone through the material and approves  the e-filing.  In this we are helping them prepare their return.   In  your case I think it is a case of helping a relative and as long as she/he understands  what you are doing , then there is no issue. The other option is to use a professional tax preparer  ( you don't need  EA or a Tax attorney  because you are not  expecting to have representation issues ). IMHO

3. As far as the interest earnings whether earned  domestically ( with or without 1099-INT ) or foreign ( no 1099-INT) , you enter these  just as if you had a 1099-INT -- just the name of the issuer,  earned interest  and that is all.  For dividends , you do the same  -- enter as dividends ( only diff is that for domestic you may have total and qualified  whereas for foreign you will generally have only total , no qualified ).

4. On foreign tax credit worksheet -- unless we are talking about large sums with AMT bites in place, the  simplified  path is the best.   You can only see your choice by getting a transcript of the year 2020 ( unless that was the year that you used a professional , in which case he/she should have the required  paperwork  as to which path was followed. But I don't see this as material -- given the numbers we are talking about.  CAF does not usually help in this  -- it is transcript that should have this info or on your back-up copy of the return in your software used last year.  Does that make sense ?

5. As long as you take care of having the taxpayer agree with what you are doing, she trusts you, you get her to review the material, and things can be kept informal, a POA is  not useful ( because a POA can never clearly delineate your powers/judgment calls  for tax preparation and you are not a professional tax preparer).  If in doubt, instead of a POA, CAF etc. use a professional tax preparer.  It is the safest way to do it..

IMHO

What have I missed  in this situation ?

Namaste ji

pk 

@pk 

Thanks - it seems you are also of Indian origin?

1. You said I have 2 options either efile for her self prepared or hire a tax professional. 

What is the advantage of using and paying tax professional - like I mentioned last year I hired EA but she made a huge mistake by declaring her interest and capital gains income as other income. ...so what is the point?  If I file for her and later IRS sends a notice - will IRS hold me responsible for not giving full details of capital gains on form 8949?  If I use paid tax preparer - that possibility of responsibility will be on that tax preparer?

2. Until 2019 I have declared her interest income as 'Various Indian banks' on 1099-INT - because she has accounts with more than 8 banks and total more than 30 accounts ...so I would just calculate total and convert in to USD and declare in one line ...is there any problem doing that again?  

3. I have copy of her 2020 return but it does not indicate anywhere about simplified election - I can see 1116 form but does not say anything about choice we made (One thing am certain that 2020 was the first year we thought for getting foreign tax credit - previous years starting 2014 we never claimed foreign tax credit ..even though she did pay taxes to Indian govt) - I can not reach out to that tax preparer any more so only way to find is thru transcript? I will not be able to get the transcript before 15th OCT so any other option? 

Thanks a lot for your time and energy to help. 

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@seccam wrote:

2. Until 2019 I have declared her interest income as 'Various Indian banks' on 1099-INT - because she has accounts with more than 8 banks and total more than 30 accounts ...so I would just calculate total and convert in to USD and declare in one line ...is there any problem doing that again?   

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It's no problem at all, as long as her total interest income (Form 1040 line 2b) is not more than $1,500. In that case, the only thing that actually appears on the tax return is the total amount of interest. You don't have to enter the details.

If the total amount of interest is more than $1,500 you have to list the individual payers. The name and amount for each payer is listed on Schedule B. You can enter one total for all the accounts in one bank, but you have to list each bank separately.

@seccam  Yes I am originally from India and am cognizant of Indian Tax system to some extent.

1. Recognizing that for  employing a tax professional , you will be acting as intermediary and therefore the tax professional  will tend to be careful and use CYA -- just natural  ( she/he is not going to risk career on one client.).   Thus , if you can do it and trust your relative  then it is alright. Note  that at the end of the day , IRS is going to hole the taxpayer responsible , no matter whom prepares the  return.   The starts the finger pointing.

