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I've noticed the exact same thing - and the canned presentations given to IRS people when they come to speak all sound the same. Tax preparers are the source of evil and fraud and have to be watched like hawks and given obscenely long checklists and threatened with fines for not filling them out. Heard of one preparer last year fined for not filling out the 8867 properly for a baby the neighbor had! It used to be we could say "personal knowledge" and it would be accepted. Yeah, when the multi-year client comes in with her belly round one year, we get the email later saying "it's a girl!" with a picture, and the next year she comes with the baby girl asleep in the carrier, I think it's a fair assumption that it's her kid! Five pages of checklists is STUPID when I know the family - and means NOTHING if I'm a crook. Crooks have no compunction against lying on the bleeping checklists! Grrrr; don't get me started.

"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.

And expect more auto-generated letters before the one you send in gets read by a human.

Remember when the IRS used to treat us as stakeholders? They couldn't praise us enough for helping them do their job. It changed when Karen Hawkins became head of the Office of Professional Responsibility. To quote her in an Oct 2015 interview with the American Bar Assoc, " I believed (then and now) that the real harm being done to taxpayers and the tax system involved violations of the various due diligence provisions in Circular 230 which occur in epidemic proportions." Every presentation she gave that I witnessed was more like a scolding than a learning experience. I remember once when she went on and on about basis of securities, assuming that we all just make them up. In reality, every preparer in the room likely spent half of their tax season trying to determine a reasonable basis. I was so thankful when she left, but it turns out that her legacy didn't. WE are the bad guys.

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.

Some folks are born silver spoon in hand Lord, don't they help themselves, oh But when the taxman comes to the door Lord, the house looks like a rummage sale, yes John Fogerty & CCR

And welcome back, KC - we've missed you!

I agree with KC, I wonder where is our lobby? Where is my government pension?

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!

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

Hi folks, Just a reminder for those who may have recently transitioned to a new tax software provider from ATX--we have vendor-specific forums for questions related to non-ATX software. If you use some software not covered by these forums, please let me know and I'll consider adding them! Thanks!

Easy Peeezy.

Another wrinkle! The house is going to have a mortgage, which dad is paying. If son is on deed and dad dies, who is going to make the mortgage payments? Will the son become responsible for them. As you said, a "rat's nest".

There's a Donate tab at the top with a number of different options, including payment by check if that's something you would prefer to do. Going through that whole process allows me to know who's donating. Before, it wasn't always easy to know which member was making which donation.

LLCs are created for all kinds of purposes other than to conduct business. The main purpose of an LLC is to attempt to shield an owner from liability for what is in the LLC. LLCs are formed to hold property and ease gifts of shares of that property to family members. That can be done with real estate or other investments.

I don't think so. Gifts are not taxable income to the recipient. Tom Modesto, CA

Gifts do not require a 1099. Direct answer: no.

I agree that Form 1099-INT is not required to be issued by a payer unless that payer is paying the interest in the course of his trade or business. No trade or business, no 1099-INT requirement.

Maybe this will help. Has your client hired an independent caregiver? Is the caregiver an employee of another company providing the care? Knowing these answers will help. According to the IRS, if a privately hired / independent caregiver is paid more than $2,000 per year, they are considered to be a household employee, not an independent contractor. Therefore, the family hiring the independent caregiver takes on all the responsibilities of being an employer including payroll and taxes. Jul 1, 2017

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

Remember when the IRS used to do lifestyle audits? They could look at your income and see if it supported the kind of house you live in, the car you drive, the schools your children attend. These were stopped when it was determined that they were essentially invasions of privacy. Now they can do them only when they have reason to suspect a mismatch between income and expenses, e.g., you make $28k and have $20k in mortgage interest, or drive to the audit in a $90k car on your $28k income. If you are under audit they can always subpoena your bank and cc records, but not before you are placed under audit. This article suggests they will now pre-audit everyone. I would like to say I doubt it, or that a similar ruling that put the kibosh on the lifestyle audit will come around, but the explosion in AI makes me no so sure.

Catherine is correct . You will need to follow Revenue procedure 2016-51 to make corrections and contributions for eligible employees.

SEP participation rules : must be 21, must have worked for the employer 3 of the last 5 yrs, had at least $600 in compensation from that business during the year. The employer CAN make these rules less restrictive but not moreso, and employees can elect to not participate. The employer must use and contribute the same percentage for all eligible employees. Because the contribution is to an employee's IRA, it belongs to the employee and is 100% vested upon contribution. For these answers and more information, please see this IRS page and the linked pages it contains for rules of participation and for contributions.

I did everything described above and nothing flows from the K-1 input to the 199a worksheet

Also, check to see if your internet provider or bookkeeping software or professional organization or website or ... offer a simple portal that fits your budget.

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

Have you made sure that the QBI items are entered on the K1 Input (1120S) input sheet? On Line 17, Code V is where QBI is entered, Code W for W-2 wages, and Code X for unadjusted basis. You can enter them in either a service or non-service box. If numbers are entered in the service boxes, it will flow the numbers to the Activities tab and check the Service Business Box, but you also have to check the Qualified Business box for numbers to flow into the tabs where limitations are computed. If numbers are entered in the non-service boxes, it will flow the numbers to the Activities tab, but you have to check the Qualified Business box for numbers to flow into the computations.

If you don't use the 1099-G, you'll never get a red error. Just sayin'!