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I would also explain math to him. You spend 50k to save 20k in taxes, you are 30k poorer. Keep the cash and try to earn money instead. Or just give it to charity for the deduction and do some good in the world!

Just make sure you have him locked down with multiple disclosures so if he gets audited he can't try to point the responsibility finger back at you. You know he will.

Where it's going is...nowhere. Interesting subject though. Many years ago a "farmer" of sorts sent his wife to me with his papers - she dutifully worked at the factory, made $15K (going wages at the time) and every year he lost $15K on the "hay farm". He actually had equipment (discs, harrows, old tricycle John Deere, etc.). I dutifully told her about hobby losses (she was unconcerned, saying "Smitty handles all that"). Third year: same story - I gave her one of Edsel's "Come to Jesus" talks and she replied "Well, we been doin' it this way 15 years and nobody's complained yet. I've got a hair-do appointment, so if you give me my papers back I'll be on my way." I actually ran into "Smitty" one time a few years later, asked how it was going, and he said "Fine; just fine Never heard nothin' frum nobody. Guess ever'thang will be alright if the Smirnoff holds out" (he was a tad on the shiftless side). Curious, I looked up some IRS history on the subject: they (IRS) had (sometime in the 80's I think) done a survey on the hobby problem and it was much more widespread than they'd thought. They sent many letters out about it and a majority replied and complied, but then they did a follow-up survey about five years later and found that a large percentage had gone right back to their old ways of doin' things. Surprisingly, IRS never followed that up or took any further action on it and the initiative died. Still, I'd hate to be there if/when the shoe dropped.

We all know this one is a hobby. Imagine if he put in a $50,000 swimming pool and called it a business because he sold three neighborhood kids $100 season passes. For some reason, people think hobby farms are treated differently than hobby swimming pools. Probably because they get away with it. All the time. I would just tell him you can't reduce taxable income with hobby losses. Because you can't.

Read this ATG - https://www.irs.gov/pub/irs-utl/irc183activitiesnotengagedinforprofit.pdf ,. show client the requirements to overcome the not for profit, I,e. Hobby, designation.

My point is, the tax preparer has a duty to file a complete and accurate tax return, regardless of legal battle between trustees, officers, partners, spouses ..etc. Okay so we go ahead and file for 2019, the estate is closed; legal and accounting fees are paid; and all the money is distributed. Then a letter from the IRS turns up with a demand to file for 2016 that nobody happened to mention before. Now who are the fingers pointed at? It is not going to be me unless I have found a case law exception for constructive receipt due to failure of fiduciary duty and have been compensated for it. As joanmcq mentioned, the sibling have been fighting since 2008, so don't expect anything to change in that department. Some could be in it for the battle and could care less about the money.

He wanted to know how the audit lottery would go.

Christian, I just have to wonder why you would still consider him a client and go along with 'this farce,' your words. I could not and would not prepare and sign such a return. YMMV but I did fire a client when I did not go along with a pseudo business that clearly was not.

Hobby. What does he plan to sell ?

"Thousands of Internal Revenue Service employees volunteered to go back into their offices Monday after the agency offered incentive pay to those who handle "mission-critical" work. That includes answering calls from taxpayers and opening mail -- which has been piling up in trailers since the government work-from-home orders took effect last month. The workers are spread across 10 different locations around the country. All workers who report in person will see at least a 10% increase in base salary for at least the next four weeks. Those who are reporting to mailrooms -- which have been deemed higher risk -- will get a 25% boost . . . . . . . . . . .An email sent to staff last week said that workers must keep their faces covered while in the buildings, but would have to bring their own mask . . . . . ."

