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Read through this IRS info. https://www.irs.gov/publications/p936 If they are not in a divorce/separation scenario then split it or do whatever is more advantageous. If one spouse is not on the loan agreement, then you can attach a note stating that the interest he or she is deducting is in another's name. Be sure to attach a note stating the mortgage owners name and the 1098 info on that return. Even if they are in the process of a divorce, a signed document, attached to the return of the one claiming said interest will suffice. Have both sign the attached note if applicable.

Going forward, suggest they use a joint account for potential deductions, such as mortgage interest, property taxes, donations, etc., to make their options easier. Not substantial authority, but a starting point with other links: https://www.irs.gov/faqs/itemized-deductions-standard-deduction/other-deduction-questions/other-deduction-questions Then you'll want to dive deeper into your research, such as AnswerConnect with source material, Master Tax Guide, and the IRC.

Only donations over $5k need an appraisal. I think the amount the charity received in a sale only applies to cars, boats and airplanes. Anyone ever had a client donate an airplane?

Since the daughter had no income, did parents support her too? If so, she can also be a qualifying relative who doesn't have to live with the taxpayer.

I don't think so. Because the preparation is sited to NY, their domicile, that is where the customer received the benefit of your services. I would think it would be the same for a company that you prepared Sales Tax Returns for a limited amount of sales via internet in the state. The benefit would be in the home state of the company. I have played with the idea of aggressively pushing back by taking only the portion of my fee that relates to CA fees (I include the resident state in my Federal fee and only charge for NR state returns), but I think that fails under the way the FTB interprets the regulations. A CA resident who has a Federal filing requirement in their domicile state received the benefit of the federal filing as well in their domicile state. If CA ever got so aggressive as to come after you for the filing of the NR returns, I think you would be able to say that only the CA portion of the fee relates to the benefit received in the state. That is how I see it at this point. What I have been told at seminars is that FTB will be looking for 1099NECs from CA companies to trigger the first few rounds of inquiries. But, since we sign the tax returns, our information is on the bottom of the return, and it would not be hard for FTB to collect that information if they wanted to go after tax firms. Tom Longview, TX

Look at the support test. Did Mom provide more than half of daughter's support? If not, she's neither a qualifying child nor a qualifying relative regardless of student status.

I am going to call in mom and have an extended chat. The daughter prepared her own return last year but did not claim the dependent exemption. Now she and mom are not getting along very well so it clearly is time to get a firm reading on this one. Thanks.

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

I'm sure you're not surprised.

If the IRS issued the refund how did the state take it?

The same thing happened to a few of my clients. No letters, nothing, just that notice on the website, like taxpayers are in the habit of checking irs.gov everyday like they check the weather. One client got an amended W2 in July 2021 for tax year 2018 that showed huge increases in income and withholding. There was a big IRS refund due, which still hadn't come after 18 months. I assumed the return was in the paper backlog in that cafeteria. (The amendment had to be paper filed because of the three year limit.) It turned out that the IRS had issued the refund but the state took it. The state recorded the higher income but not the higher withholding. Still working that out. Moral: It's not always the IRS's fault.

Got this from a Spidell post on LinkedIn. 2022-47: K-2/K-3 draft form instructions provide welcome filing relief October 27, 2022 The updated draft Partnership Instructions for Schedules K-2 and K-3 (Form 1065) for the 2022 taxable year provide a new domestic partnership filing exception. This is welcome relief for tax professionals working with most domestic partnerships. The exception states that a partnership is not required to complete Schedules K-2 and K-3 and file them with the IRS if: The partnership has no or limited foreign activity, which is specifically defined in the instructions and includes domestic partnerships whose only foreign activity is passive category foreign income that: Only generates $300 or less of taxes subject to the Foreign Tax Credit; and Is shown on a payee statement such as Form 1099-DIV; All partners are U.S. citizens or resident aliens, domestic decedent estates, or certain domestic trusts; The partnership sends specific notification to the partners by two months before its filing deadline, without extensions (January 15 for calendar-year partnerships); and No partners specifically request Schedule K-3 from the partnership prior to one month before the entity’s filing deadline, without extensions (February 15 for calendar-year partnerships). If the information is requested after February 15, then the partnership only has to provide the information to the requesting partner and does not have to file the K-2 and K-3 with the IRS. Note: The draft K-2/K-3 (Form 1120S) instructions have not yet been released. We assume similar relief will be provided in these draft instructions. We will issue another Flash E-mail if this is not the case. The draft Partnership Instructions for Schedules K-2 and K-3 (Form 1065) can be found at: www.irs.gov/pub/irs-dft/i1065s23–dft.pdf Tom Longview, TX

Have a client that filed an amended return in April of 2021 (for 21 return). Checked on the status today at "Check on Status of my amended return" and it said client "Must take action" and call a number. No notification to client that they had to call. Wonder how long the IRS has been waiting for a call.

The payroll software can transmit the 1099 file just like a tax return, but there is a fee for e-filing though the software instead of being included in the price of the software. If I remember correctly - I have not transmitted any 1099s this year so far.

Abby, your friend's consulting does not appear to be a "protected activity'. My preliminary reading is that she would have to register.

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

I found the applicable information in FTB Pub 1050: https://www.ftb.ca.gov/forms/misc/1050.pdf Based on my reading I believe my client's shipping of Roasted Coffee to customers in CA still meets the definition of "protected activity" under Public Law (PL) 86-272, 15 U.S.C. §§381-384, which Congress adopted in 1959. "PL 86-272 prohibits a state from imposing a net income tax on the income of a person derived within the state from interstate commerce if the only business activities within the state conducted by or on behalf of the person consist of the solicitation of orders for sales of tangible personal property." Abby, this Pub has a lengthy list of protected and unprotected online activities.

