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Welcome back KC. You have been missed. Don't leave again. Tom Modesto, CA

"This form transfers the burden of responsibility from the taxpayer to the paid preparer.'' That's the real problem. While the IRS should certainly go after those preparers who make a business out of preparing bogus returns, there have always been laws to do that. Shifting the responsibility, on every return, from the taxpayer to the preparer, is IMHO not only morally wrong but also totally counter-productive. Preparers are not and should not be unpaid IRS employees. Yes, you have to be alert to the occasional bogus TP, but this "solution" is just plain wrong.

Welcome back, indeed, KC! You've been greatly missed. We all hope you are well and continue to contribute - or just lurk - your sound reasoning and considerable knowledge. You will have to attend our next soiree!

I only have 150 clients...that is all I can do as a part-time preparer. Since I will likely only need a secure portal for roughly 20 of those clients, cost is a factor, I am doing a trial of Citrix Fileshare, and will like pay for that when trial is over. It does not integrate with ATX, but the cost of ATX Client Portal, is simply not justified at my quantity.

Here's a blog on the Camara decision from October 2017. At the end they discuss what the IRS could do next, but I am not aware of any action taken to date. http://procedurallytaxing.com/tax-court-reverses-course-and-allows-taxpayers-to-change-filing-status/

I posted in a thread that to get an activity to show up on the QBI Deduction - Service tab, you have to check both Qualified Business and Service Business.

I've done this in a case where a couple chose MFS because they thought it would give her child more college financial aid. It didn't and it cost them a lot in taxes. H was listed first on their previous returns so I amended his only. I've also done this for the same scenario giogis has. Do the same thing, amending one return. The only problem I had was the explanation. "Forgot they were married" had to do.

The regs issued last Friday finally make clear that taxable income for purposes of calculating QBI is taxable income from Form 1040 less capital gains AND qualified dividends. In several courses I was told that cap gains are deducted because they already get preferential tax treatment. Well so do divs, but I saw no place for them on any worksheets. From the Regs: Consequently, capital gains and qualified dividends treated as investment income are net capital gain for purposes of determining the section 199A deduction. There is no place on the 1040 that shows taxable income before the QBID. Guess they had to cut lines to make it fit on a postcard. It's all done on a worksheet, which shows the subtraction for cap gains but doesn't indicate that qualified divs are considered cap gains for this purpose. No wonder we're all confused.

It is an either or situation. The deduction is the smaller of 20% of QBI or 20% of taxable income as adjusted (in the simplest! form - assuming under the phaseout range.) That's why I am not telling anyone they will get 20% of their business income as a deduction. Like everything else in tax law, IT DEPENDS!

Yes, I'm sure that's true. And both sides either far right and far left irritate me. I've got both in my family and friends and I'm ready to look for a big rock to get under.

