Leaderboard

The best (or worst) one that I ever had was when the preparer entered over $4000 of mortgage interest paid on the line for interest income. This resulted in over $8000 of excess income. Jack is correct in that there is nobody to follow up at VITA. We amended it and it turned out that they had never even filed it. It took several months to straighten that one out. However, I know that they have supposedly competent preparers helping out. I have a colleague urge me to join him every year at VITA. However, I also know that he makes plenty of errors because I had him working for me for two days. This does not make me perfect by any means, but I am here to correct my mistakes if and when I make them.

Well, not quite a laugh -- but far too cute - if you don't at least smile at this, have someone take your pulse to make sure you're not deceased. http://www.wimp.com/bathsloths/ (Note for the link-leery; this one is safe so far as I can tell. It shows a less than two-minute video of baby sloths on bath day.)

I keep getting these e-mails from the IRS asking for preparers to volunteer their time to help the poor taxpayers who cannot afford to pay a preparer. I wonder if the IRS has ANY conception of how much pro bono work many of us do in our own practices. I never charge an active military service person. I rarely charge for Homestead Credit returns and if there is extra work; it is only a pittance. I know most of my clients well enough to know who can afford what and I truly believe that it's not all about money. (Not that I don't like money)! I have amended enough returns prepared by VITA to know that I don't want to go there. These amendments are also done pro bono. Also, does the IRS ever consider how many children, parents, brothers and sisters that we all have? I do my volunteering at home.

Me too. I think the new forum just heated things up, but then, I know I'm one of the 'stir it up' group myself. Just that this old lady is truly concerned about what is happening to this county, and how it is going to impact my grandkids. I'm trying, though, to keep it civil at all times. Wish they all would. But will continue to try and add a smile now and then, because we all need more of them.

I like this kind of post much better than the name calling. Thanks Catherine and KC!

http://www.wimp.com/announcepregnancy/ this made me smile

Thanks, Catherine! I really enjoyed that and did, indeed, smile all through it.

>>it is an audit! << Now that 1099s are electronically filed, it makes sense for the IRS to use computer letters for the initial phase of the audit, rather than waste government resources like they used to in what is usually a simple matter. The taxpayer still has ALL rights, including the right to meet in person with an office or field auditor, the right to representation and to provide evidence and witnesses, protection from repeated examination, relief from penalty and even interest when allowed by law, and of course appeals and judicial review with the burden of proof shifted to the IRS. Compare the CP2000 to the math error procedure (deceptively named because it can go far beyond arithmetic), in which there is none of that because the tax has already been assessed before the taxpayer is notified. When I say a CP2000 is usually a simple matter, I mean the IRS is probably right because the proposed change is based solely on the mismatch. They are not questioning subjective things like intent or whether deductions are legitimate, just that income was actually received. Still, the 1099 might be wrong or already reported in a different place or whatever, so the taxpayer has the full range of responses available as in any other audit. If you don't like the vocabulary, Jack, call it whatever you want.

I wish our work as preparers would be approved at 50% error rate!! With the current set of rules and liability regulations we face, it would seem that the IRS prefers errors.

I just renewed today with a 20% discount at $995. This was after 'the best I could do' by my rep in April of 10%. I had very few problems compared to others, though. My biggest gripe was the extremely slow response time with moving between data fields and opening the program. I learned to cope by having lots of things ongoing simultaneously. We'll see what happens. I did tell the rep that ATX will likely lose virtually all customers if there isn't a dramatic turnaround this year. He said they are keenly aware of that.

Several months ago there was an article where the IRS acknowledged an error rate of close to 50 % on VITA prepared returns.

>>How do I handle this disposition of asset on S-corporation tax return<< The corporation reports (and presumably passes through) $245,000 capital gain (assuming "donor basis" means the corporation's adjusted basis). In addition to the capital gain, the shareholder reduces basis in stock (and reports ordinary gain if there isn't enough basis). The son gets a basis step-up and a new depreciation schedule, and hopefully they all get a new attorney.

I could see this going either way on audit. One way, as I described above, includes two steps first a distribution to the shareholders followed by a subsequent gift to the son. Conversely, the asset could have gone directly to the son. Look for the Service to argue whichever way generates more tax. I know of no way to accomplish what you desire without paying the tax. Even asking the lawyer to reverse the transaction in wrought with danger. The Service could argue that this was an effort to evade tax in the worst case scenario or allow it to happen as, again, two separate transactions - one where the transaction incurring the tax takes place and a second transferring the asset back to the corp at FMV - so the tax was paid but the son ends up without the property. Not a likely scenario, but it could happen. You have here a text book example of why real estate should not be held in a corporation. Even if the attorney successfully reverses the transaction and son ends up eventually inheriting the S-Corp, the step up in basis at that point will apply to the shares of stock in the S-Corp but not the assets inside the S-Corp. I know I am not being much help to you, but sometimes there is not much that can be done. The planning ship on this transaction has sailed. You are left with reporting the compliance part of the transaction.

Despite Jainen's experience and reputation he has been on occasion proved wrong. To rely only on an income and expense statement to prepare a proprietorship tax return without a balance sheet reflecting owner equity basis should be, and could be, malpractice. As in this case the loan/owner equity was not on the books and is an amount in determining outside basis until corrected on the business books. True that the inside basis and outside basis are normally the same in a proprietorship/(dba), as they are usually in a S-Corp or SMLLC, but there are always exceptions to everything. Due to tax rules it is a myth among accountants that a proprietorship is not a legal entity. Check court cases and you will find the proprietorship entity and the owner both listed in the cases.

>>new avatar, Jainen<< Yeah, cool! I got one of them new smart-phoney things, so of course right away I took a picture of myself in the bathroom mirror!

>>worth a try<< No it isn't. The rule for administrative use just says a fixed location where administrative or management work is done, not necessarily an office. Anything more than incidental work at the restaurant would disqualify the home office. So unless he has job applicants come to his house for the interview, and employees show up for training and getting fired and so on, and customers demanding to speak to the manager are referred to his home office.... It doesn't matter that the head company lets him have equipment at home. That is not one of the criteria for a QUALIFIED home office. For the same reason, he can't use an accountable plan to reimburse his home office expenses either. And that also means his commute miles can not be reimbursed except as a taxable fringe benefit. It sounds to me like the savvy head company already deducts everything possible. It's all covered under his franchise fee, of course, so he can deduct that.