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Around last week of December 2022 I had to talk to CA FTB agent, one of my client received notice requesting to file 100S for few past missing years for IL based software consulting business. Normally I file tax returns only when consulting business hires employee in CA or have an end client who is being serviced in CA for that respective year. Earlier CA use to collect minimum $800.00 franchise fee regardless of whether you did business in CA or not. As long as your business is registered you are on the hook to pay this fee unless you forfeit your right to do business in CA Since client did not file tax returns as there was no CA source income in fact agent waived off franchise fee whichever years business had zero source CA income. This was something new to me because in the past for other clients they had to pay $ 800.00 fee regardless of whether you did CA business or not. In fact client requested me to close CA business account but FTB agent suggested me to keep it open & continue doing what I am doing & just file tax returns when business has CA source income.

[Note: I luckily had no client do this.] I would amend the years for which they received ERC now, so they know how much they owe. If they received the ERC monies, I'd e-file immediately, with direct debit or other payment arrangement. Otherwise, I'd hold the returns until the client receives the ERC monies and have them sign then, and I'd e-file. If they have both 2020 and 2021 ERC, those monies probably will arrive at two different times, so I'd e-file each amended return on its own schedule.

It is malpractice on the part of the ERC company to tell a client not to file a return that will show a balance due. The ERC company does not want the client to see the "true" cost of the ERC because they will know that the fee they paid as a percentage of the net they got is not what was advertised. Your client should report this to the IRS. They won't, but they should. Tom Longview, TX

Ain't that the truth! Not so much here, but on other boards I've seen people hold themselves out to be "tax professionals" when they are nothing more than a glorified keypunch operator. Software is a great tool and there are times when it catches my mistakes, but then again, there are other times when it gives an answer that I know if not right. Generally it's because I didn't click on a box or other. If someone doesn't have a good idea of what the result should be, they don't know to look at what has to be checked. I think those of us who "could" do a return with calculator and pencil are going the way of dinasours!

This is a reminder that we do NOT host political discussions on this forum, and with new leadership in the U.S. House, I expect that some members will be tempted to post about proposed new legislation on here. Already this morning, I've deleted two posts and modified a third to eliminate a political reference in a very minor way that does not affect its content. I'm asking that each of you to please be cognizant of content before posting to keep this a politics-free site. This would be especially true of any legislation floated out that we all know has no chance of becoming law short of h*ll freezing over. Thank you.

"When the Advocate’s report went to press in mid-December 2022, the IRS had reduced those backlogs to 1 million original individual returns, 1.5 million original business returns, and 1.5 million amended returns. By Dec. 23, the IRS had further reduced its unprocessed paper backlog of original individual returns to about 400,000 and original business returns to about 1 million." According to Nina Olson, the former Taxpayer Advocate, the overall situation isn't quite as positive because there are Millions more returns in Suspense waiting for a live person to resolve processing problems.

Unless you see the daughter's info you cannot get the correct information to make a correct return. If the mother will not get the info to you, and she does not know if the child is a student or not, you should prepare the return accordingly. Tom Longview, TX

There are different kinds of nexus. The one that your first post referenced is payroll related. The one most people are familiar with is sales tax nexus, which has undergone major changes in the last three years. Then there is corporate tax nexus with the apportionment factors. Finally we have state income tax nexus which we have been discussing on this thread.

@mircpa CA has moved to a new scheme of revenue sourcing regardless of the old nexus rules. Nexus rules still apply in some circumstances, but in the case of service based business, the location of the benefit of the service takes precedence now. Tom Longview, TX

I am surprised I was the first person to talk about nexus unfortunately my post was voted down.

I think you need the exact time. As volatile as crypto is, it could have traded between $70 and $150 that day. Bitcoin, for example, sometimes seems to be going up at 9AM but by 5PM is down over $400 (and there is no trading day so who knows where it was before 9 or where it will be by midnight).

Here is a lengthy analysis of the state income tax nexus situation in The Tax Advisor, dated December 1, 2022: https://www.thetaxadviser.com/issues/2022/dec/states-reactions-to-mtc-application-pl-86-272-to-internet-sales.html

In recent years, I have prepared tax returns for CA, IA, ID, MT and UT. As far as I know I will only be preparing Oregon Tax Returns this year and I plan to keep it that way.

LLC is a state-by-state entity and not a federal entity. I'm a CT SMLLC. Will I fall under the rules for a CA LLC with the minimum tax of $800 and whatever the CA state LLC filing form is? Not only might I revert to a sole proprietor, I might send my CA clients elsewhere. I'll still get those CT residents who work for a large bank or Fortune 500 firm in NY and spend a couple weeks at their CA headquarters so have Form W-2 with CA, NY and CT, unexpectedly. NY and CA seems to be a common duo for nonresident returns due to work locations or part-year returns due to a move. I don't think I can get rid of all CA-sourced income under current CA law; too many surprises at tax time about training in CA, for example.