At this rate in a few years Form 8867 and the supporting worksheets will take more time and consume more paper than the actual tax return -:( Also the potential penalty for a single return is up to $ 2,080 ! I am going refuse to do several returns this year ! Copied from the Journal of Accountancy: "The IRS expanded Form 8867, Paid Preparer’s Due Diligence Checklist, for 2018 individual income tax returns to include questions for both head-of-household filing status and the credit for other dependents. For 2017 tax returns this form needed to be included by the preparer on any Form 1040, U.S. Individual Income Tax Return, that claimed the earned income tax credit, the American opportunity tax credit, and/or the child tax credit. Form 8867 consists of a series of questions verifying the paid preparer’s due diligence in requesting information from clients regarding a series of credits and deductions that have been subject to substantial tax fraud. This form transfers the burden of responsibility from the taxpayer to the paid preparer. The new question for head-of-household status is, “Have you determined that the taxpayer was unmarried or considered unmarried on the last day of the tax year and provided more than half of the cost of keeping up a home for the year for a qualifying person?” The other dependent credit is new for 2018. It provides a credit of up to $500 for dependents who are not qualifying children for purposes of the child tax credit. The due-diligence questions for the other tax credit are the same as for the child tax credit or the American opportunity tax credit. The law known as the Tax Cuts and Jobs Act (TCJA), P.L. 115-97, expands the penalties for failure to prepare the due-diligence checklist. Under prior law the penalty was imposed on each failure and could expose a practitioner to a potential $1,560 penalty on each return (see Rev. Proc. 2017-58). Under the TCJA, the penalty is increased to a maximum of $2,080 on a single tax return for returns and refund claims filed in 2018 ($2,120 for 2019). Section VI of Form 8867 provides preparer requirements for attestation needed to sign the form. These include: Interviewing the taxpayer, asking adequate questions, and documenting the taxpayer’s responses on the return or in their notes; Completing Form 8867 truthfully and accurately; Submitting Form 8867; and Keeping the following five records for three years after the due date of the form: Copy of Form 8867; Worksheets used in completing the form; Copies of any documents provided by the taxpayer used to prepare the form; Records of how this information and the worksheets were obtained; and Records of additional questions the preparer may have asked to determine eligibility to claim the credits and/or head-of-household filing status. The retained records must be kept for three years from the latest of the following dates: The due date of the tax return (not including extensions); The date the return was filed (if the signing tax return preparer electronically filed the return); The date the return was presented to the taxpayer for signature (if the signing tax return preparer did not electronically file the return); The date the practitioner submitted to the signing tax return preparer the part of the return for which the practitioner was responsible (if the practitioner is a nonsigning tax return preparer). Careful consideration and due diligence for these new requirements is essential, as the burden of responsibility is again shifted from the taxpayer to the paid prepare

I would fill out the 8606 part III for the year in question and attach with a letter explaining that there were no earnings along with a copy of 1099R and the CP2000.

