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Don't come back here telling us you had to do some "internet research" to better acquaint yourself with what constitutes ordinary and necessary business expenses for this client.

This reminds me of when another preparer asked me to do a return for her because she was on vacation. The taxpayer was in the business of selling sex toys. Preparer said to me, "Do NOT look at her website or you will have to scrub your brain."

YOU KNOW WHO THIS IS FOR.......

And of course this is the kind of problem they bring to you during the mad rush of tax season. They probably divorced months ago when you had the time to read through all their crap, court cases, state law, etc. (when you weren't learning about the ACA and repair regs). Now of course they want to get THEIR refunds so it's YOUR problem. I don't think so. Suggest an extension.

Contrary to Ron's post, the cam girls I know make bank. The red room sounds like a dedicated home office, she'll have merchant fees (all credit card biz; in more is easily traced), utilities, costumes, props as others have said. Also website, and possibly commissions paid if she is funneled business from another site.

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

Longtime client had bright idea that his wife and her mother (in another state) would form an LLC to flip properties. Client is good with remodeling so did most of the work and will receive 1099. However, property was purchased in the name of the wife, insurance was purchased in wife's name before date of filing with state or even property purchase, utilities are in the name of client and wife, not LLC, all materials to rehab are in personal credit card. At least some outside contractor receipts are billed to LLC but I think not paid out of LLC funds. Before I ask, I think mother in law came up with the money, wife is more or less figure head and client is the worker bee with the ideas. And this doesn't even get to the Repair and Cap regs yet! Before I would lump all together to place in service but now am not so sure. Oh, and it hasn't sold since completion a couple of months ago so now they are thinking of renting it out. Can I just quit now?

As for the money coming to her from the spouse's retirement plan, make sure she understands that if it comes to her, it's taxable with an exemption to the 10% penalty. However, if she doesn't need this money, she can have a direct transfer to her own IRA which will defer tax. But once transferred to her own IRA, any further distributions will be taxable and subject to the 10% penalty. The transfer must be direct, not coming to her first. If she needs some of the money, she can receive an amount subject to tax but exempt from the 10% penalty and have the plan custodian directly transfer the remaining balance into her own IRA account. If she's already done this, it's a moot point. As for the capital loss, I agree with the other comments. If account was a joint account and divorce agreement doesn't mention it, I would think she's entitled to half the loss. But the spouse is likely taking the full loss on his return. You did mention that in the settlement, the loss was to be repaid to the wife. If that $67,000 loss was considered part of the $428,000 payoff, then I would think she's not entitled to a loss writeoff. But as jklcpa points out, there could be more to it.

The address to send the Ogden, Utah copy of Form 3115 on page 2 of the Instructions for Form 3115 requires updating. The address change applies to applicants (other than exempt organizations) and exempt organizations filing for advance consent. The Ogden, Utah copy of Form 3115 should be mailed to: Internal Revenue Service 1973 Rulon White Blvd. Mail Stop 4917 Ogden, UT 84201-1000

I think you have that backwards. It is for the BUSINESS use of a PERSONAL auto. Sounds right to me, if there is a mileage log to back it up. I would have put it in auto expenses or travel costs rather than compensation. Tom Newark, CA

I posted same question elsewhere, and got this response: Owner probably paid for the auto expense from his own pocket. If it is a legitimate business expense, the owner can be reimbursed for it. Instead of paying the owner actual money, especially if there was no money, the owner put in additional capital. The negative RE is ok since there were losses. The additional capital adds basis for the owner, which will allow him/her to deduct the full loss. Each accountant handles this differently. Some net it against any distributions. Some record a payable to the owner.

I think it is a good idea to include even if not required. Keeps the balances in your tax software so you have the beginning balances so you can hunt down those "mysterious changes" to the balance sheet the next year. 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.....

Huh? A college in Massachusetts is foreign source how? (Admittedly to me they sometimes seem like they are from somewhere near the orbit of Neptune...)

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.

I think that before you can make that determination you need more information on the source of these losses. Even assuming the divorce decree says nothing (and be careful there; there might be wording somewhere about "assets purchased by mr X with non-joint funds will be retained by mr X" which could well affect this assumption) -- what if that loss was (at least in part) the $67K? Your client, mrs X, will be made whole, so she does NOT have a carry-forward loss in that case; only mr X does (but he doesn't get to double-dip and claim the repayment is an additional loss but that is not your concern). If the remaining 47K was all jointly purchased and held assets, then yes, half the carryforward loss is hers. This really should be covered in the divorce decree. That's what those horrific financial statements are supposed to be FOR; complete disclosure of all interests and facets, so things can be divided appropriately.

