mekCPA

@rfasset - the taxpayer worked approximately 1-2 days a week. Let's assume 2 days a week for 52 weeks at 8 hours a day. That equals 832 hours devoted to the full time job, less vacation and sick hours (yes, it's a sweet deal of a job, full time pay without full time work and also paid vacation and holidays). We provided a detailed schedule of hours devoted to the Real Estate business that more than equaled that amount. Considering a 40 hour a week job is 2080 hours a year, in my opinion, there was more than enough time to do BOTH. However, according the the examiner and all the supposed "Tax Lawyers", if you have a job that pays a full time salary, even if you do not work full time hours, the fact that you have a JOB, automatically means that you cannot also be a "real estate professional". I don't see the logic in that. Neither did my client until now. @MAS - we DID provide a contemporaneous log showing that the hours needed to qualify as a "real estate professional" were met, however as I said to rfasset, the IRS and the "Tax Lawyers" have stated that if you work a job, it's "black and white" that you cannot also be a "real estate professional". I'm not seeing the Black and White. And I agree, if the taxpayer didn't qualify for the R/E professional in the first place, the taxes would have been paid at that time. I just am hoping someone has some information that's "black and white" (ha!) for me on my liability. But, I guess that's why we have lawyers!

I've come here looking for some guidance. A client recently underwent a Schedule E audit for material participation. Based on our conversations and my understanding of the situation, they were entitled to deduct losses based on the Material Participation requirements. The taxpayer had a Real Estate license, and devoted over 750 hours to the profession. Taxpayer also had a full time job. However, that full time job required approximately 1-2 days per week in the office, which is what allowed the taxpayer to devote more than half of the time worked in the full time job to this real estate business. We defended this before the examiner, who has said that the fact that the taxpayer had a job negates being able to claim material participation, and upheld the proposed additional assessment. The taxpayer was able to get the penalties waived, so what is left owing is the taxes and interest. Here's where I need you to be kind: no, I do not have errors and omissions insurance, and I did not use an Engagement Letter. I have definitely learned my lesson. Never having gone through this before, I need advice. Of course now that the taxpayer has exahausted all remedies which I have helped them with along the way, they are now stating that I should be liable for the taxes. It's my understanding (and forgive the lack of proper terminology describing liability) that if I was not negligent in the preparation and used reasonable care and have support for my position, the taxes are the responsibility of the taxpayer. While trying to sort this out, I provided the taxpayer with possible tax attorney contact information, and the taxpayer has stated that they told her this is "black and white, by having a job, the taxpayer can never deduct material participation losses". It has progressed to the taxpayer now stating that if it was black and white, I should have known that and should be responsible for the additional taxes due. I do not agree that it is black and white. Perhaps I am incorrect in my understanding. I'm thinking at this point I need some legal advice, so if anyone has a reference they can provide for that, I'd appreciate that too! Like I said, please be kind, this has been a stressful situation that has escalated to an even higher level now. Thank you!

I've started receiving emails recently from a company called Tax Exact Pro with a link to their website. I searched the forums and did not see any mention of this software, but I am also not the best at having successful forum search results. Their email says their software is $399. I am not especially interested in switching away from ATX, but I just looked at what next year's version will cost me and it is up to over $900. I know this concept of ATX increasing their fees to be more in line with the Intuit program has been discussed numerous times over the years, but I really feel like they are pushing it by nearing the $1,000 threshold. Here's what their "about" page says: Taxexact Software Development, Inc. In addition to developing new income tax software, we are reintroducing TaxExact, an industry proven leader for tax software that has not been marketed since 2006. Due to customer demand, we are also in development on an online consumer product that will allow our members to compete in the online individual taxpayer industry. TaxExact currently has a comprehensive staff of highly trained developers who understand the needs of our customers and are ready to meet them. This staff is currently refining updates for TaxExact Professional Desktop and TaxExact Online Consumer Income Tax Software. Upon completion, our customers will be able to utilize all available individual federal and state MEF forms along with business federal and state MEF forms. The developers building the TaxExact File Center have over 100 years combined experienced within the income tax software industry. Due to our extensive technical planning and layout, the file center for TaxExact and YonderWorks BETA will easily handle all electronic filing with zero downtime. We are using cloud computing for our filing center on the pacific west coast with a complete mirrored file center at our home office in Murfreesboro, TN. It is these new ideas and innovations that we feel are the steps to allowing our customers to stay focused on the growth of their business. Our investment of time and commitment is the gateway to building trust and business potential. Now is the time to join us as we become well known as one of the leaders in this industry. I don't know what it is, but there's something about them that seems suspiciously similar to TRX. Maybe it's the concept of sending emails to ATX members and quoting low prices, and the fact that their website just seems a little less than "full disclosure". Maybe I forgot to take my non-paranoid prescription this morning, too, there's no telling. Speaking of TRX, I also receive emails from them that I have had no success in being removed from. Any one have any suggestions on how to get THEM to stop emailing me? Thanks! mekCPA

