Leaderboard

And a happy, healthy and successful new tax year!

Yes, Merry Christmas.

Merry Christmas!

Merry Christmas!

Merry Christmas and a VERY Happy New Year to all my friends here!

Pacun, I don't think any of us recommend talking bad about the previous preparer. But anyone, no matter how knowledgeable or careful can make a mistake, and the best of us are preparing returns based on the information that we have at the time. I don't check the prior year's return for errors as such, but I do like to review the prior year return for information purposes. And if I see something on the prior year return that does not fit with what I understand to be the case on the current year return, I feel that I have an obligation to ask questions. And in the course of asking those questions, I sometimes determine that a mistake was made on a previous return. Once I know that, I feel obligated to explain the error to the client and let them decide what they want to do from that point.

Responsible, need to documents AND save copies of client documents, and WE get fined if clients' data is wrong. At various conferences the IRS reps keep saying "we know you're the good guys!" but the crap coming out of DC puts the lie to that.

The part that raises my attention is "getting the computer back" and getting something from opening your browser. Why was your browser set to a bad default/home page? That is something the security people should have checked, and should be monitoring. Home page hijack is not a new issue... I am not saying the security folks you are using are bad, but that this should have been caught in advance. Ask them how it happened and how they will prevent it in the future.

Individual tax incentives Provisions for individuals that expire at the end of 2016 include: Sec. 108(a)(1)(E), which excludes from gross income discharge of qualified principal residence indebtedness income. Sec. 163(h)(3), the treatment of mortgage insurance premiums as qualified residence interest, which permits a taxpayer whose income is below certain thresholds to deduct the cost of premiums on mortgage insurance purchased in connection with acquisition indebtedness on the taxpayer's principal residence. Sec. 222, which provides an above-the-line deduction for qualified tuition and related expenses. Also expiring at the end of 2016 is the 7.5% adjusted-gross-income floor for deducting medical expenses, applicable to individuals age 65 and older and their spouses, which will rise to 10% in 2017 (Sec. 213(f)). Business tax incentives Provisions for businesses that expire at the end of 2016 include: Sec. 45A, the Indian employment tax credit for employers of enrolled members of Indian tribes (or their spouses) who work on and live on or near an Indian reservation. Sec. 45G, the railroad track maintenance credit, equal to 50% of the qualified railroad track maintenance expenditures paid or incurred by an eligible taxpayer. Sec. 45N, the mine rescue team training credit, which provides a credit for a portion of training costs for qualified mine rescue team employees. Sec. 54E qualified zone academy bonds, which allows qualified schools to issue bonds for renovations (but not new construction), equipment purchases, teacher training, or developing course materials when they partner with private businesses. Sec. 168(e)(3)(A), which allows certain racehorses to be depreciated as three-year property instead of seven-year property. Sec. 168(e)(3)(B)(vi)(I), which provides for five-year cost recovery for certain energy property. Secs. 168(i)(15) and (e)(3)(C)(ii), which allow a seven-year recovery period for motorsports entertainment complexes. Sec. 168(j), which allows owners accelerated depreciation for qualifying property used predominantly in the active conduct of a trade or business within an Indian reservation. Sec. 179E, the election to expense mine safety equipment, which permits taxpayers to elect to treat 50% of the cost of any qualified advanced mine safety equipment as a deduction in the year the property is placed in service. Sec. 181, the special expensing rules for certain film and television productions, which allows taxpayers to treat costs of any qualified film or television production as a deductible expense. The provision is modified to also apply to live theatrical productions. Sec. 199(d)(8), which permits a deduction for income attributable to domestic production activities in Puerto Rico. Sec. 1391 empowerment zone tax incentives. This provision is modified to allow employees to meet the enterprise zone facility bond requirement if they reside in the empowerment zone, an enterprise community, or a qualified low-income community. Sec. 7652(f), the temporary increase in the limit on cover over of rum excise taxes from $10.50 to $13.25 per proof gallon to Puerto Rico and the Virgin Islands. The American Samoa economic development credit. Energy tax incentives Provisions for energy expenses that expire at the end of 2016 include: Sec. 25C, which provides a 10% credit for qualified nonbusiness energy property. The law also updates the Energy Star requirements. Sec. 25D, the credit for residential energy property for qualified fuel cell property, small wind energy property, and geothermal heat pump property (it will remain available for qualified solar electric property and solar water heating property). Sec. 30B, which provides a credit for qualified fuel cell motor vehicles. Sec. 30C, which provides a 30% credit for the cost of alternative (non-hydrogen) fuel vehicle refueling property. Sec. 30D, the 10% credit for plug-in electric motorcycles and two-wheeled vehicles. Sec. 40(b)(6), which provides a credit for each gallon of qualified second-generation biofuel produced. Sec. 40A, the credit for biodiesel and renewable diesel, which includes the biodiesel mixture credit, the biodiesel credit, and the small agri-biodiesel producer credit. Sec. 45(e)(10)(A)(i), the production credit for Indian coal facilities. Sec. 45, the credits for facilities producing energy from certain renewable resources. Sec. 45L, which provides a credit for each qualified new energy-efficient home constructed by an eligible contractor and acquired by a person from the eligible contractor for use as a residence during the tax year. Sec. 48 credits for fiberoptic solar lighting system, geothermal heat pump, small wind energy, and combined heat and power properties and the credit for qualified fuel cell and microturbine plant property. Sec. 168(l), which provides a depreciation allowance equal to 50% of the adjusted basis of qualified second-generation biofuel plant property. Sec. 179D, the deduction for energy-efficient commercial buildings. Sec. 451(i), the special rule for sales or dispositions to implement Federal Energy Regulatory Commission or state electric restructuring policy for qualified electric utilities. Secs. 6426(c) and 6427(e), the excise tax credits for alternative fuels. —Alistair Nevius ([email protected]) is the JofA's editor-in-chief, tax