CA taxes revenue to the end customer location. So if your friend is providing a service to a customer in CA, that revenue is sourced to CA. There is no de minimis exception that I am aware of. From the FTB website - "We consider you to be “doing business” if you meet any of the following: Engage in any transaction for the purpose of financial gain within California" Then you have to look at what type of entity they are. Corps, S Corps, Partnerships and LLC all have a $800 minimum tax that needs to be paid yearly. In order to pay the tax, you need a state tax ID number. To get a state tax ID number, you need to register with the SOS. The SOS has an annual filing fee of $25 (last time I checked). If your client is a Sole Proprietor, they can just file a 540NR showing the CA profits from their business. Hope this customer of your friend is generating enough revenue to cover the cost of doing business in CA. Tom Longview, TX

I had to call BSO technical support. I got through right away. The support person was helpful, then I was able to log in and start uploading my clients W 2s.

That is the issue. Some think a computer and software makes them qualified, prevents errors, etc. Those are the likely to think that is all a preparer does too. While I am likely knowledgeable enough to do our corp return, I am wise/old/lazy/busy enough not to. I know they do have an input person. What we pay for is their supervisor who reviews the return, makes sure staff is trained, and spends time answering my questions/concerns. It is a good working relationship. I just got a thank you message for showing PTET as a separate line item... after having a professional back and forth on a few items I wanted to be clear on.

That is so cool. I just this week purchased two on Amazon for $9.

I remember when I was taking Accounting Classes in college waiting and waiting until the cost of a Texas Instrument handheld calculator finally dropped to to $125 so that I could finally afford to buy one:)

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.

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!

Another looks to be on their way. Livid that I have no means to access their state's records and get their UI rate "for" them, since that is what they thought they were paying me for, to be their payroll service and answer all possible payroll questions for them. (I license payroll software for self use.) Interestingly, they are not a new customer. I wonder how they forgot they setup their own UI rate at the beginning of the last year? Maybe they are having a bad day, we will see. Mine started not so good, one of our kids called early to say his vehicle was stolen overnight. Thankfully, he lives across the street from his school, and we can get him our spare car in a day or two. I try to let them fire themselves, like the one starting off on the wrong foot this morning. I have replied twice, with the pertinent information, including a link they can use to log in and get their rate. Their next reply, if any, will determine their status.

Had a new guy last year who I really thought was going to be a problem. 3 calls before we ever met (all implied problems were possible) and when we met he gruffed and complained. Turned out to be a terrific guy and he's referred several others to me in 11 months. Over the summer he dropped by my office just to thank me and see how my vacation went.

I stopped in the middle of reading this thread to send an email to a client telling them that I would not be able to do their return this year. Thank you for the timely reminder that some people are just not a good fit and the sooner we part ways the better for both of us!

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

thank you for the clarification. I get the reasons, but it is fairly unworkable, for something many access only during January. No point in having a Pwd at all for that short of a time, better to rely on some sort of other method, SMS code (with a less often expiring PWD), token, etc. Just one person's opinion, and darn glad I do not have to handle their lost/forgotten PWD requests.

Catherine. I hope I am getting better (more forceful?) at catching issues up front, such as those who expect the software to teach them accounting/payroll processing, rather than use the software as a tool. My self explanation is computers have become appliances to many, expected to do it all "for" the user. Last century, all who used computers/software were already experts, now a growing majority believe the ads stating anyone can Q by using B software. I find myself working on perfecting a stock reply, that software is a tool to help someone do something they can already do without said software. If there is no existing training/experience to rely on, then hiring out is the best bet - maybe a small local person/firm who is willing to patiently answer questions (not for free) if the person wants to learn the process. I also mention all business owners should have at least a modest idea of the process, so they can spot trends/issues, but they should defer to the people they pay for advice (and their E&O coverage!). There are endless options to gain knowledge, free and paid, in person and remote, so lack of desire to gain knowledge is a red flag.

April 2021, client filed her 2020 1040. August 2021, client receives CP10 stating irs changed return and overpayment applied to 2021 was reduced from $14K to $7K. Other than a vague statement about charitable contributions, the CP10 doesn't state what the changes were or why changes were made. No calculations of the changes were included with the notice. If I recalculate her return limiting charitable contributions to 60% of her AGI instead of the 100% allowed by the CARES act, I get close to the numbers on the CP10. August 2021, I write the irs asking for details as to what they changed on the return and why. I also stated the limit on charitable deduction was calculated correctly according to the CARES act and included the limitation worksheet that was also included with the original return. So far, the client has received 4 letters stating the irs needs 60 more days to reply to our inquiry. So last week I got a POA from her and called the irs. Got through fairly easily but the agent disconnected me after getting the POA off the fax machine. Called back, again getting through fairly easily and again getting disconnected about 10 minutes after the agent put me on hold to get the POA off the fax machine. Called a third time. Got through fairly easily. Agent asked if I had POA. Told her I've faxed it twice today but the agents disconnected me. She states, "we're having a problem where the phone system disconnects everyone we put on hold". I respond, "have you considered not putting people on hold?" while refraining from telling her what I really think and wondering why it would take until 3pm to figure out you have this problem. An hour on the phone with the lady and I can't get her to agree that if the irs changed a return, then it's ridiculous that the irs needs any time, much less 16 months, to tell the taxpayer what the changes were and why the return was changed. She has no way to figure out what the changes were but tells me, "it looks like a letter went out yesterday requesting 60 more days to investigate the matter and you need to wait to receive a response".