December 19, 2020

Tax Computation Worksheet 2020

Tax Computation Worksheet 2020 in this presentation we will take a look at tax consequences of selling your home this will be a long presentation so if you would like to. Jump to your relevant parts within it take a look at the description below which will. Have links to those parts and the description for them we'll start off with an example of selling the home, will look at some worksheets to calculate the gain we'll put that information into actual tax forms so you, could see those tax forms then as we go through two different components of the calculation of the gain of qualifications for things like an exemption we can go back to that, example problem and look at the specific components as we zoom in on them much of this information can be found in publication, 5 to 3 in, this presentation we will take a look at an example problem related to the tax consequences of selling your home we will start off with the type of documentation the type of forms that we would have during this, process and we'll go through the calculations then outside of the tax forms outside of any. Tax software then in future presentations we'll take this information actually put it in to two tax forms, see it in relation to other information such as income on the tax forms and how they interact and will. Play out on the tax forms we may run some scenarios as well with in tax forms to do that we. Will use tax software you don't need to have tax software in order to follow along but the tax software will help, us to easily make changes when we think about different components, and different parts of the selling of the home calculation the sale of the home is obviously quite complex there's a lot of different, changes in variations that could happen as we move forward, into future presentations we'll be zooming in on particular components of either the formula or how it will be entered into the tax forms and you can always. Use this as a reference to them go back to the broad overview and see what the broad view is and then as. We zoom into the particular components you'll have a better idea of what the, changes we're talking about will do with relation to the entire process one of the documents we will most. We have wood recording the sale of real estate including the sale of the home in, our case is going to be a 1099s proceeds from real estate transaction this will typically have the gross proceeds and the date of close this is going to be, important information it's also going to be of course information that, is provided to the IRS as well so it should be the case that what we put in our system. Should line up in some way to this and if not we should have some reasoning asked why it would not as we, go through this process so that's one of the documents that are going to be needed the next statement we're going to need is the settlement statement or the final closing statement and this will. Be more of an intimidating type of form we should be able to, take this form and tie it out to the information the gross proceeds and figure. Out that gross proceeds from this statement but the reason this statement, is a bit confusing there's a few different reasons one it uses debits and credits but possibly not in the way that we're used. To in financial accounting so that's gonna be a bit confusing although we're gonna have the same kind of balancing, system down here you'll still have the debits and credits being in balance that will give us a nice check figure if we can find, out a system on how we can use it for our purposes to figure out what we need for it the other thing. That's gonna be a bit confusing is the relationship between the seller and the buyer and then like the escrow company like what's, going on here and so if we go over a quick kind of recap of that as we. Look at the statement it might make a little bit more sense we know. That there's an A to B transaction here right we have a seller and then we have a buyer and then we have in essence the escrow company that you could think. Of as holding the information or holding the funds in a trust as. All this information happens meaning they're gonna hold the money in a separate account so that, to facilitate the transaction and that's what is going to happen here and therefore if you think about the seller and the. Buyer if we thought about something like the total consideration for example was a million here we can think about the buyer giving the seller you know the million. If this was a straight A to B, transaction and then the seller paying off any of the expenses meaning the bank the loans that they. Paid off the the Commission to the real estate agents any legal fees they're going to take that and then pay it off but of course that's not exactly how it happens, what happens is, going to be it's gonna go into the third party of the escrow so the buyer then puts the money. Into the escrow and as everything works out for the escrow to take place for the title transfer and all that kind of stuff to happen and then. The money to be paid out that's what the third party is going to do so in essence if we, have the consideration of 1 million that the buyer puts into the escrow and then the, 1 million in this case is going to be used to then pay out whatever charges are in the process before the actual money goes out to the to the seller so the sellers, gonna get something after net of all the expenses after it goes through the escrow so in essence if there wasn't any. S you could think of it as you know the seller really got, the proceeds of 1 million and then took that and paid it all off of course all that happened in escrow however so in escrow that. Took the 1 million to the 3rd, party and then paid off whatever needed to be paid during that process and. Then the seller gets the net check for whatever the net check is so that's the first thing that you got to kind of wrap your head around when you start thinking about this what's really. Happening in basically the escrow is what is this third party that's here in this process once you, have that then you can kind of start to break this this settlement statement down these are going to be the types, of categories that we have over here there might be many different things, under this category so if we have like a loan we're paying. Back the loan on the bank there could be different fees that they call them alone here's a loan charge fee.

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