I haven't used the ATX payroll or accounting programs -- but have you taken a look at the Medlin programs? Their payroll system is slicker than slick and SO easy to use - and only $60/year. I have no reason to doubt similar for their (standalone AND work together) AP, AR, and GL accounting modules. What's more you can download versions to try and all you can't do (if memory serves) is print.

to drive some of us, uh, senior practitioners out of this business. I cite the continued major changes in the reporting requirements that some of us believe will not be fully understood and/or implemented before we take down our shingle sometime in the future. But the very real blaring proof of the conspiracy is the font shrinking on the W-2s and 1099s. Honestly, I find myself guessing at what the number might be and then I suggest to myself that that may not be very professional. So I get out the magnifying glass - and yep, I guessed wrong. Come on man! Help us out here. Some of us have eyes that are very well used and can not see those tiny fonts anymore. The fact of the matter - I am not a conspiracy theorist, but if I were...................I think they are out to get us! And while I ponder this, I keep hearing the theme that there are not as many young folks coming into this business to relieve the pressure at the other end. That has me very concerned. So carrying my conspiracy ideas a bit further.........well, never mind........................

I have a cat that talks almost exactly like that! I wonder if it's the same language? It's so funny to listen and wonder just what they are trying to communicate.

I was scanning through the taxbookforum this morning when I saw something that looked off. Since I don't subscribe to the product, I am unable to post but I visit the site occasionally to see what I can learn. The topic was Sect 179 partnership trust. The question was what happens when a partnership takes section 179 and an estate is a partner. As I understood the answer, it was stated that the estate's portion of section 179 is simply lost unless the partnership agreement allows it to be reallocated to the other partners. Section 179 is not lost or reallocated. Instead, the estate takes normal depreciation under section 168 and a separate basis is maintained for the estates share of the asset per Treas Reg 1.179-1(f)(3).

Yes (agree with Bulldog), if business mileage. I would offset distribution. Debit to Auto Expense, credit to distribution (if enough already there to offset). I don't understand the debit to compensation since that should flow thru the W2 payroll reporting.

I too use pdfFactory. But I have Acrobat. I like to print in pdfFactory. Then from pdfFactory, I can with one click convert to Acrobat. I can do a lot more within Acrobat so I like to have my pdf files in Acrobat.

My post doc client's fellowship is taxable; he got a 1098-T with the amount makes as scholarship. The amount above tuition was taxable. I had another that just had paystubs from an internship that I had to work from.

That is dependent upon the 3 L's. Location Location Location

Nope, not a thing about that at all.

As long as it's not suitable to be worn on the street....

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

I would most likely not do anything, no one is responsible to file a return for an other adult unless appointed as executor.

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.

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.

The other alternative is to purchase a new and fully registerable Adobe Acrobat that is a couple of revisions out of date, off of ebay. I've done that, too, and gotten completely functional software for less than 20% of original retail price. I do NOT care if the version is old, because I use only a small portion of the program as it is, and those bits don't change from version to version.

We use ATX Client write-up and Payroll as well as FAM. It does everything we need it to do. We do not do quite the volume that your firm does, but I do not think that the program would blink with a little more volume. We converted from CSA several years ago. If you go this route, make sure that every user does the webinar for both write-up and payroll. The conversion was what most conversions are - great in some aspects and lacking in others. But we made the conversion and never looked back. We think it is a GREAT program. And the report writer is light years ahead of what I remember CSA was. Good luck and let me know if you have any further questions.

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.

It's there, Rich just has never needed it, so he never looked for it. It's at the top of the 1099R screen if other states have a similar military pension exclusion.

Thanks, everyone, for the help. I just could not wrap my head around this last night, and you all were wonderful to help!

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.

One thing I would fully agree with Tom on is that if you do decide to change the W-2, do it for the last quarter only. You can easily defend that with the logic Tom mentions.

There are some downloadable flowcharts here that may be useful: http://mcgladrey.com/content/mcgladrey/en_US/what-we-do/services/tax/new-flowcharts-provide-clarity-on-the-final-tangible-property-re.html