Solar Tax Credit and Rebate

I can't believe that no one has an opinion on this query!

My credit card gives me a 2% cash back. I donate say $1000 to a charity online, and my out of pocket is $980, but my charity sends the receipt and I take my $1000 deduction.

Here, the taxpayer might have just submitted the net cost, $19,000 and gotten a $5700 tax credit. But, once that tax year is over, and the $1000 rebate comes, I'd ignore it. A "By the book" person will lead you to the proper method of returning the excess $300. But as your second note requested, this is my opinion. Not too different that when I find a receipt from a charity that I forget to deduct, but I hit "send" already on the return. Do I file a 1040X to get back $220? No. (Of course, there's a threshold, at $500, I'd probably do it). In the case of owing more, it's a bit more complex. Here, it wasn't even a mistake or real oversight. And the repercussion of ignoring it, is that it's probably not even detectable in an audit. This is not advice. It's my opinion. Responding to the request for opinion.

Since you're trolling for replies, mine (without zero knowledge of this credit or what's contained in its related form instructions) would be to report the $1,000 on line 21 (or current equivalent) of the 2020 return and move on. Unless there is some other clear/obvious solution, it isn't worth greater thought/effort than that (in my opinion).

"other income"?

Okay everybody. This is a real situation, not a hypothetical. It turns out that the Tax Benefit Rule is embodied in IRC Section 111. 111(a) deals with deductions and 111(b) deals with credits. It says that if you took a tax credit in a prior year and a price adjustment in the current year occurs you have to increase your income tax in the current year by the amount of tax benefit you received in the prior year. In my real situation, the person received a $300 tax benefit in 2019 (30% x $1000). He has to add $300 of tax to his 2020 tax return.

A new question: Does anyone know if there is some guidance on how one is suppose to add $300 of tax due to a recovery?

Obviously, if the person is in the 22% tax bracket in 2020, they could always just add $1364 of other income (22% x $1364 = $300). And also obviously, they would then have to subtract $1364 from California AGI. The CA form does have an "Other"line where you describe what it is.

Form 1030, Schedule 2, Line 8 "other taxes", check box "c" and fill in the blank with the explanation.

Yeah... the only problem is my tax software does not have check the box and enter the reason for Line 8c on Schedule 2 of the 1040. That forces one into a paper 1040. I can't use Other Income to solve the problem as that increases AGI and just ripples through the tax return with changes.

So... unless I can convince the software company to change the page where you select Other Reasons for Additional Taxes, I will be forced onto a paper return.

For those of you using software, I would like to know which apps (professional or otherwise) have the ability to create your own entry for Additional Taxes.

I don't use software, so I cannot comment there.

Can you enter the amount on Schedule 2 line 8, with no boxes checked and no explanation? That is what I would do for this small amount. IRS probably won't ask you, and if they did a simple letter reply would put the matter to rest. Easier than bailing out of your software to do the entire return by hand.

Does your software allow you to attach anything else in the way of explanation for anything? A blanket comment form?

Drake (professional software) provides 22 pre-defined descriptions for possible entries on Schedule 2, line 8. I would be surprised if any professional level software didn't provide the ability to enter something on this line.

Ira Smilovitz, EA Le> > >> > >>>> Someone installs a Solar System in 2019 and takes the full 30% tax

All kinds of choices in the software for Line 8 but none that match additional taxes under Section 111. And the software (TaxSlayer Pro Online), unlike the paper version, does not have a check box and a field to enter the code section and the amount. All of the software items listed are sourced from a form or schedule.

I can use the software to prepare the return and force a $1000 of additional taxes by picking an odd selection, print the return and swap out Schedule 2 with one that I prepare offline that has the correct Line

So I was just wondering whether anyone was aware of a software product that allows you to create a Schedule 2 Line 8c entry with the code section and amount.

$300, right? The credit he received against $1000 of cost which was rebated.

My bad. Yes $300 (30% of $1000).