And, this week our local news had a bit on the "SnapTax" smartphone App. They had a teacher, with two W-2s do her taxes on SnapTax. Then they had a paid preparer do them. The paid preparer resulted in a bigger refund. I think it was about $400, which is probably the MWP Credit. I was happy to see that, and hope a lot of people saw it and will hopefully leave the tax preparation to a tax professional instead of their "phone".

I never thought I'd say this...."yay, Turbo Tax!". LOL

Here's the obvious "question of the day"..... ...why would that preparer be the "previous" preparer?? Lot's of possible answers come to my mind! :)

Thank you, tkamba. I was about to go crazy trying to figure that out myself. What a PITA. And, Ken, I agree. ATX broke something that was fixed, OY! Oh, well, at least it is a "simple" enough fix.

Thank goodness for this forum!!! I would have never figured this out on my own. And there are so many emails from CCH and ATX, there is no way I would have read, or understood that, in an email from them, without actually doing the returns.

Thanks for this information. I read publication 946 on GAAs, and did not find any exclusions for farming or depreciable trees, so that is what I am going to go with. It makes sense when you think about how the IRS handles other tax issues. I really appreciate your response to this and it helped me "get one more done".

Thanks for the tips, I shall try that out. I had not thought about setting up a "disposed" asset in the method I was considering. I think your method of doing that makes it a lot more clear and leaves a lot better trail should anyone other than me be looking at this year's information or preparing a future year's return. Thanks, again!

Because of the drought and watering restirctions in California, many farmers are forced to let 30% or more of their crops die or pay for water at higher "tier" levels. As a result, one of my tax clients has reduced their orange tree farm from 198 trees to 108. I am trying to figure out the best way to "dispose" of those 90 trees. They are currently listed as an Asset on the Asset Entry form as 198 Valencia Orange Trees with a date placed in service of 1/23/04 and a life of 10 years. I can think of all kinds of "creative" ways to dispose of them to get to the number I want and to make sure the cost and accumulated depreciation carryforward to 2010 at the correct amounts. But, is there a simple way within ATX to accomplish this? Any help is greatly appreciated! Marlene

Good to know, thank you for sharing your knowledge and experience with the rest of us. To date I've only had two of these, so this is a whole learning curve for me, and again, I really appreciate your willingness to share what you know with those of us just coming up on these!

This method works? I had assumed if I did this it would go through as filed, then months later the TP would get correspondence and a check in the mail for the $250. You know what happens when they get a letter from the IRS saying they are getting a refund because the IRS knew of additional deductions that were not on their return (mortgage interest, etc).....TP questions why we "missed" that, although they didn't tell us of that amount to include in their return because they lost the 1098 or it got sent to a different address, or it came after they gave us their stuff and they never let us know. I was considering doing it the opposite way....filing by taking the $250 credit, let them know it could reject and we'd have to take the credit off and resubmit. I was not looking forward to those conversations either. So, if this method of "not" taking the credit when the TP is entitled to it will cause the eFile to reject, I much prefer the "bearer of good news" method to tell them they are getting another $250 back. You've had success with this? I did not expect the IRS cross checks to be this sophisticated, but am glad if they are!

LOL 'dog. I couldn't agree more. I had a post today asking MWP 101-type questions and thankfully this Board rocks and I got some clarification. Additionally, I had two eFile rejections for retired TPs who had Federal Government or City Government pensions and each also had SSA retirement income. Asked both if they had gotten the $250 prior to filing and they said no. After both returns came back rejected for MWP saying records show they already got it, (returns had Sch M credit), I discussed with them, one now remembers "getting a letter from SSA that said something about $250" but she never "got" $250. The other still contends they got nothing from the SSA in either the form of a letter or cash-ola. Both agreed to remove the $250 credit and refile. I am waiting for the eFile ACKS on those two now. So, I couldn't say it better ....holy carp...this should not be so freaking hard. At least now I know, better now when it is slower than April 14!

Thank you guys for the help. I guess my problem was me. I thought I remembered when the withholding tables were changed, they said they were giving the workers the money back through withholdings, and that it would reduce the amount of their refunds, or make them owe more come April 15. Anywhoooo, I get it now. Thanks for setting me straight!