jasdlm

I have a new client. She is a designer and works out of an apartment, which she rents. Has an area which is exclusively used for business. Thinks she took a home/office deduction last year. In reviewing the 2007 return as I'm preparing 2008, the CPA who prepared the return actually took the following deductions on her schedule C: Line 15 - Insurance (other than health): This is where he put 100% of her renter's insurance Line 20( - Rent or lease of 'Other Business property': This is where he put 50% of the gross rents she paid for 2007 on her apartment Line 25 - Utilities: this is where he put 50% of her utilities for her apartment. Took full deduction for telephone on 'other expenses'. No 8829. Questions: 1) Should I file an 8829 for 2008? 2) Assuming 1 is yes (and I think it is), do I need to amend 2007? She told me that her BIH use last year was 50%. I went over the rules with her, and she contacted me 2 days later to say that she had measured, and it was actually 35%. I think the taxpayer is trying to do the right thing, here. One more question unrelated to the 8829: On this same return, mileage is listed on 'other expenses' attachment as X miles at .485 and then a total. I see this often. Is there some standard for determining when to use the 'other expense' line and when to actually use the auto expense line and enter the vehicle information, total mileage, etc? Thanks!

Wow. Thanks for the site, RoyDaleOne. I'm sure many of us learned something today. I know I did. Thanks for the original post, Tom.

Very clever, JohnH. I think I'll try it!

Thank you all for your responses. It's great to have a place to go for feedback.

Could there be a possible issue here because of the use of the term 'disability retirement'? If it was disability income, and the client paid the disability premiums, then my understanding is it would not be taxable. (I have no site for this, so blast me if I'm wrong.) If the County paid the premiums, it would be taxable. If it's retirement, theoretically based on the employee's pre-tax contributions to the same, years of service, etc., then it is taxab;e. What, exactly, is 'disability retirement'. Is it the insurance company who's paying, or the company's retirement plan?

Did the Aunt die? Why do you have to amend the 2007 return. Did the stocks pay dividends in your clients SSN that weren't included on the 2007 return? If Aunt died and client received stocks as a result of her death, inheritance with basis of date of death value of stock (assuming it was in Aunt's name only; not joint tenancy with your client) If Aunt was alive when stocks were transferred, it's a gift, and your client takes Aunt's basis in the stocks. Need more information.

I received a phone message from 'Debbie' at Russell Research. She told my assistant that she was hired by the IRS to do a survey of 'how they were doing' and wanted to talk with me. I am a small-time preparer. She knew, according to my assistant, that I was a 'she', even though I have a masculine first name and most people who don't know assume I am male. I tried to google Russell Research, but their website keeps locking up my computer. Any thoughts? Is this on the 'up and up'. Does the IRS really care how a very small preparer thinks it is doing? Thanks for your thoughts. BTW . . . if she is really working for the IRS, why is she calling me during tax season???

What is the ATP designation? Just curious. Thanks!

Is it a market-linked CD? It's possible that at some point adjustments may be needed. More specific information is needed.

You may also need to make an adjustment depending on the OID . . . can be done with the drop down boxes on the 1099 entry form.

I did a client's returns last weekend; 1065 and 1040. Efiled the 1065 and then the 1040. 1065 rejected 3 days later -- said IRS cannot accept until Feb 14. 1040 accepted. Hopefully it will be fine. I will resubmit the 1065 tomorrow.

Margaret, I think that you should enter the 1099 as received and file a 5329. There's a place on the 5329 to enter 'disability code'. This happened to a client of mine a few years ago, and that's how I handled it. I haven't had any further problems. (Enter on Part I, Line 2.)

I got two emails from CCH asking me to complete a customer satisfaction survey. I got one email on the same day (this past Sunday, the 8th) giving me my unlock codes for my software. I never received them when I purchased the software. Started bothering sales, got nothing. Eventually called and left a semi-unkind voicemail message. Received a code back. Computer tech came to install software, and the code was incorrect. Called sales, held forever (while computer tech was rightfully billing time), and eventually got a working code. That was in early January. This past Sunday, I get the following: Below you will find the product activation codes you recently requested from your customer service representative. Please refer to the documentation which you received with the product for instructions on utilizing the activation code. If you have any questions or issues concerning these activation codes, please contact our customer service team. That's incredibly useful! I'm going to go right back to the 2 survey emails they sent at the exact same time and tell them just how great they are.

Excellent point on the income side, Don. I missed that totally.

If she had 0 exemptions in 2007, I assume she was claimed by someone else? That would negate any credit for her. I would think, however, that she would be eligible for $300 for the baby. Do you have the 'calculate the credit' box checked at the top of the page? (I made that mistake a couple times.)

