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The most important thing to know about preparing trust returns is this: YOU CANNOT PREPARE A TRUST RETURN WITHOUT HAVING A COPY OF THE TRUST DOCUMENT. This includes knowing what all the assets of the trust are, and seeing title to them, so that you know what goes on the trust return and what goes on the final return of the decedent. Never take the word of the family on what is and what is not in the trust. They usually don't know and they have probably never read the trust document or seen the title on any of the assets. Tom Newark, CA

And, those expenses do not duplicate on Schedule A. Those expenses were paid with pre-tax monies. They do not create a Schedule A medical deduction. They do get reconciled on Form 8889 where they keep the corresponding amount of the HSA distribution from being taxable income.

I had given out my cell when I went out on my own, but quickly found out I could have a second line from Optimum for only $14.95/month bundled with our house phone, TV, and internet (actually, hubby noticed that on the bill). So, I weaned most of my clients off my cell to my office line with all the voice mail, call waiting, caller ID, voice messages sent to my email, etc., services. I had a couple of holdouts. But, if someone called my cell, I returned their message from email or my office phone. I did not call back anyone who didn't leave a message. Now, as you say, I have a few who text. I don't like it, because it's not as easy to save to their file on my computer, and I don't like texting back with my old eyes. But, when I re-printed my biz cards, I added a line for Txt and my cell # after the lines for Tel and Fax.

HSA contributions are deducted in the year paid on line 25 of form 1040. HSA distributions are reported on form 8889, from form 1099SA, on line 14a. You have to ask the client if the entire amount on 1099SA was used for qualified medical expenses. If their answer is yes, then enter the amount on line 15 of form 8889 and you're done. If not, then ask them how much was used for qualified med expenses and enter that amount on line 15. The remainder will flow to line 21 and you might need to consider the additional 20% tax. There is no annual netting of contributions and distributions. The HSA account prior year contributions can be used in subsequent years, so it's possible to have a larger distribution in one year than contributions in that same year. The HSA distribution is not reported on Sch A as medical expense.

Oh, wow, you're welcome, I just thought I'd say something because of the cricket sounds. Yes, if aunt is reporting the whole ball of wax, I would use Sch F for her. Absolutely. And I would do more favors for people if they'd put me in their will, just sayin.

TW links to the 8889 from line 25 of the 1040, where I can back the payment out with the expenses. I hope this helps.

As in most all things tax, it depends. Was an appraisal done for the estate (inheritance) tax return? Is the house located in an area of rapid inflation or deflation of real estate prices - and yes, there are still pockets of areas where this goes on? If real estate prices have been stable and no appraisal was done, then your approach sounds solid. Be sure, however, that it is a true inheritance. Clients like to throw that term around even when the house was actually gifted to the children. Just sayin'

I agree totally and you should follow this suggestion

When a trust is irrevocable, it is its own person/entity. Someone else's death does not change things inside a trust. If it had always been irrevocable, there never would be any steps-up/down. If the trust was revocable until the father died, then the trust "was" still the father and not a separate entity, reported on father's tax return, until the DOD. So, when the father no longer existed, the trust became irrevocable and all the assets stepped up/down as they passed from the father/revocable trust into the separate entity/irrevocable trust. Only the beneficiary changed when the mother died. No assets of the irrevocable trust moved out of the trust/moved to the son; they remain in the irrevocable trust. The trust did not die. You will need to read the trust document, though. There are as many ways to set up a trust/intertwining trusts as there are trusts.

But I'm not sure we're there yet: https://www.irs.gov/publications/p970/ch08.html#en_US_2016_publink1000178534 Taxable earnings. Use the following steps to figure the taxable part. Multiply the total distributed earnings shown on Form 1099-Q, box 2, by a fraction. The numerator (top part) is the adjusted qualified education expenses (AQEE) paid during the year and the denominator (bottom part) is the total amount distributed during the year. Subtract the amount figured in (1) from the total distributed earnings. The result is the amount the beneficiary must include in income. Report it on Form 1040 or Form 1040NR, line 21. Just remember to include room and board in the AQEE.

I prepared a return last week - married couple with 5 kids. They are receiving a federal refund of $12k and a state refund of $60. He called today wanting to know how they came out. When I told him he said, "Why I am only getting back $60 on the state?" WTH, are you serious!?!

