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So at church this morning, the Pastor says in his sermon that we are going to get audited by God some day. On the way home, my 18 year old son says he isn't worried about that audit because he will have a mileage log and his receipts when he gets there. He must be listening more than my wife and I think when we talk about clients at home. Tom Hollister, CA

If they do sell in the future, and assuming that they otherwise qualify for the principal residence exclusion, the amount subject to recapture because of depreciation is not eligible for the exclusion. Also, a special rule enacted in 2009 limits the exclusion if the home was used for other than a principal residence, such as rentals or vacation homes. The gain would be prorated so that the exclusion is for only the time used as a residence, and the portion of the gain that relates to its use as a rental, vacation home, or other “nonqualifying use” after 2008 would not be eligible for the exclusion.

Oh good...you brought me all of your goodwill donation receipts that proves you donated a "truckload of clothes, 31 books, and a box of VHS tapes". Splendid! I now dislike you more than I did before.

I had one that kept asking me to explain 'differences' between their calcs and mine, line by line. It was clear they didn't understand what the lines meant. Finally, after I had sent them their return, but hadn't made a couple of corrections that I needed to do a rerun for, they said they 'decided not to use my return' and what would they owe me. I had sent a bill, and I said, the amount on the bill. They asked why, since they wouldn't file the return I prepared. Hey I put the time in, I wanted to be paid for it. They sent the check & haven't heard from them since. BTW, their previous preparer was a well-known expert in same sex tax that shut her practice down to take a lobbying job, and I know the bill the previous year was at least 4 times what I charged.

Then I would have sent him a bill for the consultation.... And it would not have been for $4. Rich

I have a bunch of engineers as clients and there are lots of tax folks (around here, at least) who won't touch them with a 10' pole. Double-check, nit-pick, demand explanations.... at some level I understand (being an scientist/engineer by training myself) but it can get annoying. I remember a client some years back (moved; went to someone else, whew) who spent several hours of hisr own time investigating a $4 "discrepancy" between my depreciation figures (from ATX, on several TENS of thousands of dollars of equipment) and the ones he got from QuickBooks -- and wanted me to "justify" MY figures!! Yeah, right. $4 out of thousands, and he wants a dissertation. I think I told him that QB uses a less-sophisticated algorithm for those calculations because they want you to pay more for their more-sophisticated fixed asset manager software. He bought that explanation and decided he could let the $4 difference ride -- for that year, anyway.

Sounds like at least a $2,000 deduction, maybe more if those VHS tapes are collectors items (which they almost certainly are). Truckloads of clothes don't come cheap, you know. And I'll bet most of them were hardly worn.

Really? I'm serious, would you really do that? Where do you live? In Tennessee, our clients would walk, I'm pretty sure. If they didn't walk, they would for sure never recommend me to friends. I have two kids in college, their dad helps me exactly zero. I don't think that would work for me. And, I'm certain I would break my neck if I leaned back in my chair.

Little old lady brings papers to office. Long time clients. Retired. Under filing threshold. No return required. What do I owe you ? No charge. No really, what do I owe you ? Really, no charge. I insist. OK, a cherry pie. Two hours later ( in a driving rain storm ) knock, knock, knock. A cherry pie at the door. I guess I will have to look at their income every year from now on.

In chilly CT, many people pick out their retirement homes while still working and better able to qualify for a mortgage. Many use it as a second home, some as a vacation home, and some as a rental. Eventually (unless one passes away, and sometimes because one passed away) they move to that warmer clime. They usually continue to send their tax documents to me. I currently have clients in FL, NC, VA, and coastal CT. I have lost a couple to preparers in AZ, but their prior year returns contained the depreciation schedules, etc..

Dear Client You know I work out of my home. You also know I do not like clients to come to my home unless absolutely necessary. You know that my husband has a business across the street that is open M-F from 9-6....and that's where people drop off and pick up from. I do make exceptions. Do you remember 3 years ago I let you pick up your return from my home? You came in, took your boots off...and talked to me for about half an hour. Then you realized I had work to do, so you left. Thinking you wanted to be "my friend" I invited you for lunch after the season. We even picked out the restaurant. Then, when I called you to confirm that morning you said "Oh, did we have plans? I have something else to do." You weren't even apologetic. So, why this morning (Sunday..when I do things with DH)....did you and your husband get annoyed when I told you I was unavailable for a drop off...as i have plans all day? Should I sit home all day to accommodate you? You don't work. Please drop your papers off with my husband or learn to fax or e-mail.

I had an engineer come in with his return prepared each year. I always found something he missed or misunderstood. Eventually, he stopped preparing his return and trusted me to do it. He organizes his information in great spreadsheets. Over the last three days, he's been arguing with me about a 401(c )(4) he belongs to that donates to charities, and why can't he take the donations on his personal return. (Yes, I came here to get input as he argued; it's the one I posted about.) He now believes me and is writing up a paper for his club. He is also a really sweet guy and very intelligent and sent his daughter to me as a client. I also have a banker and his wife who had her own business. Banker is very mellow and laid back. Wife creates amazing documentation by hand. She does question every difference. (One year I got a lower amount for LTC premiums, because of the limitation base on age; she now understands that that number will differ.) She has gone elsewhere to double-check me or to get advance information, such as the elder care attorney when their parents were ill (she brought me all the information she got from him). She asks lots of questions and apologizes, but I do like her kind of questions, wanting to take responsibility for her own finances and wanting to understand the tax implications of what they do before they do it. They contact me every fall with what their year looks like and what their final estimated tax payments should be. They are also a very nice couple and continue to use me even though they moved farther away. I had a new client late last year who'd always had his returns done by his company's accountants while he was overseas. In 2012 he'd been in the US all year, so his company did not prepare. I showed him owing a ton. There's nothing to argue over: he has a huge W-2 and only 10% withholding. He wanted to discuss with his wife. I've never heard back from him!