Thanks so much, Maribeth. I feel like a complete idiot. I really appreciate all the help you have given me. I had actually called a CPA who is a mentor to me, and she originally recommended the no 6252/interest only/step-up in basis route. I should have done more research at that time. (Not in any way trying to blame the CPA . . . she is a great mentor and friend.) I do think the gain will be relatively minor. This is a good lesson to me. Thanks again for all the time you have taken responding to my queries. I really appreciate it.

I have done the same as Denise . . . amortized as start-up expenses over 5 years.

Okay . . . I'm maybe thinking about this too much, and getting myself really confused. Client inherited the contract for deed. Wouldn't he get a step-up in basis that would essentially set his basis at the amount of the remaining principle on the installment sale? If so, why would he need to file a 6252 . . . the only income he would have had in 2006 and 2007 would be interest income? I have tried to research this, but I am obviously not looking in the right places. I may have to go back and amend his 2006 and 2007 returns, which I will do, but I want to make sure that I have this straight in my mind before I do. Essentially, isn't his GP 0%? (since his step-up in basis gives him a basis equal to the contract principle) Have I totally missed the boat here? Thanks for all your time.

Thanks, Maribeth. I think I have been trying to make the Gross Profit percentage calculation too complicated. I was trying to come up with the original GP for the father of my client. Aaargh. I'm not thinking very well. Thanks so much!

Received 10 emails -- exactly the same on Saturday. *** Congratulations! Your e-filing firm is eligible to use the e-Services incentive products. The following incentive products are now available: Disclosure Authorization allows you to submit Form 2848, Power of Attorney and Declaration of Representative, and Form 8821, Tax Information Authorization electronically. Electronic Account Resolution enables you to expedite closure on clients' account problems by electronically sending/receiving account related inquiries. You may inquire about individual or business account problems, refunds, installment agreements, payments or notices. Transcript Delivery System provides online tax return transcripts, account transcripts and a record of account for both individual and business taxpayers. Remember that you must have a power of attorney on file before accessing client’s records using Electronic Account Resolution or Transcript Delivery System. Principals or Responsible Officials can grant their employees access to these e-services through the on-line e-file application. First, add individual employees to the e-file application using the Delegate User function. Next, activate the individual e-services for an employee using the Delegate Authorities link. THIS MESSAGE IS BEING SENT BY AN AUTOMATED SYSTEM WHICH DOES NOT PROCESS REPLIES. DO NOT REPLY TO THIS MESSAGE. *** 10 copies!

I'm working on switching to 'pick up' meetings rather than 'drop off' meetings. Staff members tell clients when they call to drop off all information; I will call them if I have questions, and I will meet with them after the return is complete to go over it with them. So far, it's worked out great. Most don't want to meet after the return is done, and if they do, it's literally a 15 minute meeting, max. Of course, there are some clients I have to meet with, but I know who they are and get it set up. Truly, no one has seemed offended. Caveat: Staff training - I heard a staff member giving 'the spiel' to someone on the phone the other day. After she hung up, I asked who it was. "I don't know. A new client. He was referred to you by 3 or 4 people. I told him to just drop off his stuff and you'd call if you needed anything. He said okay." Hmmm . . . maybe a bit more training.

You all are fantastic. Thanks very much. I read the publication Roydaleone and Linda referenced. I also tried to work through the formula Maribeth suggested. My problem is, I have no idea what the original Gross Profit percentage was. Am I missing something? Is there some way I should be able to calculate that number? The original note holder was not my client. So far what I have done: looked at total principle recovered since my client inherited the note . . . subtracted from this the gain claimed on 2006 and 2007 returns. Claimed the remainder as gain for 2008 and added that gain number to the basis of the property. (Property is now rented, so used the new basis less land value for depreciation.) Does this sound reasonable? Thanks again for taking time to help. Your advice has given me great direction.

Client inherited a contract for deed in 2006. $53,000 was the value of the contract when it was inherited. In April of this year, client got the property back. (Purchasers voluntarily left the property . . . unpaid balance of note was $50,056.88.) Client had property appraised after return. Appraisal was $42,000. I'm thinking that I use $42,000 (less land value . . . it's a residential rental) for depreciation/basis purposes. Is there a way I can take a loss on the contract for deed? Thanks.

Thanks, taxbrewster. I had done that, but somehow they didn't enter it (even though they told me over the phone that it was all set up). After 50 minutes, supposedly it's now been entered. I'll try to resubmit soon. Thanks for allowing the Vent!

39 minutes and 32 sec . . . and 1 tax return later . . . still waiting