I swear practitioners of this trade should be automatically awarded full membership in the American Board of Psychiatrists and Bartenders. The clients are actually much more interesting than their tax problems. Last week I argued with a guardhouse lawyer (specializing in W-2 forms) who demanded to claim two kids living with his sister for his EIC since she had told him "I've got five, but I only need three for that "UNearned Income Credit" and you can have the other two." He left complaining two perfectly usable kids were "going to waste." March is more interesting. Heavy-lifting returns started two weeks ago and it brings out some amusing characters. #1: 1099-B: What can I do about this? BB: Nothing. You bought $10K stock back in '01, you sold it for $48K this year, you owe tax on the difference. #1: No, not THAT. I mean your $300 fee! BB: #2: Elderly clients had to cough up $5K for taxes/estimates. Very grouchy about everything - quite stern and chit-chat does not appease them. To wrap it up, I make out payment envelopes for their convenience and (to make sure it gets done) put stamps on them. Whole mood changes; they're happy as larks - never mind tax and my $600 fee - they've scored $1.88 in free postage. ____________________________________________________________ What a piece of work is a man! Shakespeare. --- Hamlet. Act II. Sc. 2 And how was your week?

Thank you all.

No. There is a general misunderstanding that farmers must file by March 1st. However they can avoid paying estimated tax penalties if filed by the March 1, provided that 2/3 of their gross income is from farming; that includes gross income from form 4835. Form 4835 is used when rent is based on production, such as a percentage of the crop sales or calves sold. The land lord shares part of the risk. In regards to the pasture rent, that would go on schedule E, unless the rent is based on percent of gain. That would be the case if tenant was grazing steers and rent was based on how much they gained. In that case 4835 would be used since landlord is taking risk. Percent of production arrangements usually qualities the property for special use valuation under section 2032A for estates. In regards to the pond work, it depends on whether is was routine maintenance or major overhaul.

The $4900 is ongoing maintenance and not an improvement. Besides, Land does not come under the 2% De minimus rule.

PS. The aunt is in her 80s and extremely chatty so it's hard to separate the wheat from the chaff in our conversations as she ignores my tax related questions or is foggy, but I know all about the local gossip. The nephew was a great source of explanation.

Almost by default, I'm moving to a single cell phone number for everything - business and personal. It's simpler and less time-consuming. Being able to identify the caller, plus assigning special ring tones to my family members, makes it easy to take a quick look at the phone before answering a routine call. I can decline calls which are out of context, knowing that if it's important they will leave a message. Having all the messages in one place is vastly simpler than having to keep track of a business answering service and a personal answering service. My drive time has become much more productive because I can call up the list of declined calls and decide whom I want to get back to while sitting in traffic. For me, though, the key communication tool is becoming texting. It's more efficient than email, and someone who thinks before texting can compress a vast amount of information in a simple message. That saves the option of actually speaking with someone (or even composing an email) for the truly important communications. Also, I remain convinced that anyone who wants to remain in this business (especially if your growth depends upon bringing in new clients), had better become comfortable with texting. Otherwise, you can write off 80% of the young people entering the work force today. They will never become your clients.

Question answered before this -- BUT -- as a different thought --- do you think the IRS will redefine this when the "land bridge" comes back between Alaska and Russia? After all Russia would then be " contiguous" to the United States? Yes, it is that kind of week //// strange but fun /// so mine goes there too.

Possi...was just looking at the 8889. Thanks for clarifying that. Appreciate it.

Facts & Circuses!

It sounds like this might be one of those facts and circuses things. She is a permanent resident of the United States, so if she lived with her daughter in the US except for temporary absences, then she was a US resident. But what constitutes temporary absences in this kind of case? I don't know. If she has permanent resident status, and lived with her daughter 330 days out of 365, which is roughly 90% of the year, I might be inclined to count her as a dependent. But where is the line? 75% of the year or more? Over 50%? I am glad I don't have to figure this out for one of my clients right now.

And, traditional IRA with basis. A ratio. And, a pain during busy tax season. Charge for it !! (And, keep your calculations.)

Ah, very good. Sorta like the ole exempt savings bond Interest and education expenses deal.

Educate your client; and then let your client make the call, if his call sounds reasonable to you.

