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SaraEA

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About SaraEA

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    CT

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  1. SaraEA

    States and TCJA

    A while ago there was a thread on the best and worst states when it comes to handling taxes. As the states get their teeth around the TCJA, we'll start to see those that have uglier sides. I nominate CT. On May 31 the governor signed a law that pass-through entities must now pay tax at the entity level, at the top rate of 6.99% of course. Partners and S corp members will get a credit on their individual returns. Problem is that we tax pros found about this on June 13, two whole days before the 2nd quarter estimates were due. So now all these entities are two quarters behind, and interest and penalties are threatened unless the individuals "recharacterize" their individual estimates as paid by the entity. It gets worse. Yesterday we learned that the state has decoupled from the new bonus depreciation that went into effect Sept 27, retroactive to Jan 1 2017. So anyone who filed a perfectly accurate return this past season and took advantage of the bonus now has to amend their CT and pay interest (at 1% A MONTH) and possibly penalties. To ask for abatement, taxpayers have to go through the usual channels and send "evidence and documentation" to the DRS legal department. I feel like sending them the whole 1100 pages of the TCJA! I can't wait to spend days culling client returns to find out who was affected and then tell them they owe CT money and us money for the amendment. The fact that no notice came from DRS until it was too late suggests they were being sneaky, didn't want anyone to notice. We need a DRS liaison in this state, and a legislature that doesn't pass laws that penalize taxpayers retroactively. I can't wait until November!
  2. SaraEA

    House fire and casualty loss

    What a sad situation for your client. I don't think he inherited a casualty loss. He inherited a burned out house and the insurance proceeds. An appraiser should value the house and land to establish FMV. The insurance is just a cash nontaxable inheritance. (Mom held the insurance and it should have gone to her, but son inherited it.)
  3. I agree with John's insight that it is wise to pay attention to what Block is doing--they have the resources to do the number crunching and projections. I think that the upcoming season will be booming for everyone due to all the confusion, but once people get the realization that itemizing won't do them any good and their refunds are shrinking due to lower withholding, that business will drop off. I read Block's conference call transcript, and there's a lot more going on. Interestingly, millennials comprised something like 35% of their new business--evidence that young people are now working and don't have time or inclination to learn taxes or attempt their own? I think the office closures are a response to competition. Back in the heyday of RALs, Jackson Hewitt and Liberty were opening offices wherever they saw Block's busiest offices. And where they opened anywhere else, Block opened to lure traffic away. Those days are over and Liberty in particular is losing franchisees, closing offices, and may be delisted. No need to have all those offices so close to one another if a competitor is gone. Block said most of the closures are within five miles of other Block offices, more like the distance used to be before they decided to out-office the competition. Block does know something, which is why they were on a mission to buy out small independents. Are they still doing that? They knew for some time that software would replace the easy-return market, and this week they acknowledged that they will do something about pricing. Didn't say which direction they would move prices, but they do charge a lot and likely can't see a way to justify the fee when a large share of their clientele no longer will itemize. When I worked there years ago, they said that changes in the tax law drew a lot of business. They staffed accordingly, and they were always right. I think this upcoming season will be crazy busy for all tax preparers. While those who no longer itemize may DIY after that, I don't think anyone who is self-employed (including the part-time gig folk, those who sell occasionaly on the internet, etc) will ever attempt their own return. Ditto for landlords. And with the magnitude of the changes under the new law, I believe a lot of preparers who were thinking about retiring will just do it rather than try to learn all the new rules and unlearn the old ones. That too will drive more business to those who stick it out.
  4. SaraEA

    Draft W4 for 2019

    Another wrinkle is that the new form is coming out now, and half the year will be over by the time the new declarations affect paychecks. Many workers had a lot less withheld starting in February, so even if the new W4 is right on the money they could still come up short.
  5. SaraEA

    watch out - more scams

    Now this IS scary. Thankfully Catherine was wide awake. What do we do? Never open any attachments without calling client to confirm s/he really sent it?
  6. SaraEA

    Gift Tax - Crypto Assets

    Your client could possibly report the sales separately on his tax return (he has to to satisfy computer matching) and then nominee them to the recipients and issue each a 1099. However, this could open up a can of worms. Can you legally invest for others without some kind of license? I know that cryptocurrencies aren't quite regulated by the regulators, but investing for others sure is. Maybe he can report the whole thing on his own return, calculate the tax he had to pay on each investor's gain, and then gift the remainder to each of them. (Gift tax return required only if over $15k.) This situation underscores a major problem with the cryptos: Novices are catching the bandwagon, some losing their shirts, and some getting themselves into places they don't want to be like your client.
  7. SaraEA

    Cash Basis Taxpayer & Credit Card Charges

    I think that "back in the day," store cards were issued by the store, so there was a difference between store credit and branded credit cards. Now most of them are issued by banks, so those old rules may not apply in many situations like yours. It was most likely a political thing, with the banks lobbying congress for special treatment. Heck now you can get a credit card branded from your alma mater, or the NRA, or AARP, or Ducks Unlimited, and it still comes from a bank.
  8. SaraEA