2.  Generally agreeing with @rjs  on  entering the details of the interest earnings - it is always a good idea to collect by issuer name because  most foreign banks  are required to report to US treasury on all accounts  when the owner is US connected ( either SSN or they suspect  that the owner is of US origin).  Don't  have exact knowledge of the transmittal format  but I know from the treasury volunteering days  that there is sufficient info.  So I would do this aggregation nu bank irrespective of the amount.

3. I would choose the simplified method for AMT -- just don't worry about the exact wording for this year and if you are wrong  in that this is indeed the "first year" , one can always explain with actual facts  in that you had no way to confirm this in time.  However , I would still suggest  that after the fact you get a transcript to see if it shows anything  ( transcript are usually as IRS keeps it in taxpayer's account not a facsimile of the filed forms ).

Is there more I can do for you ?

Namaste ji

pk

@seccam , I come back because I forgot to comment on your  capital asset disposition report.  If indeed there are a huge number of sales/ disposition, then  a good way would be to use a spreadsheet to record each buy, sell, acquisition cost ( including charges ) , sales price ( including any associated charges ) and have the  spread sheet also compute category -- short term , Longterm, wash etc.  Then sort these  by LT / ST /WA and then by date  --- this will give you what the IRS wants/needs i.e. ST  gains. losses and LT  gains and losses  plus disallowed losses ( WA ).  Now you can group these  ( for ST, LT and WA ) by date or type of stocks etc.  Then go to TurboTax  enter the group details.  That should work. And if IRS wants details you have the back-up spreadsheet to show how you came up with the summaries.   That is what I have done for many clients during my work as a Tax Professional and never been challenged, but I was  also prepared.  IRS is not after people, they just want their fair share  of taxes.

Hope this helps

pk

Thanks - for sharing a proper way to declare those trades.

I am thinking about it but but at the moment I am hesitant about it, because first of all because total income is less than std deduction, so she is not required to file return.

But since 2014, we are still filing just for records. Since last year we have thought about foreign tax credit.

Also, making a proper 8949 is preferable way but its a huge task because there are more than 5000 trades - make an excel sheet that perform the work by converting and enter them to US accepted 8949.

May be its too much to ask but can you share that excel sheet that you have made and than I am positive about doing the way you suggested. I am sending you personal message for my email.

About me filing for her - here is the link I found on taxslayer - I could not find official IRS page about it but taxslayer on this link says - you can file for someone who does not speak English 

https://www.taxslayer.com/blog/filing-a-tax-returns-for-a-family-member-or-someone-other-than-yourself/

Thanks a lot and Namaste 🙏 

You do not have to enter your spreadsheet into a form 8949.

You have to put the spreadsheet into the format of Form 8949.

IRS will accept any document that has the same information as on Form 8949.

Put a heading with your Name, SSN and Tax Year.

Rearrange columns as needed to be in the manner of Form 8949.

You have to mail it to the IRS at the designated place.

OR

The simple solution to your issue is to report using aggregation on Schedule D Line 1a.

Short-term covered trades are Box A transactions and Box A transactions without adjustments do not require Form 8949.

No mailing is necessary.

If you are trading crypto and/or no 1099-B, your category is Box C or Box F.

There is no reporting exception for these Boxes.

@seccam 

any version of desktop Turbotax will support manual entry but obviously one trade at a time. 

to get to the worksheet

1) select forms mode on the view tab

2) click on the forms tab

3) in the search box (jump-to box) type Capital Asset Sales Wksht  (case does not matter but worksheet must be misspelled) 

4) highlight the worksheet with your mouse then open form

5)  enter 1 then next

6) for broker name enter anything you want it's not used then finish

you should now have the worksheet where you can manually enter each trade. 

personally, I think Turbotax should make it much easier to get to the worksheet

"there are more than 5000 trades"

@Mike9241 

A) Nobody is going to enter 5000 transactions one at a time.

B) TurboTax won't accept that many transactions.