The Supreme Court will need to rule on this. Imagine if 50 states had this type of ruling. Locally we have a city earnings tax. If you live outside the city but work in the city, you owe the tax. Prior to covid if you worked remotely or at an off-site (outside the city) you were exempt for those hours. During Covid the city ruled you were subject to the tax whether you stepped into the city limits ever during the year. The Supreme Court will be ruling on that also but it's going to take years.

Emailing directly, user opens their email software or clicks a link which opens their email software, does not trigger nexus (IMO). Nor does sending a fax, or phoning. The triggers are VERY specific, both in the MTC suggested text, and in CA, and in NY's proposal. MTC suggested is "interacting with a web site or app to communicate". CA and NY (proposed) mention only via website. Even without income caused nexus, accepting communication via a non exempted method can trigger nexus, as it can be argued you were trying to have income. No income does not always mean no reporting, min tax, registration, etc. For me, no more online instant chat unless a chat service comes up with valid means to exclude based on location (which they back up with $), and no more website fill in and send messages (since it is easy to click and use their own email, although I lose the ability to require certain details). At least (for me) once NY or any state other than CA goes live with the new policy.

I would also be concerned about whether your client obtained a PPP Loan during the same time frame or any of the other pandemic payroll related credits, because you can't use the same payroll dollars twice and double dip.

I already e-file returns for CA resident clients, so I already have CA-sourced income. Someone who emails me from CA but doesn't hire me, won't add to my CA-sourced income.

Let the mother claim her children for any available credits. If mother gets a refund, she can repay grandmother.

Not for head of household. You are reading correctly.

I have now learned that I will never prepare a CA tax return for anybody, unless they are willing to pay me an extra $1,000 or more just to cover the extra taxes and fees I may have to pay. Wow.

California is pushing the nexus boundaries to the breaking point. It's way beyond whether you have a resident employee. Just read FTB Pub 1050, it's a real eyeopener!

I believe nexus determines taxability of services. @Abby NormalDoes your friend hired an employee to provide services to client in CA. If the answer is yes then business should file 100S, Sch R & individual owner 540NR (if it's an a S corporation)

Tom, your original post triggered me to find out if anything had changed since the last time I looked into this issue. :)

CA is starting to look at challenging PL 86-272. But that was not the point of the original post. This was services provided to an end customer in CA. There is a whole discussion of "doing business in CA" on the FTB website that gets into your situation @cbslee www.ftb.ca.gov Search "doing business in CA". Tom Longview, TX

while you have the old server running, print to PDF every client for every year that you are not going to install on the new server. I would install only two or three years on the new server. Since you give copies to your clients, you should be OK.

When I upgraded from WIn2016 to Win2019, I copied all backup files of ATX and Payroll from 2013 to the new server. If you have a need to use Payroll from 2015 onwards, you will need to install the software, apply license keys for each year and restore from backup for each year. I also have PDF copies of all 1099's, W2s and Qtrly reports so no issues.

I forgot to add, that you run the Admin Console program on each computer to locate the new database on the server.

As we have chatted about before, it can be freeing, and many will say necessary, to fire a few clients each year/season. In my case, I don't really have to prepare, I can just issue a refund, and send a "thank you for past usage, make sure to print needed records" type of message. Happened again today. Someone asked a relatively simple question, with the proper answer being no. The now former customer did not like the answer (the item was something it is not proper to do), so the refund was initiated. For me, most fire themselves, such as making the "threat" along the lines of do what I want or I will find other software/post negative reviews, etc. These are becoming sadly routine as attempted blackmail seems to be some sort of way people think they can get what they want. The other usual is someone asking me (interestingly, the person who wrote the software) for help, then claiming my suggestion is wrong, unable to be done, etc. Today's example was a customer who believed their "IT" person (or was just being dishonest about having an "IT" person), sent a nasty reply, then sent another rely that the software was not the issue as proved by installing in a different location (it was a firewall issue on their end, not broken software on my part). As I get ready to try to train my eventual replacement, I have been making notes of things to help them deal with customers. One of them is to never assume the customer is telling the truth. This is a huge change from 30 years ago when I started... It simply is not wise to take all information at face value. I actually often ask for "proof", such as a screen capture, and a fair amount of the time the customer was wrong, mistaken, or just untruthful. So for here, I wonder if you are ready to fire at all times, meaning ready to give working papers or copies on short notice, and send them to the next person/firm? I ask, because I know we chatted here, years ago, about even terrible customers having money to "get" (meaning to get/earn for services), and sometimes, they have more to spend than easy customers. In my case, I have one price, so I cannot charge more for tough customers... Plus, as I get older, and relatively stable financially, I have little need to deal with certain things. (Maybe I am getting to be more Mr. Wilson than Dennis!)

Have you ever had a client say "All you have to do is put the numbers in the computer!" I haven't had that happen in a long time as more people are realizing that tax returns are more difficult than they think. They seem to have begun to realize how we (think, research and agonize) over their returns. If we aren't doing those things, we should not be calling ourselves Professionals. Just the fact of reading and contributing to boards like this one (which is excellent, by the way) proves that we are not letting the software do the work.