Here is the article, cut and pasted. One thing to be aware of is that the author is known to use a lot of hyperbole. However, the basic substance is correct as it comes from IRS Pub 3744. https://www.irs.gov/pub/irs-pdf/p3744.pdf By Daniel J. Pilla One of the reasons identify theft is considered by the Treasury Inspector General for Tax Administration to be the crime of the century is because of the IRS. The Internal Revenue Service makes growing demands for information about people’s businesses and private lives every day. There is no such thing as personal privacy these days. That the IRS sends citizens a so-called “Privacy Act Notice” in all its mailings is a farce. The IRS lays claim to your data without court authority more so than any other government agency. And to make matters worse, they share the data with any other federal, state or local government agency claiming an interest, including foreign governments. A river of data In 2019, there will be about 152 million individual tax returns filed with the IRS. There will be roughly another 100 million business tax returns filed. There will be millions more miscellaneous tax returns, including trust, estate and gift tax returns. On top of that, over 3.6 BILLION information returns (Forms W-2, 1099, etc.) will be filed. There is quite literally a river of data flowing into the agency. The flow cannot be stopped, and as far as the IRS is concerned, they need even more. For example, one of the six “Strategic Goals” presented in the IRS’ 2018-2022 Strategic Plan is to increase its access to data, and use that data more effectively to drive its agency-wide decision making, as well as case evaluations and selections for enforcement purposes. See: IRS Publication 3744 (4-2018). This is consistent with the IRS goal of becoming a “data driven agency.” The IRS is awash in data. The 2018-2022 Strategic Plan boasts that the IRS’ volume of data was 100 times larger in 2017 than it was 10 years prior. In 2018, the IRS Criminal Investigation unit alone collected 1.67 terabytes of data from various sources. A terabyte is 1,099,511,627,776 bytes, or 1,024 gigabytes of data. I’m told that approximately 900,000 plain text files can fit into a single gigabyte. The number of users in the IRS with access to that data has increased 23 times (Strategic Plan, p. 19) in the past 10 years. Managing massive data How do you manage, process and assimilate such a massive amount of data to the point where it becomes usable? The 2018-2022 Strategic Plan expresses the goal to “invest in analytics and visualization software and tools, and develop processes to support analytics in IRS operations” (p. 20). The end game is presented in these words: Advancements in how data is collected, stored, accessed and analyzed will allow us to deploy data better. We’ll standardize our data processes and protocols and encourage collaboration among all IRS business units. Increased interoperability of data systems and sources will enhance the secure and seamless flow of data to enable greater authorized access to information. We’ll invest in training to develop more advanced analytics skill sets across the IRS, and use data to improve our business processes. (Strategic Plan, p. 19.) The investment in analytics was recently undertaken – in a big way. Big Government, meet Big Data On Sept. 27, 2018, the IRS entered into a contract with Palantir Technologies of Palo Alto, California, to handle the task of data assimilation. The contract calls for Palantir to provide hardware, software and training to IRS employees to “capture, curate, store, search, share, transfer, perform deconfliction, analyze and visualize large amounts of disparate structured and unstructured data.” (IRS Contract Proposal, Performance Work Statement, Jan. 11, 2017, p. 1.) Palantir is to build and train the IRS to use a unified supercomputer to: search, analyze, visualize, and interact with a wide variety of disparate data sets so users will be able to leverage the platform to perform advanced analytics, such as link, pattern, statistical, behavioral, and geospatial analysis on an investigative platform that is scalable and interoperable with existing IRS equipment and systems. (Ibid, p. 2.) What kind of data are we talking about? The contract proposal specifies the following data formats: · Oracle, MySQL, and PostgreSQL databases; · Delimited files (.csv, .dsv, .log, or .txt); · Excel files (.xls, .xlsx); · GraphML files (.graphml, .xml); · IVML files; · Email files (.eml, .pst, .mbox, .msg, .ost, .txt); and · PCAP files (.pca, .pcap, .pcp). Ibid, pg 20. Ingesting massive amounts of data The contract proposal states that the IRS is looking for an “analytical platform with a strong storage and indexing power allowing for rapid integration and analysis of ultra-large scale data sources.” (Ibid, p. 2.) Specifically, the system must meet the following criteria: · Allow for the rapid ingestion of massive amounts of data. · Users should be able to immediately use the imported data in the imported format to perform queries, analysis and identify links. · Allow users to drill down on massive amounts of disparate data to find connections. · Allow users to visualize connections from millions of records with thousands of links by grouping data visualization by the commonalities and roles. (Ibid, p. 20.) This would allow the IRS to meaningfully link tens of millions of tax returns, billions of information returns, and trillions of bank and credit card transactions, phone records and even social media posts. For example, if a U.S. citizen moves money from a Swiss bank to some other offshore bank, then uses credit or debit cards to spend the money in the U.S., Palantir’s software can link those transactions. It could also flag a person whose tax return shows relatively low annual income but whose social-media posts indicate something entirely different. This is exactly the kind of data analysis it will take to establish the IRS’ so-called “up-front tax system,” which I describe in my book “How to Win Your Tax Audit.” Under that system, the taxpayer is essentially removed from the tax preparation process because the IRS knows everything there is to know about your personal, business and financial affairs to the point where the agency prepares the return for you. How’s that for tax simplification? The cost of spying The IRS began working with Palantir in 2013. The agency spent $30.8 million on a five-year contract and granted Palantir access to files for more than 1 million people, according to a July 28, 2015, audit report. That contract provides the IRS with access to spy software for use by special agents (criminal investigators) “to generate leads, identify schemes, uncover tax fraud, and conduct money laundering and forfeiture investigative activities.” (Case Lead Analysis, PIA ID No. 1120, July 28, 2015, p. 4.) Under the September 2018 deal, the government will pay Palantir $98,750,546.94 over seven years to fulfill the contract. My question is, why the extra 94 cents? If the IRS’ $99 million spy software works as promised, the agency will have unprecedented ability to track the lives and transactions of tens of millions of American citizens

Hi @EricF , would you consider posting this and your other tips in the pinned topic I set up for this purpose? I foresee that many of our members will be looking for this guidance throughout the season. Thx

Just got off the phone with a honest person with Drake Accounting Support. The speed of the software is a real problem throughout the program for both users and Drake staff. Drake Accounting 2019 has the same speed issues. Drake Accounting is very aware of the the problem, but there is no fix that will happen right away. As long as you stick with smaller clients, it will be OK but slow. Do not attempt to use with clients that are bigger, it will be an exercise in significant frustration! At least they stepped up and owned the problem !

