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I would consider this activity a business and issue the 1099s.

We can all relate to what they'll face come Monday: HUGE piles of unopened and time-sensitive correspondence. Past-due action items. More things that *must* be done today than could possibly be done in a week. And that's before the coffee machines are finished brewing or the fax machines are turned back on. You know, the kind of day most of us face EVERY Monday during the tax season! (Note to Judy: meant as humor, with a goodly dollop of true sympathy. And a suggestion for background music for them - The Pretenders' "Back on the Chain Gang." I do wish them the best plowing through it all.)

They certainly are. A few years ago the proprietor of Elmo's Alternators brought me his usual cardboard box full of gas tickets, bank statements, deposit slips, Burger King receipts, invoices, a half-eaten sandwich, and beaucoup wadded-up Walmart tickets (normal fee's $225, but $500 for him since I have to pay a girl to unroll and iron the Walmart tickets flat enough to add up). Noting the new name (Elmo's Alternators, LLC) on an invoice, I said "El; this might complicate things; did you take on a partner or do anything new?" "Not a thing," he replied, "but everybody's doin' it. It sounds better!"

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!

I had someone tell me that he'd been told that as long as he left the money in his SMLLC and did not send himself a 1099, none of the money was taxable. He said a CPA had told him that! Either there was a HUGE misunderstanding somewhere (possible), or the guy giving info wasn't a CPA (possible), or he was selling/giving the kind of tax "advice" that lands the listeners into long-term opportunities to wear orange jumpsuits (also quite possible).

This convo has been on thin ice for a while.

An even longer more in depth analysis with multiple examples from The Tax Advisor: https://www.thetaxadviser.com/issues/2018/apr/understanding-sec-199A-business-income-deduction.html

One of my clients said her son formed an LLC for his painting business because it limited his liability for taxes. All he had to do was file a piece of paper with the Secretary of State. He told her once the LLC was formed, he didn't have to pay tax on any of his income. After an embarrassing period of silence accompanied by my "deer in the headlights" look, I changed the subject.

Of the 26,000 IRS employees recalled to work, without pay, earlier this month in order to ensure refunds go out on time , only 12,300 actually reported to work. The other 13,700 applied for and received hardship exemptions for things like having no money to put gas in the car or to pay for child care, etc. Senior IRS officials told Congress yesterday, that the effects of the shutdown will last well into this summer. This promises to be a tax season that we will not remember fondly.

Team, let's just focus on helping each other get through tax season and keep it positive.

I saw a Facebook post where someone who SAID they were a government employees complained they were going to lose their home because of the 35-day shutdown. Someone immediately replied :"You don't lose your home for making one mortgage payment late !"

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".

Dad is putting son on the deed because of Dad's age. I agree that there must be ways that son can inherit the house without his name being on the deed. It's causing a rat's nest of potential issues. The ongoing payments to the son will be for work done, Sch C income. If Dad dies before the project is completed, I have no idea what would happen. If son's name isn't on the deed, and there's no 1099S to come in son's name, I am not involved in that part of the circus. I"m going to push for son to NOT be put on the deed, and let the gains be split as a GIFT to son, net of Dad's tax. Thanks so much for chiming in on this!

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.

The reality is that the father is buying the house and hiring the son as a contractor to make the improvements. Anything else complicates things and could lead to unforeseen consequences. What is the reason frothe father putting son on title? Is it because of age and the possibility he may not be around when the project is completed? That cn certanly be handled differently. Also, are the ongoing payments to the son in addition to the 50% the son will receive as his share of profits, or are they advance payments? f dad dies before the project is completed, how will the rest be financed?

I like the last option, unless dad has lots of other income. Keep the house. Hire the son to do the work (SE income to son). Pay the other subs directly (keep it out of the son's tax return and no need to 1099's). Gift 50% of profit (less cap gain taxes paid) to the son and daughter in law after the sale. If dad has substantial taxable income and son does not, then the dad should sell the house to the son (installment sale), who then sells, and then gift back 50% of the profits to the dad after clearing the installment note from the proceeds. Just thinking out loud here. Tom Modesto, CA

Doesn't the fact that he registered an LLC with the state provide de facto evidence that he has a business? Why else would you create an LLC if not to conduct business? Not arguing, just asking. Tom Modesto, CA

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

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.

Just a heads up on 2 important areas for the Qualified Business Income (QBI) deduction in new code section 199A. The IRS published final regs last week. The first is rental real estate. There was substantial debate over rental real estate, and whether it ros eto a "trade or business" eligible for the QBI deduction. Trade or business is still a facts-and-circumstances determination, but the IRS created a safe harbor that basically requires 250 hours of work a year on each set of rental real estate activities for it to qualify. The work may be performed by the owner or agent(s), but a log must be maintained for years starting in 2019. More info is at www.irs.gov/pub/irs-drop/n-19-07.pdf The second is a clarification for the self-employed that has caught some of us by surprise. Many professionals and most software packages used a starting point of net Schedule C income for QBI. The IRS clarified that the QBI deduction is done after the deductions for SE health insurance, SE DC pensions, and 1/2 the SE tax: "Thus, for purposes of section 199A, deductions such as the deductible portion of the tax on self-employment income under section 164(f), the self-employed health insurance deduction under section 162(l), and the deduction for contributions to qualified retirement plans under section 404 are considered attributable to a trade or business to the extent that the individual's gross income from the trade or business is taken into account in calculating the allowable deduction, on a proportionate basis." The net is that the after-tax value of contributing to an SEP or solo 401(k) declines by at least a few percentage points; I'm still calculating scenarios. For example, with $100k of SE income, and a $10,000 SEP contribution, the 20% QBI deduction is calculated on $100,000 - $10,000 SEP - $7650 SE tax = $82,350 x 20% = a $16,470 deduction. Not $20,000.

On the QBI Deduction Summary tab in the Sec 199A Deduct Wkst , Line 4b subtracts "Net capital gains plus qualified dividends" from taxable income. It pulls those amounts from the qualified dividend line in the return and the net long-term capital gain line. Presumably, in any passthrough such as partnerships and S corps, net capital gain and qualified dividends would be excluded from the computed QBI amount.

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!

In the Form 1120S, right? You can enter the Section 199A income, wages, unadjusted basis, etc. on the tab for Ln 17d, Sch K - Oth Items. There is an equivalent form for QBI entry in the Form 1065 for Line 20.

OK...I get it. That makes perfect sense now. Tom Modesto, CA

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.

The other way to look at this, though, is if they only have SE income, then the taxable income would be after the SEHI deduction, and the SEP (or whatever) deduction, and the 1/2 SE tax deduction AND the standard deduction. So in your example, if they had NO OTHER INCOME, the actual QBI they would wind up with assuming they are single would be $14,070 (100,000-10,000-7,650-12,000=70,350 x 20%). There are so many variables in this mess, and I am still learning how they all come together. By 2025 I should have it down pat.

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.