JohnH

A slight variation, but the same basic thought: “Experience - that most brutal of teachers. But you learn, my God do you learn.” - Anthony Hopkins as CS Lewis in “Shadowlands”

It could be that the number is correct, but it is not passing the eVerify because of a small anomaly in the formatting of the name. Some variations don’t matter, but others won’t pass the “Name Control” requirements. For example, C.J. Smith Company becomes CJ Smith Company because it looks better on the letterhead. (or Smith and Jones Company becomes Smith & Jones Company over time). The possibilities for a problem with the Name Control are numerous. Some don’t matter while other seemingly innocuous ones will produce a reject.

I did see that happen one time (over 20 years ago). I hadn’t prepared the extension or the return, but was asked to look over an audit report. The original extension request showed zeros on all lines. The actual tax liability was significant - $15 k or so. The taxpayer was self-employed and clearly should have know there would be tax due. The audit only turned up a nominal amount of additional tax - maybe $1k or so. But the auditor added full FTF penalties, stating that a reasonable estimate of the tax liability was absent from the 4868 and thus it was invalid. That’s the only time I’ve ever seen that happen, so I conclude there’s no attention paid to the numbers in the 4868 unless there’s an audit. But then they have a slam-dunk case for invalidating the extension retroactively if the extension shows all zeros. That’s why I agree with the approach to estimate the projected tax liability high, even if there’s only a token payment (or no payment) submitted with the 4868. It’s perfectly fine to lowball the payment (or even not submit a payment), but don’t lowball the expected liability.

So many transactions on brokerage statements are clearly motivated by the commissions or bonuses the financial advisor receives. The transactions are relatively small in comparison to the size of the portfolio, so even large gains on a few trades would not move the needle significantly on the whole portfolio. Plus, a disproportionate number of the trades either lose money or eke out tiny gains at best, especially after transaction costs. I’ve always suspected that numerous transactions in a managed account when the client isn’t an active investor are often simply to confuse the client regarding actual performance. It’s pitched as maintaining a “diversified portfolio”, but in fact the best method of diversification is buying and holding the broadest index available with low transaction costs. Rather than looking for needles in a haystack, just buy the haystack.

I don’t have a definite answer for your question, but I’ve usually followed the “when doubt, file” rule, even if there’s no tax due. At least that starts the SOL clock running.

This type of client doesn’t bother me. It’s those who was to bring it in an expect to have it completed bly Apr 15! who would irritate me. That’s why I set a cutoff date (usually somewhere around March 15-20). Anything coming in after that date automatically get an extension. Some of those returns still get finished, but there are no guarantees. Strict adherence to that type of policy turns April 15 into just another ordinary day.

I always liked the ones who said they’re too busy to keep a log and “if I’m audited I’ll just give the auditor my box full of gas & repair receipts and let them figure it out.” I’d always tell them “The auditor will just hand the box right back to you and inform you that you don’t have a deduction.”

Actually winning anything at gambling would also be fictitious if JohnH is involved. Don’t ask me how I know…

It's a quote I've used many times when discussing total market indexing with financial advisors.

It's very difficult for a person to understand something when they recognize that understanding it is going to cost them money.

Thanks for the reply, Tom. I've always understood that even with a cash-basis taxpayer, a security deposit is not treated as income at the time received provided it is intended to be returned to the renter (minus any damages) at the end of the term, but is treated as advance rental income if the contract calls for it to be applied to the last rent payment. But I'll be interested to hear what others might say about this as well. I suppose part of the answer depends upon the language in the rental agreement.

Client received a 1099-K from their rental management company because tenants paid by credit card. The 1099-K amounts include two security deposits received in the same year (because a prospective tenant backed out and the owner refunded the deposit in full within a few days, plus it also includes the actual security deposit received from the replacement tenant). So the 1099-K shows roughly $4K more in receipts that was collected in rent. Any suggestions on the best way to handle this? Reducing the total gross rental income by the $4K produces a mis-match to the 1099-K (if there is any cross-checking with rental income). Options for Schedule E seem to be: 1) Reduce the gross rental income on Schedule E to actual; 2) Report the full amount in gross rental income and then deduct the deposits under other deductions, perhaps as "Security Deposits reported on 1099-K in error"; 3) Report the 1099-K on a separate worksheet, subtracting the deposits with the same notation as in #2, and thus reporting the correct reportable gross rental income on Schedule E. Most any of these approaches could result in an inquiry a year or two from now, but I'm leaning toward #3 as being preferable because it includes full disclosure and actually reports the correct gross rental income as the starting number on Schedule E. Would appreciate any comments/opinions on this, as well as suggestions on any other ways to handle it.

So do I. It was an enjoyable meeting. It’s closed now, although there are 3 or 4 in the area that are just as good.

Sorry, I lost you at “JohnH has a tax-preparation and consulting business in North Carolina, which makes $100,000 per year.”

Just write a letter that’s woeful enough to make them cry.