Gail is absolutely correct. Nobody here is advocating trying to make another preparer look bad. And Pacun, Catherine raised an excellent point. My new clients with loss carryovers frequently don't even know they have them. Let alone how much. Forget getting depreciations details out of client. It's impossible. Are you not concerned that you are missing deductions?

I tell clients that the piece of paper I regret is the one that I do NOT have. Sometimes today, though, those papers are saved in PDF format rather than on actual paper.

Have you looked close at the new "due diligence" documentation requirements for the new 8867? Very invasive and seems to indicate that we are responsible for all answers. Just read it closely and you will see what I mean.

By the time everything was said and done on my costly mistake I have ended up spending about $500.00 to have two computers completely wiped and everything re-installed. The IT guy I use has a monthly monitoring service that includes beefed up security software, malware, ect.... plus monitors my computer for anything really strange and alerts him for which he can decide what to do. To make a long story short, I had my computer back and within 15 minutes of starting it up and trying to install quickbooks pro from online, my brand new super duty computer came to a near stop. After about two hours quickbooks was only about 50% done and I literally couldn't do anything else with the computer. It was after hours so I didn't want to call my tech guy, decided just to reboot the computer and then everything worked perfect. Went to pickup my laptop today from him and told him my problem, he said he knew. Apparently when I was on the opening page of the browser a Trojan tried jumping on and he was successful in blocking it. He said his software nailed it to the wall and alerted him so he was able to delete is before it got to me. I have already got my money worth! The service he is offering is what the Medical professionals are running and complies with all the Hippa regs, ect... He said the biggest problem he has with this software is that once he installs it he rarely hears from his clients. We shall give it a years run and see what happens.

It never ends. Today's is a phishing attempt, supposedly from Logmein. It says my user account and IP address are blocked because of too many failed attempts at logging in. Uh, I don't use logmein, never have.