While I am not out in the wild, I rarely come across anyone who can handle even one payroll (power outage, computer failure, etc.) with any sort of writing instrument, paper, and cash or checks. I still suggest people have 15T and their state pub in their top drawer, but I doubt if any do. Same for paper checks on hand, and/or access to at least a few hundred dollars per employee to buy a day or two delay. Just an age thing, but I was not allowed a calculator in class until my feeble attempt at conforming in college. Still cannot find the Dr or Cr buttons on a calculator <smile>, or the "any" key. As I embark on trying to pass on what I know, I ever so strongly try to remind/inspire the person to learn the process, not so much the tool, as understanding the process is the gold, anyone can bang on a keyboard to use the tool.

Tax software is no substitute for tax knowledge. You can replace the words "tax" with any profession.

The password does expire every 90 days, but if you log in once a year to submit W-2s, then you can change it only that once and done. I logged in this evening, changed my password, prepared and submitted my W-2, and saved/printed the pdf. No problems whatsoever, and I used Firefox browser.

From the IRS' site; guidance for this year.

Yes - and as a result, I have rarely had to fire on the spot. As time goes on I am refusing potential problem clients upon their first inquiry. With existing clients, if I start to see signs of trouble creeping in, I recommend that they seek other help because it seems they need more assistance than I have time properly to provide. The last client I fired I finished his return (and got paid, not nearly what it was worth) and then sent a letter stating I would not be able to help him going forward. Thought for sure with him I was going to have to tell him to leave, but knowing I was ready to say it came through enough in our interactions that we were able to finish that one last year. He got a lot more slack than others, since doing his return was a favor to his late mother. Thanks for the reminder, as well as for confirming the impression that people are not telling the truth as much any more. On the tax end, I don't know if they're just incompetent financially, confused by confusing rules, overwhelmed with general busy-ness, or just lying. But I definitely see it more and more.

Some of Mrs. Kravitz' habits have leaked in as well... Not so much being a busy body, but watching what goes on, or more specifically, having visible working cameras so the baddies move along. We get asked, from time to time, if we caught something. One of our cams records every thing entering our cul-de-sac. Helped catch someone who as checking for unlocked vehicles and homes. The person who was caught skipped by our place and vehicles, looking straight at the cameras... but did not realize how wide the field of view is. Just got four new ones today, to replace some outdated ones. They not only are clear enough to get a real face image and license plate image night or day, they are supposed to pan with the moving subject.

I too use the Fujitsu for scanning. I choose to use File Center for my storage capabilities. It has some great integrations with my portal that make it even more efficient. I could use Windows to save, but found File Center worth the money for the time saving features.

All I had mailed out were the employee copies. The online service deals with e-filing with the SSA and IRS. My particular problem with login solved for $4 - far less than the cost of the time I'd already wasted.

Amusing discussion, since the IRS still hasn't implemented optical scanning and all paper filed 1099s have to be entered by an employee.

I mail black/white laser printed copies and/or efile as well.

Last year when I couldn't sign on, the SSA mailed me a temporary password which took over two weeks to arrive, which I didn't receive until the 31st of January. I waited until the 27th of January then mailed in all of my client's W - 2s. Why can't the SSA email you a temporary password like everyone else?

Let the online services have the headaches! My W2s are mailed and filed. Done. Next year I won't even bother trying SSA Business Services Online.

For the hold outs, the last time I checked, Microsoft will support Windows 10 until (at least) October of 2025. If getting a new box, there is zero reason to get anything other than a current OS. I find this totally encouraging. I know time flies, but this allows me to stop worrying for a while. I just saw this morning that it is ten years since I took a 200 mile trip to take and pass a test that turned out to be redundant. The good side of the story is that I don't have to be tested every year to maintain AFSP status. This is a quirky and difficult business in so many ways. I wonder if we have to be a different breed in order to stick with it. Good luck to all this year!

The service provider could report the income in 2022 or 2023 depending of the accounting method, but your client can only issue the 1099 for the year in which the money was paid, as Bulldog Tom said.

But the trigger for the 1099 is when payment is made. Correct?

Yes, just scroll down a full screen (in ATX). Under Conversions From Traditional, SEP, or SIMPLE.... 2 lines more has a checkbox to Check box if qualified charitable distribution (QCD) and enter qualified charitable distribution amount. Over the years I am constantly finding how many screens have so much more to see if one just scrolls up or down. For such a relatively inexpensive program (despite some faults and less than stellar support), I really think ATX has so many features, more than I know how to manage even after 26 years with it. It pays to just browse around sometimes, something I'm trying to instill in the office admin at church with the membership database.

The SS payments are included in arriving at the adjusted gross income. A percentage of the SS benefits may be taxable but all depends on other income. If there is no other income from the mother, then not taxable.

It doesn't matter whether it's one QCD Distribution or six QCD Distribution. My 1099 R from Charles Schwab doesn't give any indication of how many or how much.

1099s are for payments made regardless of accounting method of payer or recipient. Tom Longview, TX

Some days it sucks to be us