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I had a client replace siding that was expensed. About 40% of the siding was stolen off the house while it was vacant between tenants. The auditor claimed ripping off the rest and replacing it was an improvement, thus a capital expenditure. If he had left the remaining siding and replaced only the stolen stuff it would have been a repair. The auditor said if I found some court cases she'd change her mind. I came up w/ Oberman Manufacturing Co. v. Commissioner, Northern & Cox vs Commissioner, & Illinois Merchants Trust Co. In Oberman, the Court held that the cost of replacing a roof as well as the cost of inserting an expansion joint in the roof was a deductible expense ($20,791 in 1961 or 159,000 in 2012 dollars according to the federal govt’s online CPI calculator). The Court observed that "it is necessary to take into consideration the purpose for which an expenditure is made in order to determine whether such expenditure is capital in nature or constitutes a current expense." Since Oberman's "only purpose in having the work done was to prevent leakage and keep the leased property in an operating condition over its probable useful life and not to prolong the life of the property, increase its value, or make it adaptable to another use. There was no replacement or substitution of the roof." The Court allowed a deduction. In Northern, the Court held that the cost ($49,308 in 1998, equal to $69,000 in 2012) of replacing roof covering was a deductible repair expense. The repairs were done to maintain normal operating condition. In Illinois Merchants Trust the court allowed deductions for repairs to the foundation ($46,562 in 1920 or $469,000 in 2012) stating the amount was not required to be capitalized. I also relied upon temp reg 1.263(a)-1 1.263(a)-1. Capital expenditures; in general (f) CAPITALIZATION OF BETTERMENTS-- (1) IN GENERAL. A taxpayer must capitalize amounts paid that result in the betterment of a unit of property. An amount paid results in the betterment of a unit of property only if it-- (i) Ameliorates a material condition or defect that either existed prior to the taxpayer's acquisition of the unit of property or arose during the production of the unit of property, whether or not the taxpayer was aware of the condition or defect at the time of acquisition or production; (ii) Results in a material addition (including a physical enlargement, expansion, or extension) to the unit of property; or (iii) Results in a material increase in capacity (including additional cubic or square space), productivity, efficiency, strength, or quality of the unit of property or the output of the unit of property. Numerous examples are included in the reg. I pointed out three of them. EXAMPLE 9. Not a betterment; replacement with same part. X owns a small retail shop. In 2008, a storm damages the roof of X's shop by displacing numerous wooden shingles. X decides to replace all the wooden shingles on the roof and hires a contractor to replace all the shingles on the roof with new wooden shingles. Assume the shop building and its structural components are the unit of property. The event necessitating the expenditure was the storm. Prior to the storm, the retail shop was functioning for its intended use. The expenditure did not result in a material addition, or material increase in the capacity, productivity, efficiency, strength or quality of the shop or the output of the shop compared to the condition of the shop prior to the storm. Therefore, the amounts paid by X to reshingle the roof with wooden shingles do not result in betterment to the shop building. X is not required to capitalize as an improvement under this paragraph (f) amounts paid to replace the shingles. EXAMPLE 10. Not a betterment; replacement with comparable part. Assume the same facts as in Example 9, except that wooden shingles are not available on the market. X decides to replace all the wooden shingles with comparable asphalt shingles. The amounts paid by X to reshingle the roof with asphalt shingles do not result in a betterment to the shop, even though the asphalt shingles may be stronger than the wooden shingles. Because the wooden shingles could not practicably be replaced with new wooden shingles, the replacement of the old shingles with comparable asphalt shingles does not, by itself, result in an improvement to the shop. X is not required to capitalize as an improvement under this paragraph (f) amounts paid to replace the shingles. EXAMPLE 11. Betterment; replacement with improved parts. Assume the same facts as in Example 9, except that, instead of replacing the wooden shingles with asphalt shingles, X decides to replace all the wooden shingles with shingles made of lightweight composite materials that are maintenance-free and do not absorb moisture. The new shingles have a 50-year warranty and a Class A fire rating. The expenditure for these shingles resulted in a material increase in the quality of the shop building as compared to the condition of the shop building prior to the storm. X must capitalize amounts paid to reshingle the roof as an improvement under this paragraph (f) because they result in a betterment to the shop. The auditor denied the deduction. The auditor's decision was overturned on appeal. The appeals conference consisted of a five minute phone call where the appeals officer stated I presented a pretty solid case and she was allowing the deduction.