I opted out every time, but thought it started last year. I don't advertise at all. Not so sure it will stop the unwanted attention and emails, though. Although this registry caused some email spam, I have to say that when I first went on the Marketplace to look for health insurance (way back before I knew it wasn't for me), I was slammed with spam that has never ended. Never. Ended.

During my renewal process about three years ago, I did everything I had to do with my EA requirements. I sent my form to the IRS and about three months later, I got a letter stating that if I wanted to continue enrolled, I had to proved that I had my CPE credits. I went to AplusCPE website and printed all my certificates and attached them to the IRS form and issue was solved. So, I guess the IRS still needs you to send them those certificates even though the vendor correctly reported to IRS that I had passed their exams.

All of the net profit will ultimately be taxed at the individual's rate whether or not the income is on a Sch C or is in an S corp. The savings would be on the payroll taxes incurred in the S corp vs the entire profit being subjected to the SE tax on the Sch C's profit. Let's say that the net profit is the high end of $50K you mentioned, and if the client did go the S corp route, let's say she pays herself wages of $40K. In this example there is the SE tax savings on the $10K difference that is roughly $1,300, and the closer the W-2 wages are to the net profit of a Sch C, the less the savings. I did not sleep at a Holiday Inn last night, but this seems like a bad idea to me. It might save that SE tax, but it also puts the client on the IRS radar for that assignment of income, and the client would incur the additional expenses of whatever corporate licensing fees OH imposes plus the additional professional fees of incorporating, accounting and preparing the S corp, W-2s and other payroll filings on top of the individual returns now being prepared. It does not seem worth it to me to save a net of a few hundred dollars, and the lower the net profit we are talking about, the less the savings. Another factor to consider is what each client's situation is for health insurance. If the person is not covered under a spouse's employer plan and is paying premiums individually, the client will lose the above-the-line deduction for self employed health insurance if shifting the income away from the Sch C. I'd have to see a comparison side by side of where there are more savings, including the effect on the state returns. What other savings am I missing in this picture?

I'm looking forward to a handy product. I know the creators (all three active tax preparers) and know they will listen to feedback. So, feel free to make suggestions to help them create a product we all can use.

ORDERED! Thanks, Lion!

To file an accurate tax return, you have to interview your client and ask all the questions and see if they qualify for any credit or to deduct an expense. I have hard times getting answers for the year at hand (I guess I am the only one). Imagine how hard it will be to get the answers from the "open years". In order for me to accurate decide if the preparer made a mistake in previous years, I will have to ask all the questions and after the interview, I will see if amending is in order. I have had people telling me, "but my previous preparer gave that credit last year"... my answer is "I am not preparing your previous year's taxes, I am preparing this year's taxes and this year, based on what you have told and the documents you have shown me, you don't qualify for the credit". I also tell them... "if you want me check the return to see if you qualified for the credit your requested on the previous year, I will have to interview you again and check all the documents... you will have to pay me X amount for that and if we have to amend, this is my fee. If they accept my fees, I interview them and ask for documentation. I also explain to them that just because they qualify one year for a credit, it doesn't mean that they qualify the following year. A lot of people ask for their papers back and I am very happy to return their documents and wish them luck. Some of them offer me to pay for my time and I say "don't worry about it... but if you decide to come back this year or next year, please do so and at that point I will prepare your taxes and charge you" One time, I was nosy and I told a client "your previous preparer didn't file married filing separate on the same return for Washington DC and you lost $300 on your refund". Client told me let's amend. Client received his money and about two month later a bill for the same amount. I went to DC and they couldn't find the amended return. We filed again the amended return again and the client got again a bill. I went back to the DC office about 4 times and finally they told me "the client is now married and they have a profile as married on our system, but the main taxpayer on the joint return was single before and the first amended return went to his other profile and now we have check every profile to make sure everything is corrected. The client was taking to collection, I continued going back to the DC office for about 4 more times and finally I lost a client. Now, when I get someone else's work I tell my client, I don't what your previous preparer's put on your return and why he did it because I was not there when he interviewed you and I didn't see all the documents you presented. When I change doctors, the new doctor examines me and gives me a prescription based on my current situation. He never talks bad about my previous doctor and questions why he prescribed that medicine. I guess they have been in school more time than me and that's why they learn not to criticize other members of the profession when they get a new client.

