SaraEA

One of the parts of the four-part CPA exam is devoted to taxes. There are many out in left field questions, just like the SEE, so they really do have to study tax. Once they pass they become more specialized. Many CPAs work in the corporate world and never touch a tax return. I too know several who mostly do audit and attest functions, mainly for cities, municipalities, and corps (places that have to be audited annually). THAT is where the money is! The CPAs Black Bart is meeting are at tax seminars or on tax blogs--naturally those are the ones who do tax. As for attorneys, if anyone followed the link I posted under the "don't take the bait" thread, the free listing of PTIN holders includes credentials. I was surprised at the number of attorneys who have PTINs. Guess those are the ones who do taxes, but I doubt any concentrate on individuals. Even entities require accounting, and no one would want to pay $400-500 an hour for write up work. Most likely they only do estates and trusts. Has anyone ever had a new client whose former preparer was an attorney?

EAs are already stiffly regulated by the IRS. They had to pass a tough exam and are subject to background checks and continuing ed requirements that include yearly ethics. Nothing the states can do to top that except require CEs or a competence exam in state taxation like CA does. CPAs are regulated by their state accountancy boards, which also require CEs, ethics, and background checks. The CPA exam has one part devoted to taxation, so they had to study up for that. Most CPAs specialize. I meet many of them who do taxes at CE seminars. I find that many don't do taxes, or just the do returns for the businesses they handle and perhaps the individual owners of those businesses. I work in a CPA firm, and we have quite a few clients who are CPAs. I wonder about attorneys. They have to take bar exams and are regulated by their state bars and I assume have CE requirements. Do they ever have to study taxes? I have quite a few attorneys who refer estate and trust tax filings to me. They probably charge the client twice what I charge them, but the fact is they are not attempting these returns in house. So at least from my experience, CPAs and attorneys are professionals and seem to know what they don't know. CTs new regulations include a fee of $100 for the initial application and $50 every other year after that. At least there are some competency requirements (borrowed for free from IRS). When NY first began regulating preparers, there were no requirements outside of paying a hefty fee.

For those who don't click links, just google foia + ptin. In my search it was the second item on the results list.

Believe it or not, the data are free under the Freedom on Information Act. Here's the contact info of all PTIN holders: https://www.irs.gov/tax-professionals/ptin-information-and-the-freedom-of-information-act

Aw, com'on, you're spoiling all the fun. Even those who don't follow politics very closely have to admit that there has never been so much entertainment coming out of Washington DC before. I find myself anxious to get the news every morning just to discover what quirky things transpired overnight. Both parties are contributing their share of entertainment value, so it isn't even a political thing. Seriously, though, banning political discussion is the right thing to do. In almost every blog I follow, as soon as someone makes a political comment things gets nasty pretty quickly. We have plenty of other ways to have fun on this board.

I have an elderly client who on April 15 couldn't remember if he paid his one estimate or not. (If they have the cash, I often set up older clients with just one ES so they can pay when they pick up their return and be done with it for the year.) His son did a cursory review of the bank statements and didn't spot anything, so I didn't enter the payment, although I was pretty sure he had paid. About three weeks later the son told me his dad got a check for the full amount. When in doubt, especially if there isn't time to get a transcript, don't enter a questionable payment. Better for the client to get a surprise refund than a surprise bill!

Most trusts have to use a calendar year. This from the Form 1041 instructions: "Generally, a trust must adopt a calendar year. The following trusts are exempt from this requirement: A trust that is exempt from tax under section 501(a); A charitable trust described in section 4947(a)(1); and A trust that is treated as wholly owned by a grantor under the rules of sections 671 through 679." Note that the extension due date is only 5 1/2 months. Also, the letters assigning EINs to estates and trusts are pre-programmed to use a calendar year. Almost all the estates I do elect a fiscal year, so you can safely ignore the letter. Gail is correct that the reporting period is established when the first 1041 is filed, letter instructions notwithstanding. However, this only applies to estates and exempt trusts.

And then there are the clients who come in with their check already made out for the same amount they paid last year.