1099s are not on the MeF system. They are still on the older FIRE system, so you can expect to wait from 7 to 10 days or longer, due to the shutdown ?

This is extremely important. Look at the closing documents, or see if the town/county has an online registry showing the listed owners. Many times, people think they put a property in the LLC name - but it's actually in their personal name (because the LLC couldn't get a loan, among other reasons). This could end up on Sch D instead of F 4797.

No kidding! I had a Windows 7 update mess up all of the versions of my QuickBooks. It cost me hours of everyone blaming each other and I finally had to update eveyone to QB 2019. I am sitting on an update right now, because I saw some on the other ATX board say that ATX was blaming an update for problems and I'm scared to update, because mine is working fine.

It is actually correct From the Form 8863 instructions: "Tax-free educational assistance. For tax-free educational assistance received in 2018, reduce the qualified educational expenses for each academic period by the amount of tax-free educational assistance allocable to that academic period. See Academic period, earlier. Tax-free educational assistance includes: 1. The tax-free part of any scholarship or fellowship grant (including Pell grants); 2. The tax-free part of any employer-provided educational assistance; 3. Veterans' educational assistance; and 4. Any other educational assistance that is excludable from gross income (tax free), other than as a gift, bequest, devise, or inheritance. TIP: You may be able to increase the combined value of an education credit if the student includes some or all of a scholarship or fellowship grant in income in the year it is received. [emphasis added] Generally, any scholarship or fellowship grant is treated as tax-free educational assistance. However, a scholarship or fellowship grant isn't treated as tax-free educational assistance to the extent the student includes it in gross income (the student may or may not be required to file a tax return) for the year the scholarship or fellowship grant is received and either: • The scholarship or fellowship grant (or any part of it) must be applied (by its terms) to expenses (such as room and board) other than qualified education expenses, or • The scholarship or fellowship grant (or any part of it) may be applied (by its terms) to expenses (such as room and board) other than qualified education expenses. [emphasis added]"

Hey DTA, You need to hire a tax professional to help you. Just by the nature of your question, you are in way over your head. And the fact that you are asking on a web board looking for free advice is even more concerning. What you get for free on the internet is worth exactly what you pay for it. In a few minutes, the moderator is going to read back to you the terms of this site, which you agreed to when signed up and tell you that this site does not give advice to non-professionals. We only work with professionals in the tax industry. Then she is going to lock this post. Get a tax advisor, someone who is reputable, and pay them to answer your questions. Tom Modesto, CA

I've been using this form for several years and include it with the electronic return (or printed for those few) so folks can more readily see how changes in their income and deductions from last year resulted in the current year's higher or lower taxes. I wish there was a comparable form for the state but those fluctuations aren't as obvious any way. It tends to forestall some questions from clients.

I cannot imagine anyone considering IRS regs as a mess. By the way Gail I called the local Commissioner's office to see if they might provide any info on the opening of state efile. Their usual answer was DUH !

Gail subtracted the standard deduction because she assumed no other income. The QBI deduction is the lesser of 20% of the QBI or 20% of taxable income. Under Gail's assumption, taxable income is less than the QBI.

I will quote you all season.

