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Lenders are NOT supposed to issue that 1099-C unless and until they have disposed of the property, and have decided that further waiting to collect on any balance owed is not in there interests. Only then can they know exactly how much debt they have forgiven, and so issue the 1099-C. One of the recurring issues with those 1099-C's is specifically that banks refrain, oftentimes for *years*, from issuing them as they have not made a final disposition of the property and/or have not made a final decision not to pursue repayment options. One can certainly look up (on Zillow, in public county records, in online town records) the price at which a foreclosed house sold. These are all public records. If the house hasn't been sold, there is no basis on which to issue that 1099-C. If it has, then if it sold for the outstanding balance owed to the foreclosing bank -- or more! -- there is also no cause to issue a 1099-C, ever (we set aside here the case of multiple loan issuers on one property). It is only when a property is sold for LESS than the loan balance that there is any call for a 1099-C. And that 1099-C is supposed to be for the difference between the outstanding loan balance and what the property was sold for. Certainly it bears scrutiny that there might have been additional loans on this property. But on the surface, it sure looks like the bank (1) jumped the gun in issuing that 1099-C, or (2) issued it for an incorrect amount. Plenty of folks working in banks who don't understand these intricacies; could have been as simple as a worker misunderstanding an instruction, or covering for someone else and unwittingly working past their level of competence.

I would carry a solar calculator. And a mechanical pencil.

Me: "Ummm....In my professional opinion, it is because you are single with no dependents and, according to your W-2, you are claiming 12 exemptions....and thus, having almost zero Fed taxes withheld from your pay." Stinky Sam: "Oh yeah...I did do that...needed money to by me a home-brewing kit...last Spring...guess I forgot to change it back". "I guess now I gotta pipe the pooper." Me: "You mean pay the piper" Stinky Sam: "No....pipe the pooper....I gots a clog in my porcelain alter...time to get out my snake" "Later Bob!" Some days, I think I have it all figured out. Other days, I'm just glad my pooper is not clogged.

If carrying tools will make the rule, I would always carry 2 screwdrivers from my company and decuct all my miles.

Hey, Friday, I was terrible to a client. He's a computer programmer who just doesn't have time to pay his bills or do taxes, apparently. When he picked up 2012 in December, I let him out of here without paying, been doing his return for years, not worried. Well, when he dropped off 2013, I reminded him he hadn't paid for 2012. Then, when he picked up 2013 he said, "Hey, that's a better refund than I thought," and was about to leave without paying. I said, "Yeah, it's awesome, but you haven't paid for 2012 or 2013, and I'm not in business to make friends, so pay up." He laughed till he was crying. Whew, I was glad, cause I just opened my mouth and that rolled out. No filter whatsoever.

From Pub 463 Hauling tools or instruments. Hauling tools or instruments in your car while commuting to and from work does not make your car expenses deductible. However, you can deduct any additional costs you have for hauling tools or instruments (such as for renting a trailer you tow with your car). Print it for the client. If he does not accept it, give him his stuff and say "goodbye".

LJ: My deepest sympathies as well. That is a real burden to carry. What do you need assistance with? Review? Input? Assembly? If you need input help, if your are scanning backup info into PDF, you could send a copy of that plus last years ATX file and tax returns, an then one of us could input that info and return a completed tax return via export to you. Just negotiate the fee... per return, etc. Review? Sorta the same thing. Assembly, well, we have to be in the office for that Think it thru. Some one can help. Rich

I have two clients who never have money to pay me but the day their refund hits their banks, I get a desperation call from them asking me where I am because they want to pay. The first year they paid while in the office but the second year they started paying me when they get the refund and they have done it for about 6 years. The first year they didn't have any money to pay us, my partner was going to start a sermon and I immediately said "No problem, you can pay us when you receive your money". That was the best sentence I have ever used and now I have at least 10 clients coming from referals from these clients. Honestly, I trust all my clients. If I don't trust them, then I cannot prepare their taxes, correct?

