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I'm watching the Hurricane Matthew news and praying that everyone will be safe. My son has a vacation bungalow a block off the ocean in New Smyrna Beach, FL. I may have to drop everything and go help with cleanup. I am working late on tax returns and office work so I can get there if needed. It's going to be a late night at the office.

SFA, I kept waking up last night checking the Weather channel because Matthew had a bullseye on Stuart FL where I have friends. It turned out that the worst of the storm stayed offshore and in speaking with my friend this morning there was only a torn screen. He is 1 mile from the beach. It appears that New Smyrna and Daytona Beach will have more damage but not devastating. If your son's bungalow needs replacing, that's what insurance is for, the main thing is, he is safe. When it is rebuilt it will be better than ever. This may be nature's way of keeping our economy going, except that it doesn't take into account the personal loss, that's why there is family like you.

Client always whines because she owes. They have several 1099-Rs with little or no withholding. Same with W-2s. I tell them every year it would be good to have more withheld. OK, they say. No, they never have more withheld. So, today she actually tells me, "But they won't withhold more than that". Mmmm hmmmm. I Google "How do I have more withheld from my (insert name of company) retirement?" I print the W-4Ps and addresses for all the companies. Print W-4s, too, and highlight line 6. It's one thing to ignore my advice, it's another to treat me like a fool. It was worth a Google. No, no forms with get completed. But it's not wasting time if you enjoy it. It was the same feeling you get when you mess with scammers. It was worth it.

Absolutely NOT! Their shoes are clueless (and probably have Athlete's Foot). What we have to do is understand what it's like to stand in those shoes. But I ain't puttin' 'em on. No way, no how!

We are all praying around here for the safety of the people affected by the hurricane

An acquaintance of mine moved to Hilton Head Island in South Carolina several years ago. That's about a 4-5 hour drive from Charlotte - all interstate Highway. He dropped by today for a short visit with local friends because he had driven up here to escape the storm. Traffic was so bad it took him 9-1/2 hours to make the drive, in spite of the fact that they are using lane reversals on I-26 for evacuation.

My sister and family are in St. Simons Island GA. No one answers there now so I am hoping they have evacuated. Someone on the radio said she doesn't expect her home to still be there on return. Scary!

I'm praying that everyone stays safe, whether you are in the hurricane's path or helping family and friends in need.

Funny, I think I get most of my culture from movies. May not be saying much for me, but it does work well at parties.

So many movies, so little time.

I agree! I am NOT a babysitter! 9 1/2 months is enough time for ANYONE! I have even resorted to telling people the deadline is still Aug. 15. Guess when they bring me their information??? Intentionally Apathetically Ignorant and Clueless!! I just fired 2 clients this week because I could not complete their just provided documentation completed in one day. I told them where the closest H&R is located. I'll bet they pay their Cable TV, Internet and Cell phone bills on time!!

Oh, *I* have seen penalties assessed. Big fat hairy ones with fangs. Non-filing, late-filing, plus interest. One client is a contractor (who really NEEDS to bring his records here so we can do accounting for him but he doesn't) is late- very, very late - EVERY year. I charge him triple my usual price as my own penalty (so in all, FOUR times normal fee). I am STILL waiting for info for the 2015 1099's. But the IRS sends him penalty bills, every year. He hasn't wised up yet.

I have friends, clients, and client-interests in the area and am praying for them all. Plus everyone else, of course!

If you want wacky, offbeat, and FUN, have you watched Undercover Blues with Dennis Quaid and Kathleen Turner? Or Real Genius with Val Kilmer?

Same here. They've got six months with the extension and I send reminders off and on. No guarantees this time of year.

Good. If taxpayer was innocent, I hope preparer gets a penalty. I know you have told taxpayer that he has a duty to look at his returns. Good job.

October clients just aren't understandable. Have one right now with two kids in college (could use the money) who hasn't filed for three years. I completed what I could and told them their combined refunds are approaching $29k. One would think they would get me those few missing pieces of info like yesterday. Still waiting.....

