Leaderboard

Prayers for you all! May evacuations go safely and swiftly, and may you return to find your homes and belongings intact.

Christian, just about all schools report the amount billed instead of the amount paid. When the Hope credit started in 1998, the schools complained that they couldn't get their systems ready in time to show amount paid. Two or three years ago they were given a one-year deadline to begin reporting in Box 1, but they whined some more and got another extension. Beginning in 2017, they finally have to comply. If it takes our institutions of higher learning almost 20 YEARS to figure out how to do a simple programming change, I have to question whether they are capable of teaching their students anything. At any rate, our lives should be made easier starting this tax season with Box 1 filled out. You still need transcripts in the event of 529 distributions though. Earnings on plan distributions are tax-free if used for qualifying education expenses, but not the same expenses used for the education credits. However, payments for room and board count as allowable expenses for plan distributions (but not for the credit). Books are allowable expenses for both but won't be listed on the T. Let me try an example. Client withdraws $10k from a 529 plan. Tuition is $5k, r&b is $4k, and books are $1k. The ed credit uses $4k of the tuition payment. That leaves only $6k to apply to the distribution and thus a $4k excess distribution. The earnings on that $4k is taxable but the penalty is waived because otherwise qualifying distributions were used for the ed credit. You calculate the earnings on the $4k by first calculating the ratio of earnings included in the distribution (Box 2 divided by box 1 on the 1099Q). Apply the resulting percentage to the excess distribution to determine how much of it is earnings and must be reported as taxable income. The IRS may still demand proof, which you will get by supplying the school's financial transcripts (which show r&B, which is not on the T), book receipts, and your calculations. Good luck with those receipts. Today's plastic generation does not know what a paper receipt is, so educate your clients who will have a college freshman in the fall to demand them. I am sorry to go into so much detail, but your statement " In any event the client had enough money in basis in his 529 distribution which was paid toward tuition to qualify him for the credit" suggested you didn't get that you can't apply just the basis to get a tax break. Each distribution contains both basis and earnings and you have to pro-rate the amounts applied toward each break. This is not a witch hunt but has been a focus of the IRS for a couple of years. Last year we had a half dozen or more such letters, including for clients who made too much to take the credit.

Another option is to refuse to respond at all. I fired a chronically late problem client *after* sending him a "drop-dead date" by which I needed to have ALL materials from him. I gave him several weeks' advance notice, and waited a week *after* the date to hear from him. Then I sent the "you're fired" letter and *instantly* got a scathing, nasty, "how can you leave me in the lurch like this" response. I did want to respond - with a Rita-hug. After conferring with my assistant, I decided to wait a week and see if I still wanted to respond. Within that week, I got a call from another accounting firm, wanting to transfer records. I made *them* get the Section 7216 disclosure. Then I sent everything they requested, with an admonition to them to get paid first and to be stone-cold bastards about deadlines with this guy. My mistake from the get-go was to be lenient. But then, he was a hand-me-down client from a retiring colleague who had told me he was always a little late but always came through. The client took that leniency and over more than a decade turned into a real problem. The new folks were very grateful for the advice.

Chad, Welcome to the board and don't take it personal. Jack hates everyone and lets them know right away. Tom Newark, CA (Until tomorrow)

I agree with Sara. She said it all, but since I've been working on this forever, I'm posting it anyway. If you're going to exclude the earnings in the 529 distribution from income, you have to use the entire distribution toward this purpose. Let's say your earnings are 20% of the account and you withdraw $5,000. To exclude the $1,000 of earnings from income, you have to apply $5,000 of your education expenses to the $5,000 distribution. You can't withdraw $5,000 from the 529, exclude the $1,000 of earnings from income, and use the $4,000 of basis to pay expenses for AOC purposes. You'd need $9,000 of expenses to both exclude the $1,000 of earnings in the distribution AND get the maximum AOC in this scenario. Whew, I hope that makes sense to somebody besides me. My head hurts.

I called all my FL clients this morning (about a dozen) and to my amazement they are all staying put except one cruising in the Gulf (hopefully not under threat of a tsunami). One client is 98 y/o in Pembroke Pines (I think Red Buttons' Century Village) with his 90 y/o wife and a large group of grey and blue hairs, asking Irma to "bring it on." I told him to keep away from the patio door, he thought that was a good idea and will tell his friends, they won't even go to the local shelter. Most clients feared getting stuck on the highways which are jam packed all day and night. Tough situation, I hope everyone stays safe, is prepared, and don't take chances. If this is as bad as they say it could be, the aftermath is going to be a challenge with so many people staying in their homes. Think positive thoughts that this monster weakens, or, takes a hard right, although that would be an act of God for that to happen.

The data was compromised months ago. Any damage was already done, and not yet widely connected to the specific breach. I choose to take what appears to be a minority view. I accept my data is public (since it likely already is), and take appropriate steps to monitor and have backup plans in place for the few days it takes to repair damage. This is a result of having several cards compromised over the years. Have not had a credit report issue - with the now exception of one son asking me a few days ago to help clear some incorrect items off his reports (probably a common name issue, not fraud).

and AMEN!