And if you all want to pay me $1 or $2, I will report the income, pay the taxes and not gripe (much). Promise.

The 1099-C instructions disagree with that. Box 2. Amount of Debt Discharged Enter the amount of the canceled debt. See Debt Defined and Exceptions, earlier. The amount of the canceled debt cannot be greater than the total debt less any amount the lender receives in satisfaction of the debt by means of a settlement agreement, foreclosure sale, a short sale that partially satisfied the debt, etc. If I owe the bank $500k and they foreclose on $200k property they should be issuing a 1099-C for $300k. Total debt less any amount the lender receives (the FMV of the home) through foreclosure. Table 1-1 in Publication 4681 does the calculation in how much is ordinary income and how much is COD income. FMV of property can affect both of those calculations.

Just this week I received a check in the mail from a client whos taxes I did this time last year. She did not pay then and moved from Ohio to Florida...So I figured I'd seen the last of her and that I would never see that payment. Surprise! Check in the mail with an apology note. She also gets points for being smart enough to move from Ohio to Florida.

Yes, this is our model. We close out all tax returns with our clients. When they sign the return, it says: Under penalties of perjury, I declare that I have examined this return and accompanying schedules and statements, and to the best of my knowledge and belief, they are true, correct, and complete. I personally would not sign that without going over the contents with the person who prepared it, so this is our approach with our clients. Yes it takes longer, but we believe it is the right thing to do. I also recognize we are in the vast minority of tax professionals by adopting this practice.

Using part of the home for storage would give them a home office, true. That wouldn't change the commute miles though - the home office needs to be considered your principal place of business in order to make the transportation expenses deductible. Storing goods would just give you some deductible home office expenses, no miles. For an employee you also have the for the convenience of the employer test. It's a good idea for the taxpayer to get something in writing from their employer.

These things *usually* begin with, "Here, hold my beer and watch this!"...

Well, his mother just picked up his tax info and she stated that he just wants to show the 1099 to the lawyer. It appears he may be returning. I informed her that depending on when he comes back he may need to file an extension. Im sure that lit a fire under her butt. Needless to say I didnt charge anything and was nice as could be. I should have taken up acting.

http://www.slate.com/articles/life/food/2014/03/united_steaks_of_america_map_if_each_state_could_have_only_one_meat_what.html Delaware - scrapple. Yeah, you don't want to know. It could have been chicken. We have tons of chicken processed here downstate thanks to Perdue.

ESPECIALLY APPROPRIATE IN TAX OFFICES THIS TIME OF YEAR.

Well, I thought my post about why the hell would you put $400K income on a $200K transaction was pretty good, too, but I didn't get any love from you on that, JB.

Catherine...that explanation was brilliant.

Rita...you're right on target. Most of my intereaction now takes place through email. I still have a good number of folks who stop in to see me personally but the majority is through email. I send my clients a copy of the final return through a secure pdf. I ask them to review it and to let me know if there are any questions or concerns. Included in the email are copies of the respective 8879 forms with instructions to print the 8879's sign and return them to me. Once I receive the signed forms, I normally wait at least until the next day to efile. Just want to allow for a bit of a cushion in the event anything "pops-up."