Just came to the realization that ATX 2012 problems could affect us again in 2013. If ATX fixes the crashing and speed issues in 2013, but does not fix these same issues for 2012, those of us (myself for one) that keep the prior years return open for reference will have to deal with the CRASHING & SLOW SPEED ISSUES AGAIN, on both the server and workstations. For me this includes load times on the server of 3-6 minutes and on the workstations of as much as 10 to 15 minutes! And crashes, who knows how often. Personally I have transferred the remaining of my clients to Drake, as this years software is so bad on my network that it is virtually unusable. I do, however, have a few completed returns in ATX 2012 that I will need to deal with later. I for one intend to transfer those completed returns to Drake after the season is over. I suggest that anyone that switched software mid-season should do the same after our busy season is over.

http://www.accountingtoday.com/news/Congressman-Demands-IRS-Release-Star-Trek-Video-66117-1.html?ET=webcpa:e6845:61496a:&st=email

A young guy from West Virginia moves to Florida and goes to a big "everything under one roof" department store looking for a job. The Manager says, "Do you have any sales experience?" The kid says "Yeah. I was a vacuum salesman back in West Virginia ." Well, the boss was unsure, but he liked the kid and figured he'd give him a shot, so he gave him the job. "You start tomorrow. I'll come down after we close and see how you did." His first day on the job was rough, but he got through it. After the store was locked up, the boss came down to the sales floor. "How many customers bought something from you today?" The kid frowns and looks at the floor and mutters, "One". The boss says "Just one?!!? Our sales people average sales to 20 to 30 customers a day. That will have to change, and soon, if you'd like to continue your employment here. We have very strict standards for our sales force here in Florida . One sale a day might have been acceptable in West Virginia , but you're not in the mines anymore, son." The kid took his beating, but continued to look at his shoes, so the boss felt kinda bad for chewing him out on his first day. He asked (semi-sarcastically), "So, how much was your one sale for?" The kid looks up at his boss and says "$101,237.65". The boss, astonished, says $101,237.65?!? What the heck did you sell?" The kid says, "Well, first, I sold him some new fish hooks. Then I sold him a new fishing rod to go with his new hooks. Then I asked him where he was going fishing and he said down the coast, so I told him he was going to need a boat, so we went down to the boat department and I sold him a twin engine Chris Craft. Then he said he didn't think his Honda Civic would pull it, so I took him down to the automotive department and sold him that 4x4 Expedition." The boss said "A guy came in here to buy a fish hook and you sold him a boat and a TRUCK!?" The kid said "No, the guy came in here to buy tampons for his wife, and I said, 'Dude, your weekend's shot, you should go fishing...................

Woke up to 14 degrees with a wind chill factor that makes it feel -1 degrees outside Last year today we were at 85 degrees

The Tennessee Department of Revenue is now accepting Individual Income Tax returns for tax year 2012 through the IRS Modernized E-File program (MEF). This partnership between states and the Internal Revenue Service allows tax preparers to include the state tax return and any associated payment with its electronically filed federal return. The Department of Revenue will accept Individual Income Tax (INC250) and Application for Extension of Time to File (INC251). Click here for a list of current certified vendors. You must first select the certified software vendor from whom you will obtain the software that will be used to file the electronic return. Once a vendor has been selected, you must contact the vendor and arrange to use the vendor's software. You will also, at this time, determine if you will file your return and payment at the same time using the vendor's software or if you will file the return only and pay using the new income payment voucher form (INC253). If you have any questions, please contact the Electronic Commerce Unit: Statewide toll-free (866) 368-6374; Nashvile-area and out-of-state (615) 253-0704.

Update: ATX technician called US! He was terriffic and we are now fully restored to our most recent client files. He was amazing, but doing things that are waaaaayyy above my level. We could not have done this without the technician from ATX. For now we just want to get back to work. He also recommended that we do manual backups of our files to another directory. Then our routine backups of our server should include these files within the ATX program directory: 1. Backup Folder 2. Efiles 3. EFIN Enrollment 4. Network Share Folder (which includes "Formset") He said that if we have these files, they can recreate our returns.

Well, my first glitch in seven years with ProSystem fx. The return says TN has qualified for e-filing. But, when I call CCH (by the way, they answer the phone immediately for Pro fx !!) they tell me no e-filing for that TN form. Gotta email the daddy back to tell him I'm mailing them a TN return to sign and mail to TN.

