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Basis in an IRA is not a "use it or lose it" situation. The clients had basis in their IRAs. If they contributed more after-tax, they increased their basis. If they took distributions and treated them as 100% taxable, they did not use up any of their basis. (Unlike depreciation, which is "allowed or allowable.) Just file an 8606 for the current year. I don't think the IRS keeps track of these forms anyway. They have no reason to because they want to tax the whole thing. It's up to your clients to keep records supporting their nondeductible contributions. I just did one of these where for a few years clients were taking distributions and filing 8606s to calculate how much was not taxable. Then for unknown reasons for a few years there were no 8606s and the distributions were 100% taxed. I just picked up basis where they left off--after all, they still have that much in their IRAs that was already taxed. Speaking of do-it-yourselfers, I have an appointment tomorrow with a new client. We aren't even taking new clients but this one was referred by a valuable client. The note says she already filed her 2014 and "screwed it up" so needs an amendment. I can't wait.....

This is common in new auto sales. It is called a spiff (SPIF-Sales Performance Incentive Fund). But it wouldn't apply to the store commission. It might apply to the consigner's commission, but more details are needed here.

I usually use 7% as guesstimate of the actual extra cost, because half of the S/E tax is an adjustment to income. So depending upon the client's tax rate, the true after-tax cost of the S/E tax is something less that 7.65%. If I were inclined to suggest the 8919, I'd be sure to ask the client how they would feel if they lost their job over this. Some people wouldn't care, while for others it might be devastating. They need to know the risks, no matter how small.

Only costs the client the 7.65% SS & Medicare that would have been the employer's responsibility.

Aww, thank you, Catherine, and everybody. My daughter took the photo, and one of my sons cut that tree off the road, and there are volunteers all over doing that. My church is Red Cross warming center. Very thankful and everything is going well, all things considered. The energy company did not get to my road yesterday, but I met them again this morning. So much to be done, but everything is good.

I support the ENTIRE Constitution of the United States. Including the Second Amendment.

Filing the 8606 does not create basis, making a contribution and not taking a deduction for it does. Filing the 8606 only tells the IRS what you have done. But the transaction still stands on its substance. If you can determine the amounts of the non-deductible contributions, that is the basis. Think of it this way, if the taxpayer was selling his home and had made significant improvements to the home, would you allow him to add them to basis? Sure you would, if you could figure out how much it was that he spent on the improvements. Can you figure out and document the contributions in the intervening years? If so, that is what you should use. You should be able to get the brokerage to give you the amounts added every year. They should have that record. Then pull a transcript for the years you can from the IRS and see what he deducted. Not easy, but doable. I would not even consider a 3115. Tom Newark, CA

And due to the "DC vs Heller" and "McDonald vs Chicago" decisions at the SCOTUS, one should just be able to walk into any court and get this sort of crap instantly overturned. No level of government in these united states (federal, state, county or municipal) has the power to deny you your right to keep and bear arms. It's not even debatable at this point; it's firmly settled law. What NJ did to that man was unconstitutional.

If the cops took MY legally owned firearms and destroyed them, I'd look more than a little crazy too. Those are EXPENSIVE pieces of machinery, and to have them stolen and destroyed by the government (at gunpoint, by the way; the government does *everything* by gunpoint) would make me so furious you would *not* want to be around me.

The employee could complain, and they might get some results. . Depending upon the total amount of additional tax involved (which is really only 7%). it may or may not be what they had in mind. They should weigh the potential results against how much they like working there. One result of saving that extra 7% of whatever the amount is on the 1099's could cost them their job.

Back in 1970-74 I was fresh out of the Air Force, my wife and I were attending college, and I was working a part time job to help support us and our newborn baby. Between the GI bill, my part-time work, and lots college loans we scraped by. My brother-in-law who worked for Social Services kept telling me we qualified for food stamps, and that "everybody was doing it". I kept refusing to apply because our financial difficulties were a result of lifestyle decisions we made to get an education in anticipation of a better future. I felt that food stamps and other welfare programs should go to the truly needy. It took us 15 years to pay off some of the college loans - just in time to go another round of loans when our daughter went to college. If I had it to do all over, I wouldn't do anything differently, but I realize we were (and still are) chumps in terms of what our culture embraces today.

Just makes me sick. I paid 100% for my education, went part time. I applied for no aid. WHAT WAS I THINKING! Maybe that my fellow citizens are not responsible for my higher education

The mantra...at least once a day. The stock market was good. Non-active traders...those with managed accounts etc....are unaware that their managed accounts have capital gains etc. They just see the value going up. And, I have to explain...over an over. And I tell them they should be celebrating because they made money. (But they don't see it this way....since they didn't take possession of the cash.) When they want to know how to avoid this in the future....I suggest investing in a long term CD...where they will be guaranteed .00000001%....and have a minimal tax liability.