I think we agree on the $199,000 depending on why the bank sold it for $1,000. Usually what happens is the bank forecloses and auctions off the home and takes the best offer they get. In which case the sale price and FMV are probably close enough to call the same. They're not going to get the Zillow estimate price in a foreclosure auction but the house probably isn't fixed up nicely like it would be in a regular sale. So that sale price is probably a good number to rely upon for FMV. And there certainly could be situations in which a $200k house now has a FMV of $1,000. If the prior owners used it as an unofficial hazardous waste dumping site that someone will have to pay significant money to clean up for example. So if $1,000 is the best they could sell it for, sure that could be FMV and $199k of cancellation of debt makes sense. If on the other hand someone at the bank liked the house and thought it would make a nice gift for their nephew and convinces someone at the bank to sell it for $1,000 instead of going through a public auction that $1,000 sale price is meaningless. I still believe the 1099-C should show the write off amount for the bank, but I don't believe the write off amount for the bank should be $199k. If that house was worth say $150k the fact they sold it for $1k doesn't give them a $199k write-off. The write off would be the difference between what was owed and what they could have sold the home. The $149k is probably compensation to someone if they sold it to an employee for $1k. I think the situation you're getting at is where I have a house worth $250k and get a 1099C for $350k. Can I subtract $250k from the $350k because $250k is the FMV? NOT ENOUGH INFORMATION! If the 1099-C is correct, the answer is NO! Based on the value of the home and the 1099C my total debt was probably $600k, as the issuer of the 1099-C is required to reduce debt by amounts received (the house) in determining the cancellation of debt amount. Which would also be write-off amount for the bank as you point out - they sell the house for $250k they write off $350k. This seems to be a common mistake made by taxpayers - they assume the 1099C is showing the total debt rather than the cancelled amount (or write off amount). The problem is, what if the 1099C is not correct? What if total debt owed to the bank was $350k, the bank sells the house for $250k, and they then issue a 1099-C for $350k? That 1099-C is wrong, flat out. I would no more report $350k of COD income on the tax return than I would include all the income from a W-2 that had an extra 0 on the end in error. If the form is wrong the form is wrong. What actually happened is what is what matters. Table 1-1 in IRS Publication 4681 is very good for calculating the COD and gain/loss amounts for a foreclosure. I've never run into a situation in which it didn't work. I've seen it used incorrectly, sure. For example with 1099-C where the prior preparer assumed the debt cancelled was the total debt owed and in fact the 1099-C was correct on that one, so they significantly underreported income. If you know the correct total debt and the FMV the table works though.

Where were you deducting the taxes paid or interest paid on the time share property, Sch A, correct? So it is a personal loss, no deduction.

1099-A Box 2 = 200K, Box 4 = 200K 1099-C Box 1 = 200K Yes, the debt is 100% acquisition of the house. Yes, the house is worth $200K. Yes, the debt was $200K. Yes, the lender has the house. No, the taxpayer does not have the house. The sales price of the house on Form 4797 = $200K. If you also enter $200K on Line 21, cause the lender is apparently writing off $200K at the same time they took back a house worth $200K to satisfy a debt of $200K, your soon to be ex client has no rental house and a $70K tax bill. You have entered $400K income for a $200K house. $200K on Line 21, and $200K on the 4797. This is not the best accounting work you have ever done. Yes, I can use Form 982 incorrectly, as it is supposed to be used to exclude gain and there is no gain on this deal, no matter what the 1099-C says, but I hate half-assing things. I would prefer to subtract the $200K off Line 21 with a statement saying, in essence, "The 1099-C is wrong."

No pay, no return. I use FeeCollect too. Only lost out once in 10 years when the IRS grabbed the entire refund for delinquent Student loans. I now despise "injured spouse" forms. The way people use it does not fit my definition of being married. (rant over)

Your original quote was "I don't see where anyone is being harmed by this, even though it may not be permissible." which is what I was replying to. I would agree that they don't care whether I am being harmed, but if they have a regulation on this, they should either enforce it across the board or drop it so everyone can swim in the same pool.

I feel lucky! One of the few times I'm glad a client cancels is when they call and say they are turning back toward home because husband became ill on the way and actually had to stop at a gas station to throw up. The wife made a second great decision when she agreed to let me mail them the returns.

Oh, good, all her questions will be answered if the lawyer sees it.

I am getting in a canoe and paddling for the islands right now. Tom Hollister, CA

OMG...thanks jasdlm and Jack....I've been looking at this a certain way and refusing to look outside my own small view/opinion. They are only living in Kansas because that is where he is stationed.....DUH....they did not just decide on a whim to move there to see Dorothy and Toto. So I guess I would file a Joint KS state return and list his income as not taxable since he is nonresident and get refund of the KS tax that was withheld from spouse's pay I'm assuming there is a non-resident KS form or section of the KS return to state non-resident.