SFA...Be safe and Gods speed to your son.

Here are the first two listed: IRC § 6694 – Understatement of taxpayer’s liability by tax return preparer. IRC § 6694(a) – Understatement due to unreasonable positions. The penalty is the greater of $1,000 or 50% of the income derived by the tax return preparer with respect to the return or claim for refund. IRC § 6694(b) – Understatement due to willful or reckless conduct. The penalty is the greater of $5,000 or 50% of the income derived by the tax return preparer with respect to the return or claim for refund.

They also never used the 1040-ES forms I printed for years. Pretty sure they just didn't want to deal with anything. Common for October clients. At least they showed up I guess.

Let's not take this "known or should have known" mandate so seriously. Schedule A itself is optional, so I assume the various components in it are each optional in their own right. If you can have $20k in qualified mortgage interest or state income tax withholding and still choose to take the standard deduction (perfectly legal), why can't you have $20k in charitable contributions and choose to claim half of them? In your case, though, where the client has the right documentation, encourage him to take the tax break he deserves. Tell him you will take his foolproof receipts to any audit and he won't have to worry himself about it. Tell him that one of our presidential candidates declared himself a "genius" for knowing how to work the tax code and that claiming documented contributions is a "no brainer." Seriously, teach him that those carryovers last for five years, and who knows if he'll need them in that time. This discussion reminds me of a problem raised in my Master's program. Many Jewish people give large sums to their synagogues and in return receive preferential seating and other social perks (just like in the BC days). Students wondered if the full amount of their donations counted for the deduction because they got something in return. There were a bunch of IRS agents in the course, and they all agreed that never in a million years would they get away with digging into the intent of the donation. The only thing they were taught to watch for was tuition to religious school disguised as a donation. Your client has nothing to worry about.

One of the funniest movies ever! I used Young Frankenstein and Clerks as a test for potential mates after my divorce. If they were offended or didn't laugh their ass off at these two movies, I knew it would never last.

Lawd have mercy! I wonder if I ever dare post again. I am reasonably sure Jack is technically correct but I have no fear I will be looking at any penalty nor for that matter that my old friend will trigger an audit of his return. A former taxman in our area used to stuff his farm returns with everything but the kitchen sink. A farm rental return of his I received had about $600 in rent income and some $6,000 in deductions in that year as an example. He practiced in this manner for about forty years until his death and as far as I know triggered few audits. Was this right? Of course not. But if my old friend wants to pay more tax than he need pay that is his decision and I'll abide by his wishes even though I did tell him he was overpaying.

Code T simply means that the issuer of the 1099 R does not know whether the five year holding period has been met and the participant (in this case) has died. My guess is the issuer erred by listing a taxable amount. Your options are to request a corrected 1099 R (kinda like spittin' into the wind) or file the return as you know it to be correct and deal with the IRS notice if and when it shows up.

Dogma is another favorite. It' related to Clerks.

I like Dogma as a test myself. YF is such a classic - might have to give it a look again soon.

My goal here has been to express my opinion that you are wrong that Christian could get nailed for overstating liability. Of course he could, and should, be hammered for understating liability. So do I. I believe if they were going to hammer us for misstatements, they would have used the word misstatement, not the word understatement (of taxpayer's liability). I think IRS was very clear if you think about it. I'd bet my lunch that no lawmaker ever thought anybody would be fighting over the ethics of overpaying tax. Only tax pros. IRC § 6694 – Understatement of taxpayer’s liability by tax return preparer. IRC § 6694(a) – Understatement due to unreasonable positions. The penalty is the greater of $1,000 or 50% of the income derived by the tax return preparer with respect to the return or claim for refund. IRC § 6694(b) – Understatement due to willful or reckless conduct. The penalty is the greater of $5,000 or 50% of the income derived by the tax return preparer with respect to the return or claim for refund.