The commissions are received a part of doing her job there. It is correctly reported in box 7 and should be subject to SE.

"Why is my refund $30 less than last year?" 1460 vs. 1430. $6,000 extra W-2 income...

Yes. pain is overrated. In God we trust, all others pay cash.

With the "equipment" he listed, I would hope he is not bartering, but to each their own. Tom Newark, CA

Yes...foreign sources fund research..all the time. My post docs all get funding from foreign sources....and none of it is taxable. They don't get 1099-Misc or W-2s For example....some of my Russians were funded by something from France. I don't get into the politics of it. Ask them if they do research.....

are you getting a fee, or doing this on barter? Inquiring minds want to know.

So much for hoping for a slam dunk answer which I really didn't plan on getting. I will read the two cases but as I said in my original post, I think it is imperative to know if there were jointly held assets that generated the loss and were part of the marital estate. I know one thing for sure, I have advised my client as to what my fees have totaled so far. She keeps giving me various amounts of information which is indeed helping with how to accurately prepare her return. Each time I think I have it correct, she sends me, via e-mail, more documents, changes her mind regarding claiming her son which we are now not doing and only using him for HOH purposes which I have researched and she can do this and give the exemption to her ex. I only found out last evening about the divorce agreement and settlement sheet that is very vague and contains none of the language Catherine spoke of and yes, I have combed over it several times. She is still afraid of his retaliation in some manner. I've told her that her return is none of his business and that her return will be prepared accurately and according to the law and to not share anything with him other than the 8332 form. What he does is his business and none of mine and I don't want to know.

Ha ha. The personal use %s should be fun.

I am not sure what your qualifiers have to do with this - she is a model/actress with income and expenses like any other model/actress with income and expenses. With a son in the entertainment business, I can tell you that there are a lot more expenses than income for those that are still struggling to make it. I think you use the same criteria for ordinary and necessary as you do any other business. Obviously, state of the art computer and web cam and high speed internet should fit the bill. Make up would also fit the bill. Training, either in the use of the technology or acting, I would think would be deductible if it is used to keep her skills polished. My point is - lose the qualifier and treat her like any other model/actress. Now, all that said, personally I would have to invite her to have someone else do her tax work. But that is just me. And I would do that for all of the same reasons I fired a strip joint that I inherited in a practice I bought some years back.

Dividing the loss carryforward IS a sticky situation and goes back to whether state law, the divorce agreement, and settlement interpret that carryforward to be property of the marital estate. Then, there's also the consideration whether state law preempts Federal law, the tax code, that says that the loss follows the legal title of the account and transactions that gave rise to the loss in the first place. It can be further muddled if separately owned assets generating losses are used to offset gains from jointly held assets, and that may have been claimed over years. At least this case involves only the wife's inheritance and one tax year. There have been cases about this that go both ways, so the answer isn't always clear at all. I don't know if these will help. The first one has some cases cited and a concluding section (that doesn't really reach a conclusion we want) that mentions valuing the loss carryforward by the future tax benefits that it will produce. That probably wasn't done in the case with Terry's client since the wife got $67K more because of the husband's mishandling, so not sure if the loss itself was considered a marital asset. It doesn't sound like it. http://www.divorcesource.com/research/edj/tax/05nov121.shtml The second link is about a particular case in MD where a divorcing couple had jointly held investments that generated cap losses. The wife relinquished any right to the jointly held account, and then used ~ 50% of loss c/f on her next return. Husband sued that she didn't have the right to the loss c/f and court held in his favor. Wife appealed and the appeals court reversed the decision in favor of the wife stating that the carryforward was not an interest in the investment account itself. http://www.marylanddivorcelawyer-blog.com/2015/02/12/maryland-court-interprets-settlement-agreement-dividing-marital-property/ That's a long-winded way to say "it depends."

And you also have to be careful about how the funds are given to the ex-wife. If she has to pay taxes on all of the money that she gets from the retirement plan because it is reported on a 1099R, then I don't think I would consider it a repayment for tax purposes and I think that she should be able to go ahead and deduct the loss. This one sounds like it is a little sticky with alimony, property settlement and repayment of losses all tied to the same marital asset. So i am with Catherine: somebody has to wade through all the financial information relating to the property settlement and figure out what goes where for how much and why and ..... You get the picture.