I am so sorry to hear of your losses. I am in Hollister. Work my day job in Gilroy. My wife Patty is a CTEC preparer as well. She may have 1-2 days a week to work for you if that could help. She is in our Lodi office Tues and Wed. We travel to Lodi and Fresno on Saturday's. But we may be able to give you enough help to get you through this tough time. Distance is very managable for us. Let me know if you want to go to lunch and discuss. I work right off Leavesly Road in Gilroy. We could meet at Black Bear Diner, Denny's or Chevy's. Send me an e-mail or PM me if you are in need. Thomas R. Carlson, MST, EA [email protected] (831) 635-9414

Sorry to come in so late to the party, but I think Catherine is right on the money. I see it as two different possible explanations: 1. The bank did not sell the home, listed the FMV and issued the 1099 in error 2. The bank did sell the home for 200K and issued the 1099 in error. If this were my client, I would ask them to call the lender and get an explanation, and try to get them to correct the 1099 (yeah, I know, good luck with that and let me know how that works out for you). But it is part of the due dillegence process before you advise your client to take a position on a tax return. If the lender is not taking calls or is uncooperative, then a call to a congressman up for re-election might help. If it was my client and they could not get a clear explanation from the bank, I would show the home sold for 200K as per the 1099A, and include the 1099C on Line 21, and then zero it out on line 21 as well with an explanation "incorrect 1099 issued by bank". Document the position, wait for the letter, and explain it to the IRS in 2 years. It seems very strange to me that the dollar amounts were exactly round numbers? Is that you just making up numbers for illustrative purposes or was the exact FMV listed as $200,000.00? Just my take on this. Tom Hollister, CA

Just had this issue this past week. T/P with 2012 return. I made four appointments with him, that he broke, to get the 2012 return done. Now, he wants to redo the mortgage with the bank. Now he is hot for the 2012 return to be completed. Phone message after a week: "Rich can you send me the return! I need it!" I get it done, create the bill, and have my office manager call him and leave a message: "The return is complete, the fee is $360 and Rich needs a credit card number" He calls me back the next day... "Rich what's up with that?" "I get paid at time of service, not when its convienent, what the numbers?" And then I sent the return info out. Screw em. Rich

Only time it could be deductible would be if it was used as a rental property, and reported on Sch E. A very rare situation.

That's a bit like saying we can't dispute, appeal or control the employers process in determining the amount of wages to report on a W-2. If a W-2 is incorrect I'll continue to dispute that W-2. I'll continue to rely upon IRS guidance in IRS Publication 4681 in determining the amount of ordinary income and gain/loss. I agree to disagree.

A redneck would NEVER wear a hat like that !!! Not even drunk......

Yesterday we were talking about this with my partner. We had a client who paid about 40% and then said that he was going to pay us the rest on "Monday" (maybe he will come back). My partner said "We lost that money and we worked for nothing". I said, "not really", "we already covered our fixed and variable expenses so that 40% is enough and it is a profit". I explained to her that we already have the knowledge, the computer, the software and that 40% was plenty for the time we worked. I went on and said we have 10 clients who don't have money to pay us but they are smart enough to stick with us and not go to HR block and their fees deducted from their refunds (no RALs in my office). Even if 1 of them don't come back to pay us, we are still ahead on the game. Sometimes, you have to read between the lines!

First of all I thought your title was: ERIC and Alimony. I think you are confused. Let's say that a person who collected 15K in alimony and has no other income, this person would not qualify for EIC credti because this is not earned income for EIC. This doesn't mean that alimony income will not jump her out of the range of EIC

Hi, JB. I live in Kansas. Do you know what County she lives/works in? Return will be a part-year return, of course. Schedule S is the form you will use to back out the income from the time frame she lived in Ohio. Is she W2 or Schedule C? Kansas has a new law in 2013 where 'business income', rental income, entity pass-through income, etc. isn't taxable. Let me know your questions as you run across them. We'll get it worked out. Bart is in Missouri, but I believe he does a large number of Kansas returns, also.