I understand you posters who want to do the "right thing," but the IRS is not going to have transcripts going back 20 years. It is a good idea to pull this client's record of account to see if perhaps a SFR was filed. If not, there is nothing you (or the IRS) can do but file the open years. I did have a client who hadn't filed in about 5 years, but in this case the IRS had 1099s to prove income and was hounding him. Believe it or not, he actually had records (receipts, check registers, mileage logs) for all those years. I have observed that serial nonfilers often have some personal catastrophe that gets in the way of their filing one year, and after that they are afraid to file. In Naveen's case, though, I believe the IRS would have come knocking if a SFR showed a balance due. Did he move a lot so notices didn't reach him?

But the presenter I had yesterday said since the Statute of Limitations has passed, no one has to pay the taxes. Sounds like in your example, somebody paid.

The US Congress can't make states regulate tax preparers, but several states have done so on their own. Realize that the states often serve as laboratories for policies and procedures that, if successful, eventually enlighten national policy. MA, for example, had mandatory health insurance requirements for years. It worked well enough to become the prototype for "Obamacare." Same-sex marriages were initiated by the states (which have always been the ones to make the rules governing marriages--remember the jokes about eloping to Las Vegas because they didn't have the testing and waiting periods for marriage licenses?). There have been many attempts at the federal level to regulate tax preparers, none of which have gone anywhere. Now it's up to the states to step in and show the feds how to do it. I do agree that in some cases state regulation is nothing more than a money grab. When NY first instituted regulation they charged over $100 for the privilege of filing state returns. There were NO competency requirements at all! They have since imposed some, but early on it was obviously an attempt to collect money. The NY chapter of NAEA fought long and hard to get state officials to exempt EAs from the new fees on the grounds that they were already regulated at the federal level (which at least had some meaningful teeth in it).

I was at a seminar today, and the presenter mentioned how elderly clients will sometimes unearth US Savings Bonds that matured some time ago, or someone dies and the relatives find a stash of matured bonds. We know the interest should have been reported in the year of maturity even if the bonds were not cashed. The presenter said that if the SOL has passed, the IRS can't collect taxes on the accrued interest. He did mention that the SOL is longer if the unreported interest was more than 25% of gross income and even suggested that if the person hadn't filed because they were under the filing requirement the tax could no longer be assessed. He said that when the person/heirs cash the bonds they will get a 1099 for the interest paid, but they should add that to the return and then back it out with a notation that the interest was reportable in a closed year. To me, it just seems wrong that someone who cashes in old bonds with, say, $50k accrued interest, will not have to pay taxes on that amount because they didn't report it when they should have and the IRS didn't catch them. Thoughts?

Not sure about 20 years ago, but in more recent years the IRS computers would have created a SFR, using Single, one exemption. If that showed a balance due they would have filed for him, and he would have heard from them by now. My hunch is that there were overpayments, which he certainly can't claim now. I'd just file the open years and assure him everything must be ok with the IRS before then.

I got just the tail end of a voicemail recording at home that said I was being sued by "the state" for failure to pay taxes. I always talk with my clients about the IRS calls, and by now most of them know these are frauds. Guess the scammers are trying a new tactic. Good thing they're too dumb to at least identify what state is suing me.

If an asset is sold within 6-9 months after the date of death, the IRS will use the selling price as FMV because it's obviously what a "willing buyer" was willing to pay. If an estate return 706 was filed (unlikely), the valuations on that return must be used. The problem with Probate filings is the inherent conflict of interest--the attorney will undervalue assets to lessen Probate fees, while heirs need a higher valuation to minimize cap gains when they sell. I have a client who inherited a home on the ocean in the Hamptons that shows a FMV of less than $300k in the court filings. I think the patch of grass between the walk and mailbox is worth more than that. She did buy out the other beneficiary for $1.8m, so at least she'll have some basis to show.

In what state does this client live? The way I understand it only the resident state gives you credit for taxes paid to other states (because the resident state taxes you on all your income). If you file a nonresident return, you only pay tax on the income earned in the nonresident state (so of course there is no credit).

I have a CA client who recently got a letter from the department saying he didn't pay the estimates he claimed to pay and owed $228. I had copies of his cancelled checks for $1200 each. He called them and they said he must have used 2015 vouchers. No, the vouchers clearly said 2016, as did the notations on the checks, "2016 CA Form...ES" on all four of them. And if he used the wrong vouchers, why wasn't he off $1200? Where did $228 come from? Talk about them not being helpful: They told him to just pay it because it wasn't that much!