That's how I'd do it.

Client of mine goes to the Masters every few years. He says there are ALWAYS tickets available to buy on the street which shocked me. My wife's cousin did a corporate event at the Masters 2 years ago and confirmed - sponsors get a TON of tickets and whatever is left over get sold to the public. I've gone to the US Open 2x - eventually the Masters will happen but I'm not pushing it with the wife - we do an SEC football trip each season and she never complains. We generally always schedule vacations for May or September. Gotta go when everyone's kids are in school so that they aren't at our destination. Next summer the wife won't be able to get off work - I'm going BACKPACKING!!!!

As much as the IRS insists we round off to the nearest dollar, in their own instructions to forms, for instance, they themselves truncate. It leads to some silly letters like you mention from DC. And, clients have brought in letters saying they were missing interest from ABC, as an example, for sometimes large amounts like $123,456, when we reported $123,457 from ABC; the IRS is reporting a second amount from ABC was missing instead of just a mismatch of $1 on the one and only ABC interest. Time consuming. I even had a client bring in a letter stating they owed $0.00. It was obviously a less than 50 cents rounding difference that showed as $0.00 on that computer generated letter. I told her to ignore it, that the computer or a real person would catch it next month. Nope. At least one more letter asking for $0.00. So, I told her to write a check for $0.00 to mail in with the payment voucher from the letter. That did the trick!

I think I'd tell client that the people who program the DC computers have absolutely no common sense.

The virtual phone system I use allows recording. Must be memorialized in some manner. Easily resolves the "You told me to...", "I thought you said...", "You never...", and so on. Always have a record of your communication. Will not save grief, since some will still argue, but it will give you the proof of what you communicated.

@RitaB - is it also OK to kill the clients who call your assistant before dropping off papers, hand them to the assistant, call the assistant when they get back home to make sure the assistant still has them, and then call YOU the next day to make sure YOU got the papers from the assistant? If so, I'd like to lease a piece of your back forty for a client who desperately needs a Rita-hug.

Text to Joe: "Hi Joe. I heard your voice mail. Probably can't get back to you for a couple of days - too many appointments right now. If you'll text me the answer to my question, I can at least get your return back in the queue. Right now it's on hold until I get that info from you. Thanks, John": How's that? I'd be tempted to add "Rita already gave me permission to kill you if you don't respond."

You know when you text a client a very simple question and instead of texting back a very simple answer they call and leave a voice mail to call when you get a chance? It's ok to kill those clients.

After I bought a portion of another guys tax practice, I replaced the chairs that were in front of the desk. I went from straight back plastic chairs to some leather-like products from Staples. He told after seeing them: "What did you go and do that for? You don't want them hanging around!" I should listen to him. Rich

Jill, I think that most of us are looking at this as not that he is charging her rent, but that they are sharing expenses. If he had said I own the house, so you pay the electric and the cable bill as your share of the expenses, would you consider that as charging her rent? Basically, it seems to me that he is just saying you pay your part of the expenses by giving me a check, and I will write all of the checks to pay the bills since everything is in my name. But I agree with Pacun - you are closer to the situation than any of us, and if your feeling is that it is really a landlord/tenant situation then by all means report the income. But I think if I did that I would report it on line 21, and only deduct the expenses he can normally deduct on Schedule A.

I got a call yesterday from a client. Went like this: Client: Hey, I heard there's a new law that allows you to deduct everything you buy. Me: Everything? Client: Yeah, I got some emails that said they have passed some new law that nobody knows about. Me: Send me one of those emails. Client: This was some time ago, I probably can't find the email. Me: Oh, OK, let me know if you find anything on this. The kicker for this exchange is what the guy does for a living. He's an engineer in a really big power plant....

