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My 20-year client called this week, gonna sell her rental, adjusted basis about 20,000, for 90,000. Congrats! "I'll just make enough to pay off the heat and air unit I think. Just wanna know if that'll cause me to pay back SS benefits." Ummm. (I seriously had to sit there a minute, thinking, this is your one and only concern right now??) No, you'll get to keep em, but they'll be taxable. And I will be mailing you a pretend return so you can see how much of your heat and air conditioning money you best save up for yer tax bill. Love, Rita, EA (Even After 20 years they think if they say they didn't make anything my job is to tell IRS that.)

Posted February 7 · Report post ...a PROSPECTIVE CLIENT...Friday. Said he was single; gave me his docs (two W-2s, small pension, bank interest) which I plug in the computer and give him the refund amount. After a pleasant 20 minute chat I told him to come back in three days; he starts to leave, turns around, and says: PC: Oh, it don't really matter, but I guess I'm supposed to tell you - I sold a house last year. BB: Your house? Your personal residence? PC: Naw, my uncle died and left me his old, fallin'-down rent house. It wasn't worth but $10,000. BB: Oh, well, uh; we have to put that down. PC: No, no, it's okay. See, I let this guy have it for just what my uncle owed the bank on it. I put it on a land contract between him and me. BB: Well, we still have to.... PC: No, you don't understand. He cain't pay for it all at once, so I'm helpin' him out. He pays me exactly what the bank payment is ever' month and I turn around and give it to them until the $20,000 note gets paid off. I never get no money to keep and so I don't make nothin' off the deal. (My) Failing to grasp this irrefutable logic exasperated him. He guessed he'd have to go somewhere else where they knew more about taxes. And out the door he went. May 25th PC MYSTERY SOLVED (I THINK) Re: this guy (above) who had the inherited, run-down, under-water rent house – this week a lady I didn’t know stopped in saying her only income was social security and had not filed in years, but asking should she have filed and paid taxes on a $5K life insurance policy her uncle left her. The departed uncle part rang a bell -- turns out she’s the PC’s sister. While glad to hear no tax was due, she complained bitterly about ungrateful Unk leaving his old rent-house to her brother instead of her. Claims she did lotsa stuff for the not-so-dear departed, conniving bro did zilch, and it was a damned outrage she didn’t get the house too. I said she probably got the best of the deal considering the liability (I guess that’s okay to say since he isn’t my client and paid me nothing). She said “What liability? Uncle XXX paid that house off years ago! My brother sold the house to some dope who watches those TV fix-up and re-sell shows and is paying off a big note that my brother owes the bank.” I swear, sometimes I think we independents attract more blowflies than honey. I know (well; I think) he would not have approached HR/JH with this story and I guess they lump us in with the kitchen-table crowd (25 bucks-all comers). Probably thinks that my "EA" means "et already".

The Office of Management and Budget (OMB) released President Donald Trump’s proposed FY 2018 budget for the federal government on Tuesday. Included in the proposals are several tax items, including a proposal to authorize the IRS to regulate all paid tax return preparers. http://www.journalofaccountancy.com/news/2017/may/trump-budget-tax-proposals-201716729.html

Personally, I would prepare the amended return to see if there is a refund after changing the status. If there is, I would file the SS8, including the DOL letter, and then file the amended return showing the SS8 application and the DOL letter. I would not want the statute to run out on a refund. If the amended return shows a balance due, I would probably advise the client to file the amended return but leave it up to them to decide. Tom Newark, CA

Easytax, thanks for pointing out that it was a DOL determination. I know, I know, it was in the original post but by the time I got back to this and answered, I didn't go back to look at Catherine's original post Sorry, Catherine. I don't have anything else to add to what Ed posted.

All the above are good references and suggestions //// for WHEN the IRS notifies your client of reclassification. Until then, the DOL has no status for tax matters. Think of it as if a "court" had ordered something for a divorce, IRS does their own thing! Action to take is AFTER IRS notification , anything done before then will simply confuse the issue and make it take longer overall. By the way, the DOL and IRS do "talk" on matters such as employee reclassification. There is a push on by the DOL for a lot of reclassification due to their broader definition of employee vs ICC. They basically use a financial circumstances definition to ensnare more entities into employee instead of IC. Reason being (my opinion) easier to collect taxes due from employer than from multiple IT'S.

I have never dealt with this issue when the DOL made the determination or for an employee that was notified of the reclass. I briefly searched and found this page on the IRS site, 2nd to the last item seems to cover the situation. Check this out and form 8919 too. This IRS page has similar info too.

Thank you @Catherine & @Lynn EA USTCP in Louisiana for your responses! For some reason, I could not find any information about system maintenance online.

CPAs and EAs have complained forever that half of the issues on their tests are things they will never, ever see in practice. Probably true, but you never know. I'm sure I forgot a lot of these things that I "learned" studying for the SEE, but guess what? Every so often an issue comes up and something in a hidden brain cell tells me there's a rule for that. Then at least I know to look it up. So, while some tax areas may seem remote and you'll likely never encounter them and will forget the details, knowing that they exist may be helpful someday. I am resigned to the fact that the industry needs regulation. We have all seen the shady and/or stupid things that some tax "pros" produce. And we've all have potential clients walk because they didn't like the result. Where do they go? Back to the jerk who lets them deduct commuting miles, "uniforms that consist of jeans or black pants, nonexistent education, you name it.

So you had yourself one GREAT escape, didn't you?