CSA - I assumed was Thomson Reuters Creative Solutions. I know of no other accounting software that carries that nomenclature around with it. Yes - we do use ATX. I have been using FAM ever since ATX made it a separate module. I have not experienced the issues that othesr apparently have. I have 287 clients in FAM with number of assets ranging from 1 to 429. I hear and read about the issues others are having and my normal response - unwritten because I do not want to get into a protracted debate - is "check your hardware and check your setup and if those are not conflicting with recommendations, then call support". I did have to call support when I installed new hardware - server and workstations - because the program would not locate my client files. ATX support took charge and fixed the problem. While watching what they were doing, it became evident that I DID NOT follow the installation instructions precisely. They fixed the problem and did not even call me an idiot - at least not while I was on the phone. Bottom line - I like the products that I am using - FAM included.

Me, too! I've used PDFSuite995 for years. I usually buy every few years to get the newest version. But there are a lot of great inexpensive pdf tools out there and I may be switching to one of them after checking them out this summer.

You are correct. This qualifies as a gift of a present interest, the parents recognize the amount of the gift as payments received on the installment note and report their proportional share of the gain for the year on the 6252. It's as if the children paid on the note and the parents gifted that same amount of cash back to the child and child's spouse. Same next year when the note will be satisfied by the gift of the remaining principal forgiven and will be the final year of the installment sale. The children will have the full basis in the company according to the original agreement with no reduction for the amount of debt forgiven by the gifts. This is similar to self-cancelling installment notes, aka death-terminating installment notes, that allows transfers of a company or highly appreciated real estate to a child, bypasses the estate tax, and the child still receives a step up in basis.

I don't. I see 36K of income and28K of losses. Taxpayer's standard deduction cannot create an NOL. there would have to be a schedule A with business deduction on it to make it part on the NOL. What am I missing that makes you think there is an NOL? Tom Newark, CA

The default is to allocate the annual profit/loss according to the number of days the SH was a SH. If you go to elections, click on the 1120S tab you may find an election to allocate as of specific dates, but it must be signed by all SH.

Weird, almost this same question appeared over on the Drake forum recently. I had one years ago where a client was contributing to an IRA and not telling me because she was covered by a plan at her work, and the entire IRA was n/d so she thought no need to report anything. I wrote a letter that accompanied all 8606s for the prior years that should have been submitted to document the basis. From there I properly included an 8606 with each year's return after that. IRS didn't assess the $50 penalty for not filing those back years, and client never heard a word about basis not being allowed either. I totally agree with Tom's first paragraph about basis being created and calculating the deductible and nondeductible portions of each year's contributions. No to the 3115 also.

I had a new customer come by yesterday; he looked like a cross between ZZ Top and Duck Dynasty. He reeked of Tabaco and had all his tax returns going back to 2000 and wanted to show me all of them. I told him all I need is last years. He asked about Casualty Theft and Loss; he said the police raided his home and confiscated all his guns. He said the guns were legal in FL but not NJ. He was told the guns were destroyed by the police, and then he slammed his hand down and said the township stole his guns and he want to deduct them. I explained it wasn’t deductible. He need to get more paperwork and said he would be back. He stopped by today with his property tax information and receipts for his father’s funeral expenses and asked if he could deduct the expenses that totaled $7,000. I explained he cannot deduct the expenses on his return, but it would be deductible on his father estate return if one needed to be filed. (one doesn’t need to be filed) He continues to say he paid for the food also for all those people, can I write it off as a company picnic. I said no. He looked at me like I was crazy. Do people really think we as preparers will lie and cheat for them? Total strangers but we’ll lie and help them cheat on their taxes. So what are some of your craziest customers and or request?

This is going off-topic pretty far and bringing politics into the discussion once again. I've had a request to lock the topic, but anyone that wants to discuss guns and shooting could start a new topic and leaving out the politics. My husband has several coworkers that have built their own guns. That is perfectly legal to do here and to own and shoot them, but not OK to sell them. Last time he was at the range with them he tried one out and I think he'd like one too. He's not too subtle about dropping hints about prezzies he'd like to have. lol

You can make a perfectly functional firearm, *today*, in the comfort of your own home, from plumbing parts available at your local hardware store. Any machinist can make specialty parts. One of the great advances in general manufacturing - swap-out pieces that fit any of the same model of item - is relatively recent. In the past, individual custom-made items were the rule, and owners of *any* machinery (whether firearm or seed drill) had to craft and fit their own repair parts. So this CNC machine fedex won't ship is basically no different than a machine that makes automotive parts, except for the open source software code.

Here in DE, if person dies intestate the court would appoint also, but they would first consider any spouse, parents or siblings over an unrelated administrator. Also in my state, any estate assets would be used to satisfy debts of the decedent, and if debts exceed that when all is liquidated, then no one else would be responsible for the remaining debts unless there were things like someone had guaranteed the debt, co-signed a loan, was co-applicant on a credit card, etc.