Just keep all your documents. Problem solved.

I have all my dated certificates (some just as pdf's) so if there is any question later I can prove CPE credits. So I'm not going to worry about the IRS systems. We were warned at some seminar or other that it was going to be a case of playing catch-up for them.

(Snipped quote actually from Pacun) I don't audit but I *always* look over new clients' prior-year returns. How else do you find state tax owed and paid for the current Sch a, capital loss carryforward amounts, sometimes charity carryforward amounts, and other items? If I see something egregious - or even if the return I do looks vastly different from the prior year's results, I look more deeply. If only to reassure myself that I have not done a stupid!

I don't audit my new clients, but try to review their open year tax returns as part of my service to them. It gives me a better understanding of their situation and sometimes end up amending for a refund, most commonly in business returns. Omitted expenses are one example. If you put three year's of schedule C's side by side you can quickly see patterns and obvious omissions. Several years ago I amended a return for a rancher from Idaho who sold out and bought a smaller place nearby. The CPA in Idaho incorrectly calculated a multi asset 1031. He also failed to take section 179 in the year the client was in a high tax bracket due to the sale of his ranch. My guess was the CPA did not know that 1245 gains count as business income for the section 179 limits. He also overlooked the fact the client had omitted some obvious expenses on his quick books and their were miles of fence on the new property to write off. The 1040X netted a refund of $20,000 plus. Client had no problem paying me to "audit" his return.

This has been an ongoing thing since I believe October. IRS is "updating" service. NO CE's have been accepted by them from CE vendors - not just specific ones, but all it appears. It is just a matter of waiting as from information --- even if sent in by ourselves, records will not be updated soon. Leaves one to wonder if this will affect programs such as ASFP (supposedly needing completed by year end) or any other IRS requirements. Sorry not to know m ore but it has been, nothing new.

The CURES act negated the $100 day penalty: Small firms that reimburse workers for health insurance get relief. They will not be subject to the $100-a-day-per-employee excise tax if they do it through a qualified small-employer health reimbursement arrangement. There are lots of hoops to jump through, and only small firms qualify… It also extends, through the end of 2016, IRS relief that expired on June 30, 2015. Here is a copy of the Cures act: HR_34 Cures Act 2016 121616.pdf

You should have some sort of company policy (in writing) that states if and when an employee would become eligible for any benefits offered by the company. For the record, part year full-time work does not constitute a full time employee - at least not where I work and play. You policy could be based on hours worked per year, years (or months) of service, etc. If you have such a policy, you should have no concern for getting into trouble.

I believe the opt out has been there for at least two if not three years. The amount of tax cr.. is gone to almost nothing since I "checked the box." But, it has taken a couple of years. Even though I have opt out, my name and all information is still in the ptindirectory. Some of which is incorrect.

It is not your obligation to advise the clients of your opinion of previous errors on previous tax years. Therefore it's not your obligation to amend any previous years unless the client requests it. My advice would be to deal with any problems if and when they occur. You make waves in a small town and you lose.

Me, too! .

Two kinds of people, I guess. I pick that thing apart. No just glancing for me. That's no fun. CSI over here.

Totally agree with Abby. I normally do. (See what I did there?) For sure, you want to be respectful of previous preparer; nobody wins trying to outshine somebody else. This will be a great opportunity for you, and I'll betcha many of the clients won't be surprised at the errors. Be gracious, and yes, it will seem you are spending twice as much time as you should. Just part of it; they're gonna love you, Naveen.

Exactly right Lion.

It's two part, right? 330 days in a rolling 12 months qualifies you for the exclusion. But in the quote above, only 6 months were in 2015, so the exclusion for 2015 is HALF the annual exclusion, more or less. Right?