You're overthinking this. Yes, the trust can sell the property, purchase date is "inherit" so automatic long-term, stepped up basis. The only difference is that if the trust is going to sell, the expenses to manage the property (electric, water, mowing, etc) will not be deductible because they are for the convenience of the beneficiaries.

Most likely the most relevant section of the reg is " (2) Without regard to the date of the decedent's death, property transferred by the decedent during his lifetime in trust to pay the income for life to or on the order or direction of the decedent, with the right reserved to the decedent at all times before his death to revoke the trust." In other words, if the grantor explicitly had the right to the rental income and could change or revoke the trust at any time, beneficiaries get step up. You have to read the trust document.

In our office we do on purpose what ATX is making you do, i.e., put the things the client needs to attend to up front. So, for example, we collate fed payment instructions and voucher, fed ES instructions and voucher (knowing they will make out checks and it's easier for them to make out two in a row to US Treasury), state payment instructions and voucher, state ES, then the returns. Even when they have refunds, we put the fed and state instructions up front because most of them only want to know how much they're getting back without digging through the whole folder. If we are delivering the returns to the client electronically, I usually send two messages--one for docs to sign and return, the other containing the returns. Even then, I've had a few who print out and sign page two of the 1040 and return that. How could I make it clearer than a separate message labeled "documents to sign and return to us"?!

I too plan on working until I don't want to anymore because I love what I do. At some point I may not want the grueling hours of tax season so may go to work for a big practice or tax attorney doing legal research to derive "substantial authority" for positions clients might want to take. And/or do estates and trusts only, especially estates since they have their own fiscal years and don't get bunched up into a few months. I understand everyone's concern with letting go long-term clients and worrying about them getting into good hands. Don't. Long ago when I was with HRB I put off leaving for too long because of concern for loyal clients, many of whom had been with me for years. (I was always booked solid every hour I worked and fortunately didn't have to deal with walk-ins.) After I bit the bullet and left, a couple of dozen found me even though my new position wasn't anywhere near the HRB area. The rest I trust got settled with someone else or somewhere else. I still think about the deaf client whom I always started with a big sheet of paper so we could write each other notes, and the one who couldn't read but wouldn't admit it so I had to read things to him. Now I too have lots of mail-in clients I've worked with for years, and almost all need advice or opinions from me year round. You know what, though? If and when I retire, they might just find someone in their locale and realize it's better for them that way. This year I picked up two new clients (referrals since I don't take new clients) who had been dealing with out-of-state preparers and finally decided to go local. Both were thrilled with the ease of getting their returns done, dropping stuff off, etc. It will happen to your clients too. Maybe the hardest part of letting go is admitting we are not indispensible.

Yesterday I emailed an attorney with my fees for a trust 1041, since he is doing the estate return and can deduct them. The trust was a grantor trust in 2015 with not much on it that all went over to the individual return, which I was doing anyway so I charged $250. This year it was a complex trust, final return, with four K-1s. There were literally three stock dividends to put on it, nothing to weed out that belonged to the deceased. It took a little over an hour, most of that time spent assembling, and I charged $500. Attorney got back to me that my fees are low! Maybe he's used to making $500 an hour, but that's glorious to me.

CPAs and EAs have complained forever that half of the issues on their tests are things they will never, ever see in practice. Probably true, but you never know. I'm sure I forgot a lot of these things that I "learned" studying for the SEE, but guess what? Every so often an issue comes up and something in a hidden brain cell tells me there's a rule for that. Then at least I know to look it up. So, while some tax areas may seem remote and you'll likely never encounter them and will forget the details, knowing that they exist may be helpful someday. I am resigned to the fact that the industry needs regulation. We have all seen the shady and/or stupid things that some tax "pros" produce. And we've all have potential clients walk because they didn't like the result. Where do they go? Back to the jerk who lets them deduct commuting miles, "uniforms that consist of jeans or black pants, nonexistent education, you name it.

Since when do partners get wages? Guaranteed payments, maybe, but those are not wages.

Some states are asking filers to verify their identities, but they have to respond via a state portal. You can't use it unless you got a letter requesting you to do so. I have seen two letters from the "IRS" that were obviously scams. They surprised me because they came in the mail instead of the usual electronic means.