Amen.

But the sock full of nickels can get them ready for the Rita hug, if used correctly!

If I had a nickel for every time I messed up a post, I'd have a sock full of nickels to hit people pitching 529 plans. Just kidding. Maybe.

ATLANTA (AP) -- Credit monitoring company Equifax says a breach exposed social security numbers and other data from about 143 million Americans. The Atlanta-based company said Thursday that "criminals" exploited a U.S. website application to access files between mid-May and July of this year. It said consumers' names, Social Security numbers, birth dates, addresses and, in some cases, driver's license numbers were exposed. Credit card numbers for about 209,000 U.S. consumers were also accessed. The company said hackers also accessed some "limited personal information" from British and Canadian residents. Wow, if Equifax can get hacked, no one's information is safe ! Maybe I should go offgrid and deal in cash only !

Rita, what's your preferred brand for the task at hand? Case, Caterpillar, something else?

Tom wins the internet! His post was one where I couldn't decide on the best emoticon: trophy (for thanks), a laugh or the heart.

But we love him anyway, because he's Jack. And he knows jack...

I agree with Medlin. I too have had cards compromised years ago and have always been proactive in checking all statements. I've have a security freeze for a few years and easily lift it and reinstate easily, have had no issues. As I understand it, even if they get our info, what good is it if there is a credit freeze. They wouldn't even be able to get Netflix.

I can't breathe.

Sometimes it's nice to be reminded of features that are embedded.

WARNING for anyone who is thinking of signing up for the Equifax "TrustedID Premier" service. If you agree to it, you are WAIVING your right ever to sue Equifax.

Follow above suggestion for how to have watermark on client copies. Then: Print icon Client tab On left window, you should see a checkmark next to Watermark under Copies Type in 'Draft', or customize what you want watermarked. I believe 'Client Copy' is default, but this can be deleted out of field and replaced with what you want.

RITAB Is this possibly from a selfie AFTER you gave a hug? Maybe on your way back to the "back 40"?

You don't need nickels to Rita-hug them, though!

We froze our info on all three agencies a few years ago when Anthem was hacked. Now that Equifax was hacked, that freeze is useless! Like you say, nothing we can do short of leaving the grid entirely. Hubby received an email to click on a link to see if our Equifax info was leaked. Hubby does NOT click on links.

I already signed my family up on their website. It looks like three of us may have had our info leaked. Two of them came up that Equifax did not think that their info was involved. If they can't stop this stuff, I don't know how the heck I will be able to keep my computer safe without taking it completely off the Internet.

Here are another two quotes I sometimes read out loud: I have more choices, including no. I will not apologize for saying no.

I like the scripts! Is 09/07 very late to find another accountant? You can't swing a cat in Phoenix without hitting one. I feel pretty good about getting off the hook here. I'm also ashamed to say that I feel sort of good that now she's the one on the hook. A little guilty, but overall pretty good.

Send something like this better: "Thank you for the feedback, but this decision is final. " Like most people we see No as a maybe, using a script like this closes the door for a Yes. This script sets clear expectations and finalizes the relationship in a professional but firm manner. I’ve only had to use a form of this script a handful of times but with particularly “bad” clients it can be justified. ^^^ Source: http://www.nicholasreese.com/problem-client-scripts/

Text from client: "This is really harsh & leaving us in huge limbo" The response I really want to send: "Better you than me"

Ugh. I just sent the kiss of death resignation email to the client. She texted me and I don't want to talk to her. I'm very busy working on a peer review, have another client that I do need to chase around and don't want to fire, and a bunch of other stuff. And, I'm tired and feel like crying. boo hoo

Illmas, I agree...Very Sad.

Now this is a real life sad story:

These days, either one will get you pulled over. I think the dummy parts would get you more than just a stern warning, though.

Something Similar, Catherine....

Remember, years ago, when it seemed everyone had one of those "Baby on Board" signs in their cars? A woman I worked with at that time had a different sign: "Ex-husband in Trunk" and she had a crappy old tie that dangled out on one side...

Printouts from the Bursar's Office can be a huge help here - I demand them from all my clients with education expenses. (And they're getting better about actually getting them for me, too.)

I had a client who got that letter last year. She did not have any 529 plan. By the time I got the letter she had one day to respond, so I had her call to get an extension so she could pull her records and the IRS Agent pulled up her account to and could see no reason for the letter and told her everything was fine. Never heard anything else since. So it's worth a try to call and ask?

Well that's easy for you to say, but I'm finding that monitors just don't last all that long. It's getting expensive to keep replacing them every week or so. After a few days all the White-Out already makes them hard to read, and now you're telling me to make a bigger mess with rubber stamps.

Thanks Jack. I found that my printers all have that capability as well. I tried jainen's approach, but every time I try to attach the rubber stamp to an email, it falls off the keyboard into the floor.

Smart hubby! I am sure that it will only be a matter of time (maybe minutes, but time) before scammers use this to their advantage. I did go to Equifax's site and check, and my information is among that which is compromised. Fun, fun.