Yes, that falls under "exception 1" as described in the instructions for the 8949. You aggregate the appropriate totals and report them directly on Sch D. No need to use the 8949, and you do not need to attach anything to the return either. This only applies if all are covered securities and you aren't making any adjustments to the amounts reported on the 1099B. It's on pg 3 here: http://www.irs.gov/pub/irs-pdf/i8949.pdf

Rita -- I am so glad that YOU are safe. And BTW -- the photo is beautiful. Scary to think of living with/through, but taken as art it's just wonderful. Once we get to May, you might think of having it printed and framed.

Thanks everyone. I knew it was a capital lease, but the client was pretty insistent. Always nice to have confirmation that I was correct.

I also worked through college and paid back student loans for nearly 15 years after graduating. Not paying them was never an option. I borrowed the money and paying it back was the legally and socially/morally the right thing to do. I'm proud to say that I have instilled that same sense of honor and moral character in my daughter who has started repaying her student loans. Don't get me wrong...I'm not saying that this kid/client had a choice...from what he is telling me, the bank was not willing to work with him at all..but it bothers me that he thinks he should be able to walk away from the debt without suffering at all. This sense of entitlement that is common in the younger generation is worrisome.

I found the discussion. It's titled Oh Crap! I forgot the election, Feb. 9, around page 6.

Ahh, if you made additional changes I think it still may be superseded. In my case, I only omitted the election, no other changes at all. I would prepare the updated return with all the changes, write 'SUPERSEDED' on top and mail. It wouldn't be helpful I should think to mail in the original without the changes and the election. Perhaps KC will chime in here. It was just a couple of weeks ago that this was discussed but I don't know how to link to it. My understanding is that a superseded return, if filed by April 15, will replace the originally filed return. Yes, mailing is the only option, I believe.

Thanks for your responses. The store is claiming that the commission is being paid under a different entity. I know the second 1099 is a different entity. I fully agree that both entities are avoiding employment taxes, especially the store! Oh well, SE tax, here we come!

And, in many cases the IRS can perform the same lookup. They know the child's birthdate, for instance. They have the 8962 prepared by the taxpayer or tax preparer that has a change in a certain month due to move or whatever. If they are able to correct inaccuracies on the 8962 due to taxpayer not reporting something like a move -- and I realize that's a big IF -- then they can update the 8962 to reflect the proper SLCSP in most cases. Or the US Treasury should lose the extra tax. Not have it be a wash on their side while half the taxpayers' 8962s caused additional tax for taxpayers or additional time/expense to amend for a problem the taxpayer did not create. I realize this is an extra income opportunity for tax preparers. But, I'm a one-person shop and don't have time to redo.

The commissons from the store should have been on her W 2. Her employer is trying to avoid the employment taxes.

We have been sleeping on my office floor, and I have grill marks on my @$$ from rolling over the floor vents, but I am very thankful for a warm place to stay. I took the ice out of the freezer at home yesterday because I thought it might start melting. It's still in cube form in the sink this morning. I met the energy company on the way back to work with three light poles, you better believe I waved. Here's a pic of the average of every road in our county:

Or they could invest in a low-cost, tax-efficient mutual fund such as Vanguard's Total Stock Market Index. They get a 100% guarantee that they will do as well as the entire US stock market - no better and no worse. They also get the benefit of keeping their investment earnings rather than paying outrageous commissions to a financial advisor who is exposing them to unknown risks while raking off 1.5% to 3.0% of their principal, and in some cases additional commissions on the transactions, even in years when he fails miserably. They could also invest some money in Berkshire Hathaway B shares, which reinvests all profits and never pays dividends. That way, their entire investment increases tax free (assuming BH does well), and they get to control when they receive a distribution by selling shares. They also get the benefit of capital gains treatment on all their gains this way, while controlling the timing of the tax liability. The only reason people get surprised by taxes on Dividends and CGD's is because they are too lazy to pay attention to what's happening with their hard-earned money.

The lease is fully deductible. Just not necessarily in the current year. I am so glad that our customers have so many people to advise them on the proper tax treatment of everything, and all they need us for is to fill in the numbers and get them their refund.

Sort of unrelated, but this thread made me think of my guy, who came in the day after dropping off his return to ask me: Oh, yeah, I'm retiring early. What am I going to do about health insurance? Beg pardon? I was calm on the outside, but on the inside I killed three people. Insurance salespeople, Nancy, and POTUS make a lot more than me, and you are asking me this question????? I pretty much told him (in my sweet way): I don't have any insurance to sell, affordable or otherwise, so if you're looking for me to solve this problem, I guess you better keep working, Buddy.

If I hit that 500m lottery, I sure as heck won't be worrying about clients, the ACA, or repair regs and the 3115 ever again. Maybe I'd even hire someone else to prepare my returns.

Frikkin' Unbelievable Nonsense FUN Tom Newark, CA