Even though I disagree how the tax $ is spent in our country I am here to uphold the tax law.

Hauling tools is nice, but does not make commuting miles deductible. I hear this one a lot. Out of one guy. Every. Year. I guess he thinks I will change my mind. http://www.irs.gov/publications/p463/ch04.html#en_US_2013_publink100033923

New York U.I. Audit is not the same as workers compensation audit. Here is what is involved: Auditor WILL visit client worksite as part of the audit program. You cannot prevent it. There they will observe number of employee working. They will also look for weekly work schedule posted and they will copy name listed on that schedule. they will look at general ledger/ tax return, quarterly payroll return and most definitely they want bank statements. Paychex/ADP do not handle this type of audit for their clients. I had several NY U.I audit and this is the standard operating procedure that they have followed. Naveen Mohan

The Service has consistently held that compensatory damages, including lost wages, received on account of a personal physical injury are excludable from gross income with the exception of punitive damages. Rev. Rul. 85-97, 1985-2 C.B. 50, amplifying Rev. Rul. 61-1; see also Commissioner v. Schleier, 515 U.S. 323, 329-30 (1995), in which the Supreme Court used an example of an automobile accident to illustrate in this employment discrimination case how “on account of” in IRC § 104(a)(2) is construed. In the example, the Court held medical expenses (not previously deducted), pain and suffering, and lost wages received by an accident victim are excludable from income as “on account of personal injuries.” Schleier, 515 U.S. at 329. Punitive Damages Punitive damages are not excludable from gross income under IRC § 104(a)(2). With the enactment of SBJPA, Public Law 104 -188, Section 1605(a) in 1996, Congress made it clear in IRC § 104(a)(2) that punitive damages are taxable, regardless of the nature of the underlying claim. Non-Physical Injury or Sickness Prior to the amendment of August 20, 1996, the Service and the courts consistently interpreted IRC § 104(a)(2) as providing an exclusion for damages received in connection with claims of mental and emotional distress which arose from non-physical injuries. Examples of these type cases are employment wrongful discharge, discrimination, libel, etc. Please refer to Chapter 3 section on payroll and self-employment tax considerations for a discussion on FICA, FUTA, RRTA and SECA on back pay, lost wages, lost profits, etc. received in a lawsuit award or settlement. The August 20, 1996, amendment has plainly resolved this issue on the side of the Government. With the exception of amounts paid to treat emotional distress, damages received after August 20, 1996, are excludable under IRC § 104(a)(2) only if received on account of physical injury or physical sickness. Therefore, a taxpayer receiving lawsuit proceeds from a non-physical injury claim cannot exclude any amount for payment to compensate for an intangible emotional distress value. The taxpayer can only exclude an amount for actual out of pocket medical costs. This exclusion would further depend upon whether the taxpayer had previously deducted those medical expenses on his or her tax return. See IRC §§ 111 and 213. I'd suggest sending a copy of this snips [from the IRS Lawsuits, Awards, and Settlements Audit Techniques Guide] to both the client, client's Mom, since he already involved her, and the lawyer, if you know who that is.

Again, I am new at this. I don't have a clear understanding as to why I would file a 1040 which is a US resident return for someone who is no longer a resident of the US. I am not really sure if there is a filing requirement at all. The 1099R has 10,000 distribution. Thats it no other income and no other deductions. Simple as can be but I want to be sure the correct form is used. KC, thanks for the link for the ACA and the info.

Yeah, that would bother me, too, but I think you'll be a winner if you just give him back his stuff and say, "Sorry it didn't work out. I'm here if you need me later." Then curse a lot after he leaves. He may just come back, but for sure, he'll bad mouth you all over town if you charge him. Nobody that's not self-employed understands.

If all of you don't pay me $2, then I'll have an even bigger loss.

if all of you don't pay me $1 then I will have a big loss this year, Yah, no taxes to pay.

OMG I love these! Especially 11 and 19.