    Form 8283

    Does ATX really make you fill in all that info? Good grief. I hate 8283 as much as anyone, but UT goes a lot easier on users. The type of organization defaults to 50%, no property type or contribution limit questions (repetitive question), no question about goods or services received, no checkboxes about the organization and type of gain, and no entry for condition. How would you even know that? Half of the receipts I see don't even list an amount and none has ever shown condition (well, once and awhile someone lists "new"). There is a box for donor's cost but it doesn't have to be filled. I think ATX is really overdoing it and torturing users. In a National Research Program line-by-line audit I recently completed, the auditor disallowed ALL cash contribs because of lack of documentation that followed the law but didn't say a word about a lot of Goodwill donations. The clients had only skimpy lists written on the receipts, but I guess the substantiation requirements in the code and regs are not spelled out so auditor just accepted the amounts. What a racket. Hopefully our 8283 angst will dissipate now that fewer people will itemize.
  9. SaraEA

    This is a new one for me

    Instead of a shady relative or careless preparer, it could actually be an IRS error. I've seen several in the cases of decedents. In the last couple of weeks a widower came in with a refund check made out to his deceased spouse. I told him to call the IRS, which told him it was the preparer's error. Um, the return is clearly marked with the correct spouse's date of death, and since the return was efiled I doubt the computer mixed up the names. Maybe these returns have to be handled by real people, who no longer seem to have adequate training. If a joint return was filed, the surviving spouse does not need a 1310. If there was one, then I'd be suspicious. In that case, maybe the preparer never did this before and not only filed one but filled it out wrong. It definitely requires a SS#, though, and one would think IRS matches name and number with the SSA just like they do with any return before accepting it. Best thing to do is for the client to call IRS and see what happened and how it can be corrected.
  10. SaraEA

    Retrospective look at 2017 tax filing season

    When clients don't know their total miles, just don't put the property tax on the auto worksheet but enter it directly on Sch A. So they pay a little extra SE tax, but at least the amount on Sch A is documented. This of course might not help people who already reached the $10k cap on state and local tax deductions in 2018. Thinking about that caveat, I am beginning to recognize that we have a lot to UNlearn.
  11. SaraEA

    Personal question, kind of

    I think part of the emotional letdown is that for months now you have been building up for the race, focusing all of your time and energy and thoughts into it, and now it's over and you've crossed the finish line. Think of those runners in the Boston Marathon on Monday. They spent months training, a few hours running, and now what? Go back to running their 5 miles a day or whatever they do, it's just not the same. The other part is that for these few months, we have been the most important person in many of our clients' lives. They need us, depend on us, confide in us, and now we're just another service provider. This can be a real downer. Think it through. No one can keep up the pace we do during tax season all year long. Would you really want to? Not me. And while it does make us feel valued and important that so many clients trust and depend on us, that responsibility is what overwhelms us as tax season draws to a close. I am so looking forward to a normal life after the past few weeks. It does take a little time to "come back down."
  12. SaraEA

    back to the trust year

    Most trusts have to use a calendar year. Estates can use a fiscal year. An estate 1041 ending June 30 2018 will be due Oct 15. You can file for a five-month extension.
  13. SaraEA

    SSA Says Taxpayer Is Dead

    This week a client whose wife died in January got a refund check made out to her. This happened in our office once before, and that time the IRS was quick to issue a new check. This time the client called IRS and was told that the preparer messed up. Excuse me, the return clearly shows the wife's date of death and has "filing as surviving spouse" in her signature area. It was efiled, so why don't they blame the computer? Looks like the reduced money IRS has for training is taking its toll. I feel so bad for these people. Both had recently lost their spouses and now had to go through this mess.
  14. SaraEA

    More Trust mishandling

    Just don't mark the 2017 return as final if payments continued into 2018. The date the trust technically closes and the date it closes for tax purposes don't have to be the same. I recently filed a final estate return that has a big refund coming. I told the executor to keep the bank account open because the check will surely be made payable to the "estate of..." and there will be no way to cash it if the estate account is closed. So the estate is closed for tax purposes but still technically open. In your case, if the income was being deposited into the trust account, was it being distributed to the beneficiaries? Then it should be taken as an "income distribution deduction" and flow through to them on the K-1s anyway so the trust will owe no tax.
  15. SaraEA

    Need Help with Rental

    What everyone is recommending is of course the "right" way to handle this. In this case I might just take a shortcut because the bottom line will be exactly the same. On the 4797 there is a line for "depreciation allowed or allowable." Calculate the depreciation that should have been taken and deduct it from basis. There is no recapture because the house was depreciated under MACRS. The depreciation not taken in 2014, 15, and 16 is going to lower basis on the 4797 anyway, leaving you with exactly the same amount of gain/loss. The prior year unallowed losses should have been larger with depreciation, which may or may not affect gain/loss taken in the year of sale depending on how the math works out because they are allowable in the year of sale. Thoughts?
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