Your subject's funnier than mine (by the way, I like your Dr. Seuss quote very much), but regarding estimated tax I once inherited a new bank president as a client. I'd done his predecessor(a smart, reasonable man)'s return and he recommended me. The first year everything went swimmingly 'cause even though he made scads of dough he paid heavy estimates. Second year, same income, but, he had decided to forego the estimates (told me this a month before the deadline) and just go with the bank's withholdings. Highly P.O.ed at me and my projected high tax due, he asked "Why?" Told him "Well, see; if you make so much money then you're gonna have to pay so much tax and you did and you did not pay your estimates like you did last year. You still have all that paid-for rent property." He said "Well, so what? I've got banker friends who make the same as I do and they pay nothing; why should I?" I reply "Each case is different - your friends may or may not have things you do or do not have which can either help or hurt you." To no avail; he -- the town's leading financial wizard, advisor, analyst -- decamped and went off to, supposedly, greener and tax-free pastures. It's an odd thing; I've noticed over the years that the more money people make (usually starting around $100K) and the ego expands, the less tax they expect to pay -- as if success will or should provide an escape unavailable to mere mortals.

Ha! This place can be satire, vaudeville, slapstick, schtick, and hilarity all rolled into one. Not to mention the therapy value that comes along with it.

Sometimes I go to comedy clubs an pay for a few laugh-out-loud moments. But during tax season, I just visit this forum, see threads like this, and get more than my share for free. Thanks everyone.

Yesterday PIA client who calls me all year as if I were her brother has a 35K tax bill because she refuses to pay estimated tax reasoning that "something might change this year." No itemized deductions, but she asks me if her $30K implants she is getting this year will be deductible. I said no, unless maybe if you were an exotic dancer, it's really cosmetic. She argued with me back and forth for a few minutes until she said, "but I need them to eat." Then I realized she was talking about her teeth. At least we both had a good laugh.

client just emailed me to tell me that he will be sending his info next week. I guess he thought I was sitting around wondering when I will get his stuff.

I am going to stop telling clients the results of the return until I receive payment. The results are MY WORK and they should pay BEFORE they receive my work. I think people find out they are not getting thousands or owe and decide to let them set. We will see how this works.

Well, he and I both knew he'll likely be in heaven this time next year, so it really was the sweetest thing ever. But that other heifer...

A tale of two new clients. 1) Lady bitched about my $150 fee yesterday, which included searching property tax data to set up new rental and the sale of business property from closed trucking business. She always paid her friend $75. Always. Is this the same friend you told me always fixed up your return so you have never paid SS/MC tax and now you have no SS benefits? That friend? No, the new one. The one in FL who is not answering his phone, which is why you're here? That friend? Yeah, that one. 2) Retired gentlemen who came in three weeks ago, 88 years old, had a friend preparer with an actual PTIN who really screwed up his 2014 return nonetheless. I was sick when I saw other guy charged $40. I charged $150. Client wrote the $150 check and also handed me a $20 cash tip. He came in yesterday (which is not easy, he's pretty frail) to say, "Well, I got my refund check yesterday, just had to come by and tell you I'm now obligated to come back next year if you'll let me." I gave him a nice hug (not the one where I measure for the grave in the back yard), and said, "Well, then I am obligated to be right here waiting on you." "Yeah, buddy," he says. What I have to learn to do is think about the second client more than the first.

I have a lady (real nervous nellie) who has called twice a week for a month either talking my ear off or leaving long rambling messages with ZERO information. She dropped off some missing papers - put them IN my assistant's hand - then called me the next day to "make sure I got them" (no, my assistant used the paper as rolling papers because we now have medical marijuana here in MA and if YOU aren't a valid reason I don't know what is... but I digress, and I'm not serious about that). Her bill is going up $5 for EACH phone call. Now, the crazy lady who calls several times a week - we're lucky. She calls the trustees of her special needs trust (you see, she really *is* crazy) several times a DAY. They just pay our fee, knowing there is a hazardous duty portion tucked in there. And *we* are grateful not to them *them* dealing with her daily calls.

This week for the first time I am charging "Loitering Fees" for those that I am waiting on information. This is in addition to my "Numerous Telephone Call Fees" to the same people. For some reason this year I have about a dozen all with various excuses as to why they have left their returns with me in a nearly finished state for weeks, even a month. But it's my fault, I need to get tougher on them with higher penalty fees, not just a phone call saying, "are you mad at me?" or "did you forget me?" I'm thinking of going with "hey knucklehead, I gave you an easy task, I guess I can't fix stupid!"

"Unaffordable" is determined using the Affordability Worksheet that is part of the form 8965. If your client meets that test, code A would apply to this situation, and that code does not require any sort of exemption request from any Marketplace. I'm assuming that ATX has the worksheet and generates the "A" code if applicable information is entered.