That is all simply fantastic, Jack, and I'm glad you posted that because I remember you also making a comment about not caring about articles written by some unproven source, that is if I may be so bold as to *retread* something you said. That statement of yours was in reference to an article by an attorney that was an expert in the area being discussed and published in the AICPA's JoA, but never mind that now because the information below is what is pertinent to the current discussion. So,back to your post that references the penalties assessed under sec 6694, there is no need to make any interpretation about the "spirit of the law" here. If you've ever read that section, you should note that it ALL pertains to UNDERSTATEMENT of taxpayer's liability, and nowhere in it does it reference understatement of deductions. If you are unsure and would like to read it again or perhaps for the first time, here is a link to that section of the code: https://www.law.cornell.edu/uscode/text/26/6694

On the "scams" about owing taxes, etc.. Here is a url for an article about "India Call Centers" taking in (this case alone) $150 K daily (55 M - yearly) "collecting IRS taxes. Doesn't matter to them if they REALLY WERE OWED OR NOT, collections were good regardless. They did good business and had numerous floors of offices and affiliates to get the needed information (U.S. based and others). http://www.msn.com/en-us/money/companies/fake-call-centers-in-india-scam-americans-of-millions/ar-BBx4xsM?li=BBnb7Kz

In addition to those arrested, they are questioning SIX HUNDRED PLUS people? No wonder everyone in the US has already been called five times. Congrats to the India authorities.

Rfassett, thanks for that insight into the client mindset. We do need to put ourselves in their shoes more often. Of course they jump to the conclusion that a tax letter is from the IRS even though it's from the state, because the IRS is most fearful in their minds. And of course they deliver to us any correspondence that has numbers on it (property re-evaluations, insurance bills, etc), ask us questions about working and taking Social Security, whatever. Our receptionist pointed this out to me this week. I had had it with clients who haven't paid their state registration fees and secretary of state fees for a few years and get furious with us for "our" omission. Excuse me, we don't renew your sales tax license or driver's license or law license or medical license, why are we responsible for renewing your business license? The recept made me see it in layman's terms: You get a notice that says "tax" or looks like a bill from the state, and you assume your trusty accountant is handling it. We don't pay their bills, but they just don't see it that way when it looks like a tax TO THEM even though it isn't. Maybe we should get certified to issue marriage licenses and to register motor vehicles too. It would make our clients' live so much easier. Heck, Block is offering to renew ITINs for free.

Hmm, maybe after that will be those 709s that you weren't at all worried anyone would ever find out about... even after having read the technically correct answer. Last year it was "reality, too much effort, and who's ever going to find out" and now it's "known/should have known, ethics, and circ 230". Pick one.

You're freaking me out Elrod!

I have filed late ones every year for the very same reason you stated. I have never seen a penalty assessed. But I do hear that January 2017 is the year they will start assessing the penalties. Who knows.....we can only do what they bring us. every year I tell them I need before end of January and still they wait.

She also wanted to deduct all her household utilities. My feeling is they knew better. If not, they do now.

You mean having a place to go to the bathroom isn't an ordinary and necessary expense for a farmer?

I've never tried, but I did find the following that might help you decide if it's possible or put it back in the lap of the client: "The penalty will not apply to any failure that you can show was due to reasonable cause and not to willful neglect. In general, you must be able to show that your failure was due to an event beyond your control or due to significant mitigating factors. You must also be able to show that you acted in a responsible manner and took steps to avoid the failure." https://www.irs.gov/instructions/i1099gi/ar02.html#d0e2122 My lady in my thread about "they won't withhold more than that" once tried (all by herself) to get out of failure to file penalty because a family member had an accident on Oct 20. That went over like a fart in a space suit. But I digress.

You may be right. When I asked her if there were assets in her farm Maintenance and Repair, she said, "Yes, $2,000 for bathroom remodeling."