FYI - ATX is still not doing it correctly either. You have to fiddle around with the return to get it into the return as wages for EITC but not taxable for income (similar to military combat pay). IRS has not acquiesced to the court case that allows IHHS payments to be classified in this manner. That may (or may not) be the reason the software companies are not updating the software to handle the payments this way. However, they did process a refund for a client of ours with this situation. We cited the court case on the 1040X and they processed the refund. Tom Modesto, CA

You may still owe a state return even though you live in Lithuania. If 2008 was their last US return, that's where I'd file their trust returns unless someone can give me proof why a different state is better. If you can't determine what state their trust return is due in 2016, how on earth are you arguing their 1040 was incorrectly filed in 2008? I have a hard time believing any state is going to argue that you owe the money to them over another state unless you choose a tax free state like Florida. Unless the tax preparer was hired to do their taxes and didn't, I fail to see how the OP is liable for a tax return not being filed.

In conclusion I'll pass this along. Years ago I had a small farmer who kept perfect records but for 15 or more years never posted a profit. If he got near one he ran out and bought a piece of machinery. Coming in one year he said a lady had come to see him and I asked why he had not called. He explained she sat at his kitchen table and after some two hours prepared to leave saying they would be sending him a check for $54 as he had a gas tank on his property and bought gas for his tractor having it delivered onsite (something he never bothered to advise me or my Uncle his former taxman about) and that he owed no tax liability for the year in question. He never heard anything more.

After your initial search, a page will appear with the results where you can click "more search options". Doing that will bring up another page where you'd click "search by author" that will allow you to enter your name. But all of this requires that you have a specific term that you are searching for. The profile page may work better for you to scroll through the pages to find your posts.

Go to your profile by clicking your name next to your avatar in the very upper right of any screen, then click "profile" from the drop down menu. Once there, it will list activity to include your "likes. " To narrow that down, click on the box at the right that is labeled "See my activity." The other way would be to search for a term of more than 4 letters and that you know was in the post, and then from there you can narrow down the search by you as the member that posted it.

Recovery attempts work best if the drive has been untouched since the data disappeared. Any sort of wiping or reformatting reduces the odds greatly. Before recreating, design and implement a good backup plan. 1. Decide how much work you are willing to recreate. For me, it is half a day. This becomes your minimum backup frequency. I backup onto: a portable drive connected to router, a second computer on my local network (my backup computer, ready to go if main fails), a web server I control, and an AWS cloud account. Twice a day "incrementals". Weekly full. Monthly full. Quarterly full. (I use Cobian backup and CloudBerry for software to upload/download to my storage points. I use two different storage software in case one fails.) I do not trust the online services. The main reason is most people use the defaults, and do NOT manage to backup all important data - not realizing it until they need their backup. 2. TEST AND RETEST. Unless you actually go through a simulated recovery (say into a separate folder on your drive), you have no idea in you know what if you really can recover. There is no point in having backups unless you routinely prove you can recover from them (use the recovery process, and make sure you are backing up what you need to recover). 3. DO NOT trust any sort of local network backup exclusively. Your local network may fail, your computers both get damaged at the same time, etc. You should have at least two different online/remote storage points in addition to any local storage. 4. Do ask the software vendor about any second set of local files. Unfortunately, if there was one, the software vendor would likely have already made it known as a feature. In my case, we store automatic backups (for power outage) in a special folder, and also in a folder the usual free or low cost online backup vendors may "catch" and use as part of their default settings. Candidly, drive space is no longer an issue, so all important software should be storing backups set on your drive as a cover for human errors.

Just out from VA tax: Important Information Regarding Virginia's Income Tax Payment Deadlines: Interest Waiver for Certain Tax Payments in Response to the COVID-19 Crisis Virginia Tax is announcing that certain income tax payments originally due during the period from April 1, 2020, to June 1, 2020, may now be submitted to the agency without the accrual of interest as would otherwise be required for late payments. This waiver of interest only applies if full payment is made on or before June 1, 2020. For a taxpayer filing on extension, at least 90% of the total tax liability must be paid by June 1, 2020, in order for the interest waiver to apply. If the interest waiver applies to such a taxpayer, no interest will accrue on the amount of tax paid by June 1, 2020, but interest will accrue from the original due date to the date of payment on any amount left unpaid after June 1, 2020.

He's spending 50,000 because he enjoys what he's buying. Just like the guy with the swimming pool would still install it, and ask his tax pro after he filled it up. If only elements of personal pleasure was addressed by the nine factors...