Section 263(a)(1) provides that no deduction shall be allowed for any amounts paid out for new buildings or for permanent improvements or betterments made to increase the value of any property or estate. See also Treas. Reg. § 1.263(a)-1(a)(1). Section 263(a)(2) prohibits a deduction for amounts expended in restoring property or in making good the exhaustion thereof for which an allowance is or has been made. Capitalization is the proper treatment for expenditures incurred in new construction. See §§ 263(a) and 263A. Capitalization is also generally required for additions to existing buildings or for installations of material components to buildings or equipment. Quite frequently, new additions are made to already existing property. These additions are not replacement components nor are they repairs to property, but are instead newly installed components. These additions are required to be capitalized. This requirement applies to both § 1245 and § 1250 property. In Tsakopoulos v. Commissioner, T.C. Memo 2002-8, aff’d on another issue without published opinion, 2003-1 USTC ¶ 50,513 (9th Cir. 2003), the court stated that the cost of the work performed on the roof must be capitalized because of the substantial nature of the work done and the work appreciably prolonged the useful life of the roof. For buildings placed in service prior to 1981, a taxpayer was permitted to use component depreciation or composite depreciation. Under component depreciation, a taxpayer allocated the cost of a building to its basic component parts and then assigned a separate useful life to each of these components. S. Rep. No. 97-144 (1981), 1981-2 C.B. 412, 422. Components include the basic building shell, wiring, plumbing, roof, and other identifiable components. Each of the component parts was depreciated as a separate item of property. Under composite depreciation, a taxpayer assigned a single useful life for the building and all of its structural components. http://www.irs.gov/Businesses/Capitalization-v-Repairs-Audit-Technique-Guide#14

If a landlord puts a brand new roof because his 30 year old room has had it, it is prolonging the useful life and I am capitalizing it! I know some have posted some examples and case law to the contrary but i am playing it safe. I have been doing that since I got into the business and unless I see clearcut examples that have passed IRs scrutiny, I am sticking to the good old capitalization method.

Court case Northen v. Commissioner, T.C. Summary 2003-113 (8/13/03) The Tax Court held that the cost of repairing the roof is deductible. She did not intend to prolong the life of the property, increase its value, or make it adaptable to another use. Expenditures incurred as part of a general plan of reconditioning, renovating, improving, or altering business property are capital expenditures, even though certain portions of the work, considered alone, might be classified as repairs. Regs. Sec. 1.162-4. Repairs.

Okay . . . because I have never seen Jainen post anything inaccurate, I had to quickly research this just a bit. While Pub 527 states that a new roof is an 'improvement', ergo Capitalize, I just discovered that there is definitely case law supporting expensing. I withdraw my 'ditto'. Sheesh . . . I want to download a few of the brains on this board. I will send a thumb drive. Please password protect. You know who you are.

>>Does a new roof on a rental property ever get expensed??<< Sure, almost ALWAYS! Does it extend the life of the building? No, it just prevents deterioration. Does it make the building suitable for a new use? No, unless it is an upgrade like steel or something. Usually a new roof just means they repaired the old one. In order to capitalize it, you must first remove the undepreciated basis of the old roof. Would that make sense? No? Then you aren't really replacing the roof, are you?

I just successfully transmitted 23 W-2/3 forms for Fedaral and 17 for States. WOO HOO!!! Once you get all the little checkmarks in place, it is slick like goose grease!!! I will NEVER mail a W-3, 1096, 941, 943 or 944 again!!! I get a printable acknowledgment for each file transmitted. Don't get no better!!!

It is a question that clearly shows a level of confusion. BUT that just means the poster has the sense to ask questions rather than just blindly charge ahead. That should be encouraged, not criticized. Offering direction to the right sources is a proper [and kind] response. Please, that is how we should strive to react.

>>such an elementry question<< It was a good question--nothing about pass-through entities is elementary (except spelling). Earned income means different things under different provisions of tax law, and with more IRS scrutiny of EIC it is prudent to ask for advice.

Same here about processing, Jack. I have several clients plus my own W-2's. Using AccuWage is easy as is the uploading and confirmation. Much better than paper for sure! I think the 1099 and W-2 functionality in ATX is really good. I would, in fact, pay additional for it should that come about or if that is the only survivor (but I have had almost no trouble on a stand alone and really hope ATX can pull it out of the morass it is in now).

And don''t forget how the IRS treats damages awarded and attorney fees, It 's easy to say the attorneys make $$$$$$ and we'd get $. But we'd have to report our share of it ALL, then deduct the attorney fee on the A, most likely.

Yeah, just got a "Winter Storm Warning" and I am in AR.