According to the Instructions for Form 1040, "For federal tax purposes, individuals of the same sex are considered married if they were lawfully married in a state (or foreign country) whose laws authorize the marriage of two individuals of the same sex, even if the state (or foreign country) in which they now live does not recognize same-sex marriage." NT from here on... On the other hand, it's starting to look like the chances of even meeting someone same-sex is unlikely. Have you seen all the new Facebook options? Wow! Trans- and cis- and andro-pan, and I don't know what-all. Check this out http://techland.time.com/2014/02/14/a-comprehensive-guide-to-facebooks-new-options-for-gender-identity/?xid=rss-topstories

MFJ or MFS for federal return.

Are all seven partners your clients? I wouldn't expect the partnership itself to track individual basis. A reduction in partnership liabilities increases capital accounts, if that's the question. Decrease in any partnership liability will decrease the partner's basis. The share of liability is in section K of the K-1. And of course the interest payments reduce taxable income which in a sense also reduces basis. Perhaps more important, at least for a general partner who is personally liable, paying down a recourse loan will decrease the at-risk basis.

You need to keep record of the FMV of the at the time of conversion. Ask the client to have that record handy and for the rest of their lives.

I think you have covered this very well. Only thing I see is the recapture of depreciation at the time of selling.

Yes, that was the point of my first post in this thread. You have met some actual people, right? As my Daddy used to say, "You might as well wish in one hand and in the other and see which one fills up first." My chair spins around. If you're not living on the edge, you're taking up too much room. ;)

The decree may have stated that mom has to sign over an 8332 even though dad has custody. We know how well up on tax law divorce attorneys can be...not!

I've had a few, but never any "arguments." I have one couple that usually does a draft of their return as they get their documents to get their own estimate. I've usually found deductions they miss. One year they had a much lower tax than I did. It was the first year of the American Opportunity Credit & I missed it. i learned my lesson & didn't make that mistake again. Yes I still prepared that return for them. Personally, I like it when my clients understand what's going on with their return. I've only had a couple of instances where the level of questions went from "understanding the return" to being "annoying." Like Catherine, perhaps that's just the engineer (by degrees) in me.

Ms TabbyKats, parents are supposed to support their kids. So get it out of your head that support means a parent can claim a child. Look over the definition of qualifying child and you'll find that support isn't even in the equation (except that the child can't provide more than half his or her own support). The critical issue in who can claim a child is physical custody. If the child lives with Mom the majority of the time, Mom has custody. Only Mom can claim that child unless she chooses to sign the 8332. If a court orders her to and she doesn't, it's a civil matter. The IRS isn't persuaded by civil courts. We had clients last year who divorced in the fall and their decree ordered them to file jointly! Now which rule do we follow...the IRS one about marital status on the last day of the year or a civil judge who obviously doesn't know a thing about Title 26 (the Internal Revenue Code)?

Mac user in the house!!! Ask me anything related to running Windows or how to set it up. MAS

A group I avoid....lawyers. My "smart people PhDs and electrical engineers" are concerned with the size of the refund. One lawyer I dropped had a long list of charities ....and got upset because I used "&" instead of "and". Probably the best clients are of average intelligence with blue collar jobs....that think we're really smart....and would never challenge.

Only once. I ask them to come get their information and take their chances. Only lost 1 client. The following year he was back, with a CP200 and a look of helplessness. His fees are now double what they originally were. I do not have time to play games with people that insult my professional abilities by checking me with Turbo-Tax. If they have a question about the return, I am glad to answer, but don't use a cheap software to challenge me.

IRS regulations were never intended to be fair.

Well, yes, that's what I do. That's exactly what I do, other Rita.

"Time" is not one of the statutory factors for determining who can claim a dependent child. Various units of time may apply, such as days or nights or months or years, and qualifiers like normal or temporary, so assumptions are not reliable. It sounds like the divorce agreement was for the children to live with the mother. Before I would believe that didn't happen, I would ask for a detailed explanation that doesn't involve the divorce decree. I confess to being overly conservative on the point--in my experience, the father is almost never right.

Maybe this illustrates the difference between "snow" and "snow job."

I just look at them, while on the phone, and tell them: "I am getting paid $150 an hour whether you are on the phone or not" And then I lean back. Rich

Yeah, my guy that aggravated me taking a call from his boss the other day didn't threaten my ego, and I did other things. But he talked to his boss for 15 minutes about a project he is behind on. He didn't go in to work that day because of the snow and taking unnecessary risks and all. But luckily, he was able to get to my office and pace around for 15 minutes talking on his cellular. He was unable to step out and sit in his car because of the danger of an icicle falling on his head en route. Then of course, he took the time to explain it all to me. I really appreciated being in the loop like that.

The IRS looks to the parent who had the kids the most nights during the year. File on paper and tell your client to gather documents that show the children lived with him: report cards, doctor bills, even pages from divorce decree which carries no legal weight with the IRS but may help with their reluctance to believe the father had physical custody, letters from his church and neighbors attesting to the children with the father, magazines or mail in the childrens' names arriving at his address, his 2013 calendar with notes about after-school events/parent-teacher-conferences/doctors' appointments/all the things we schedule for our families, everything you/he can think of for 2013 so he'll be prepared when he gets a letter from the IRS. By the way, a letter from his lawyer to hers might cost only 15 minutes of the paralegal's time and make his ex think twice before filing for 2014, unless she has more money than him to spend on lawyers and enjoys being the defendant in a lawsuit.

So if you left a dirty $10 bill in your trousers and it went in the wash, would it be best to dry it and reuse it, or just throw it away? After all, you probably have plenty of other $10 bills lying around somewhere.