I get what you are saying. But sometimes, nay, most of the time, the client believes what he is telling you. He probably has received multiple W-4Ps from the pension/IRA places but said "what the heck is this form for?". And unless he asked you at the time, it just went into the file or the round file, never to be thought about again. The longer I am in this business, the more I understand the client mindset. The client, unlike you and I, usually has a very strong aversion to anything tax and IRS related. I cannot tell you how many times I have had a client tell me they got a letter from the IRS when it was really from the State. But they BELIEVED it was from the IRS. I had one client recently bring the "IRS" notice in and argued with me that it was from the IRS - even after I pointed out that the letter was from the State. And my clients are not stupid. They just do not want to deal with anything tax related. Anyway - on another note. I am down to my last ten returns - none of which are in-house yet. Seeing how today is the sixth of October, it is highly likely that those ten returns will go delinquent. I do not do overtime in October.

His cost basis is what he paid for the stock. In this case, he paid for it in two ways: a check he wrote the broker/what the broker withheld in a same-day sale/what the broker knew and reported on 1099-B PLUS what was included in his compensation/already taxed income. Not much different than if he bought the stock in two different lots on two different dates but sold all at one time. Just add together everything it cost him to acquire the stock.

I am using "if your truck costs more than your house and you own neither, we can't be friends." I watch TV a lot.

You really are the absolute best, and it is a shame you have only 52 posts. We need you. I'm only going to say it one time.

This is what amazes me. There's a letter in there telling them what it's for. But here's the run down on remodeling their personal residence and their vet bills. Oh, good.

You've never seen Young Frankenstein? Marty Feldman as Igor. Pronounced Eye-gor. Gene Wilder as Dr. Frankenstein. Pronounced Frunkensteen.

Thanks, Abby N -- That answers my question even if it doesn't cure my (his) problem. Two carrybacks and then forward -- what a mess. He's really a nice guy but he's so broke he can't pay attention; much less the fees for two pointless carrybacks and several c-forwards; to say nothing of the tax he'll owe. This is going to be a test of spiritual character (concern for my fellow man) since there'll be next to zero chance of any fee collections (oh well; my office needs painting). Seems like 1099 construction workers are always falling into the trap of nothing withheld, broke at year end, and SE piling up for 3-5 years until they're in for 20K with all the crushing penalties plus compound interest piling up 'til they can never get out; just trudging on an installment treadmill far into the future. But, such is life; the old man used to say. By the way, that is the confoundedest avatar I've ever seen. Where'd you get it? Is that you or a mad scientist (accountant) having a very good day? ____________________________ "Now, here you see, it takes all the running you can do, to keep in the same place. If you want to get somewhere else, you must run at least twice as fast as that." -- LEWIS CARROLL -- ALICE THROUGH THE LOOKING GLASS.

I believe the IRS could care less if a deduction was omitted and more tax was owed. But on the other hand, if the omission was to create less tax or a higher refund such as EIC, they could come knocking on your door. Same for the taxpayer who wants to inflate income to max EIC. I turned one of those away a couple years ago, funny how his income from odd jobs put him right at the EIC peak.

Assuming you're talking about an NOL, the pubs says that the election to forego the carryback must be file by the extended due date. https://www.irs.gov/publications/p536/ar02.html#en_US_2015_publink1000177379 But I'm pretty sure the refund limitation increases to 5 or 6 years when an NOL is involved, so all may not be lost. And you will have to file 1040X because 1045 must be file within 1 year of year of the loss. Here you go: 25.6.1.10.2.8.1 (04-01-2007) Net Operating Loss (NOL) Carryback or Capital Loss Carryback A claim for credit or refund based on the carryback of an NOL under IRC Section 172 or a Capital Loss under IRC Section 1212 may be filed within the three year period from the due date of the return ( for the taxable year of the NOL or Capital Loss which results in such carryback) plus the period granted for any extension of time to file for the year in which the NOL or Capital Loss is incurred. See IRC Section 6511(d)(2). Note: The three year period runs from the extended return due date regardless of when the return is actually filed. The three year period may be extended through a consent to extend the period of limitations on assessment. See IRC Section 6511(c).