An incredible discovery that was recently made in Russia threatens to shatter conventional theories about the history of the planet. On Mount Shoria in southern Siberia, researchers have found an absolutely massive wall of granite stones. Some of these gigantic granite stones are estimated to weigh more than 3,000 tons, and as you will see below, many of them were cut “with flat surfaces, right angles, and sharp corners”. Nothing of this magnitude has ever been discovered before. The largest stone found at the megalithic ruins at Baalbek, Lebanon is less than 1,500 tons. So how in the world did someone cut 3,000 ton granite stones with extreme precision, transport them up the side of a mountain and stack them 40 meters high? According to the commonly accepted version of history, it would be impossible for ancient humans with very limited technology to accomplish such a thing. Could it be possible that there is much more to the history of this planet than we are being taught? For years, historians and archaeologists have absolutely marveled at the incredibly huge stones found at Baalbek. But some of these stones in Russia are reportedly more than twice the size. Needless to say, a lot of people are getting very excited about this discovery. The following comes from a Mysterious Universe article… Alternate history buffs are about to be whipped into a frenzy! OK, maybe not, but they will find this interesting. An ancient “super-megalithic” site has been found in the Siberian Mountains. Found recently in Gornaya Shoria (Mount Shoria) in southern Siberia, this site consists of huge blocks of stone, which appear to be granite, with flat surfaces, right angles, and sharp corners. The blocks appear to be stacked, almost in the manner of cyclopean masonry, and well…they’re enormous! Russia is no stranger to ancient megalithic sites, like Arkaimor Russia’s Stonehenge, and the Manpupuner formation, just to name two, but the site at Shoria is unique in that, if it’s man-made, the blocks used are undoubtedly the largest ever worked by human hands. When I say that this is a new discovery, I am not kidding. In fact, the very first expedition to study these stones happened just a few months ago. Prior to this expedition, there were no known photographs of these megalithic stones. Archaeologist John Jensen is mystified by these ancient ruins, and the following is an excerpt from a post on his personal blog… The super megaliths were found and photographed for the first time by Georgy Sidorov on a recent expedition to the Southern Siberian mountains. The following images are from Valery Uvarov’s Russian website. There are no measurements given, but from the scale depicted by the human figures, these megaliths are much larger (as much as 2 to 3 times larger) than the largest known megaliths in the world. (Example: The Pregnant Woman Stone of Baalbek, Lebanon weighs in at approximately 1,260 ton). Some of these megaliths could easily weigh upwards of 3,000 to 4,000 tons. The super megaliths were found and photographed for the first time by Georgy Sidorov on a recent expedition to the Southern Siberian mountains. The following images are from Valery Uvarov’s Russian website. There are no measurements given, but from the scale depicted by the human figures, these megaliths are much larger (as much as 2 to 3 times larger) than the largest known megaliths in the world. (Example: The Pregnant Woman Stone of Baalbek, Lebanon weighs in at approximately 1,260 ton). Some of these megaliths could easily weigh upwards of 3,000 to 4,000 tons. Another very unusual thing about these stones is that they caused the compasses of the researchers to start behaving very strangely. Here is a link to the full article, which includes lots of pictures as well. http://www.dcclothesline.com/2014/03/11/newly-found-megalithic-ruins-russia-contain-largest-blocks-stone-ever-discovered/ These stones are likely to remain an unsolved mystery for a very long time. But what is abundantly clear is that according to the commonly accepted version of history they should not be there.

Agree 100% but these people don't want anything mailed. They want to pick them up, and that's why I'm going to suggest paper filing right from the start, to avoid the possibility of one or both of them rejecting.

If the tax program pops up while you are on a different screen, any keystroke you do will be entered in the very first field which happens to be the first name. ATX has a propensity for popping up when you least expect it. I have had this issue often for the last few years. While I am waiting for ATX to process something, I work on another program. Then the 1040 pops up and I am suddenly typing in the tax return instead of the program I am working on. It is more prevalent since I use two monitors.