Christian, Based on your posts, you already knew what you were going to do, so why even ask the question(s)?

I have prepard his mother and father's taxes for about 25 years and his some likely seven or eight. Bart's reply is precisely what I had anticipated as I myself have seen this as well an ongoing small operation losing money year after year and never and I do mean never questioned. I have no intention of kicking the guy out. I've advised him of the risk he is taking and if the Service will not enforce their own rules I am not a paid federal employee. If they call him in for a little chat well he will owe some tax but I willl print out what Lynn has referred me to and give it to him and send him on his merry way. Well that is an audit guide which I doubt he would fully understand so I'll review it and perhaps can make a few points. Unlike my concern for a single mother making a poor health insurance judgement through the heathcare exchange under pressure this guy is loaded and if audited he will not miss any taxes imposed.

Tried to delete the above but couldn't. Please ignore...

Some tomatoes he can raise and a goat from time to time. Seriously Lynn how long before the Service takes a close look at this farce. In truth I have known folks here who raise a few cows to go on for years losing money and never hear a peep out of the IRS. He has just inherited a considerable fortune from his mother and will be reporting significant dividend and capital gain income going forward. He hatched this idea to cut his taxes. To me it is self evident but I wonder if they will in fact ever check him. Just curious to know what other preparers have seen in this regard in their experience with this sort of thing.

I haven't been following much of this, but I'll just say I'll be happy with the loan forgiveness, no matter how the rest of it sorts out. Personally I think as a matter of fairness, free money would override & exclude the use of any other tax benefit regarding that particular expenditure, but maybe I'm missing something in the conversation.

I was mistaken. Her query was for the EIP supposedly entered on the IRS website. She used her 2018 agi and feels strongly that this is the cause of her problem. In any event I prepared her a copy to mail in as well as the Form 14039 with attachments to fax to the Service. She has worked for the government from time to time and I am certain her employee file was acquired in that hack of the OPM some years back. I advised her that her refund would be a long time coming as it will sit in a trailer in Kansas until the Service is back up to snuff.

Your clients have never heard of online banking and downloading bank statements? And how is payroll being done? Sorry, but we're functioning quite well here, due to using modern technologies for the past two decades, at least.

Ask her specifically if she did this on the IRS site, or exactly where and to whom she provided the AGI. If she was checking to see if her stimulus check was in the works, that site does ask for AGI as part of the i.d. verification process, and it's also possible that she could have filed an EIP return. I've had some calls from clients that tried all of the areas on that site trying to find a way to enter banking information, including where it specifically said that person should not use. Of course, they tried all of that before calling me. Grrr! Did she already have the client copy of her return before you tried to e-file, otherwise where did she get the AGI to use for wherever she did what she did? There are more and more scammers out there trying to get taxpayers' information that includes emails and phone calls that make it seem that providing information will speed up receipt of the stimulus check. Finding out what exactly she did will tell you how best to help her going forward.

Thank you! That is good news for some of my clients.

I have a client whose returns for the last 3 years have been rejected and had to be paper filed because someone had used his SSN and name on a tax return. It turns out, his father was claiming him as a dependent even though son is in his forties. I prepped his returns for a while, so it happened after that. The father is a little strange, completely paranoid. He used to carry his tax papers and computer around with him on a suitcase cart, because he told me that people go into his apartment and move things around so he couldn't find them. It was all part of a scheme by the landlord who wanted to get him to move out so the rent could be raised in rent controlled SF. This included playing loud sounds and flashing lights at night to keep him up. The next time I saw me he told me his computer had been stolen right off the cart in a supermarket.

Sounds like she gave info to the scammers! File on paper with the covering rejection notice and Form 14039 and requested attachments. Police report. Consumer Protection in her state. FTC.gov/IDtheft has some good information on all the things to do. Apply for an IP PIN. Place fraud alerts with all credit agencies. Order credit reports to report errors. Freeze all credit. SSA. www.irs.gov/identitytheft.