Unfortunately, Tax Reform seems to knock this deduction out because it is a miscellaneous deduction subject to 2% of AGI per IRS Publication 529, and all such deductions are disallowed on Schedule A. The IRS is planning to issue regulations on this matter, and they asked for comments from the public in Notice 2018-61. Part of that Notice is excerpted here: The section 642(h)(2) excess deduction may include expenses described in section 67(e). As previously discussed, prior to enactment of section 67(g), miscellaneous itemized deductions were allowed subject to the restrictions contained in 8 section 67(a). For the years in which section 67(g) is effective, miscellaneous itemized deductions are not permitted, and that appears to include the section 642(h)(2) excess deduction. The Treasury Department and the IRS are studying whether section 67(e) deductions, as well as other deductions that would not be subject to the limitations imposed by sections 67(a) and (g) in the hands of the trust or estate, should continue to be treated as miscellaneous itemized deductions when they are included as a section 642(h)(2) excess deduction. Taxpayers should note that section 67(e) provides that appropriate adjustments shall be made in the application of part I of subchapter J of chapter 1 of the Code to take into account the provisions of section 67. The Treasury Department and the IRS intend to issue regulations in this area and request comments regarding the effect of section 67(g) on the ability of the beneficiary to deduct amounts comprising the section 642(h)(2) excess deduction upon the termination of a trust or estate in light of sections 642(h) and 1.642(h)-2(a). In particular, the Treasury Department and the IRS request comments concerning whether the separate amounts comprising the section 642(h)(2) excess deduction, such as any amounts that are section 67(e) deductions, should be separately analyzed when applying section 67. (Emphasis underlined.)

No, just amend whoever you want to be first on the return and add the other taxpayer. IRS knows how to handle this.

I agree with you 100% I want my voucher to get free meals and food, as well as a promise of backpay, if I should get furloughed. My question: What did they do with all the extra money they have earned for all the years they have been government employees. Smart people have 6 months living expenses in a rainy day fund. If they don't, too bad, so sad.

That is EXACTLY my point. They have jobs that pay better than what most of us make. Those jobs come with benefits most of us can only dream of from afar. They can NOT be fired, under usual circumstances, even if they goof off all day surfing kiddie porn, very much UNlike you and me. But people are bemoaning their fate as if they are being made to walk the plank into shark-infested waters - when what they are facing is far LESS than a regular garden-variety lay-off. With NO guarantee of call-back, NO guarantee of back pay eventually, and no one publicly mourning their dire fate. Sorry; they got nothing from me. NOTHING. I've faced nasty lay-offs too many times, where I quite literally had NO idea where my next job was going to come from, or how I was going to survive until then, with no savings (used up in the last lay-off and just barely caught up to zero with no reserves yet) to help at all. In desperation taking crap jobs doing what I did to put myself through school, running a cash register at nights at a gas station ALONE (young and female), substitute teaching knowing I was working that day because of a phone call at 4AM, day-work bookkeeping via an agency running a paper-tape calculator. Quite a come-down from the supposedly well-paid engineering jobs I had spent years qualifying for. Work a high-school dropout could do. All for minimum wage but nowhere near 40 hrs/week - not just for lack of work, but also because I had to keep up the job search. Yeah, it sucks being out of work. It sucks worse when you don't have a call-back with pay waiting for you in a month or two. I got NOTHING.

We all get to work for the government for free until (depending on state tax burdens) April or May. That's how long we work to earn the money to pay our taxes. Sorry for them but not terribly sympathetic. They can get unemployment, too, and then get all the back pay later. The ones being called back in to work (with no pay) can opt-out of doing that to preserve unemployment. I got laid off a half-dozen times in a bit over a dozen years, and no one ever gave a dingleberry about whether I had savings or could pay my bills, nor was there any guarantee of work ever again. For those old enough to remember, the early 80's were *not* easy times to get a new job.

Some of us will try to bait you into saying something inappropriate, just so you can join us in the doghouse. But if we don't succeed, we have confidence in the ability of our government to do the job.

Slacker. Anyone worth their salt should have a few warning points. We have to keep @jklcpa on her toes. If @kcjenkins was still moderating, we would see a boatload of warnings hitting the members. I think we should have a very nasty political fight on the board to get some points flowing. Just kidding Judy. Please don't shut me out from the board. I need you all this year. Tom Modesto, CA