SaraEA

The only question that throws me is #5: Did you satisfy the record retention requirement? To meet the record retention requirement, did you keep a copy of any document(s) provided by the taxpayer that you relied on to determine eligibility or to compute the amount for the credit(s)? I In addition to your notes from the interview with the taxpayer, list those documents, if any, that you relied on First it says did you keep copies of any documents you relied on, and then it asks which IF ANY did you rely on. How do you answer that?

The problem with the approach being recommended here is that the new withholding amounts don't start on Jan 1. By the time clients come to us, we calculate new withholding amounts, they turn the W4 into HR, and a pay cycle or two go by before the change takes effect, it's March or April or May. They will still owe next year. Be sure to warn them. I HATE having to calculate withholding amounts. I believe you can have 10 people or 10 software applications using the same Pub 15 and will get 10 different answers. For this reason I always suggest mid-year checkups. A few actually take advantage, but only a few. The rest repeat the screaming and hollering the next year. Always OVERestimate.

I'm with Rich. I've only done two returns so far with CTC (Not ACTC) and the due diligence questions were making me dizzy. Then I realized, hey I know these clients, been doing their work for years, remember when their kids were born. I am absolutely sure they are eligible for the CTC and I am not going to take up their or my time attempting to obey the instructions for a million little boxes on the 8867. If anyone else claims their child, it will be a case of identity theft, not lack of due diligence on my part. If there is a statement from child care or maybe the child got Soc Sec from a deceased parent, I'll keep that in my records. But I am not going to torture most of my clients who have children into proving the kids live with them and are indeed theirs. Of course, we know most of our clients. New clients with kids will be a different story. For a few years we have not taken new clients with EITC. We send them to Block, saying the rules are so complex and we do so few of that type of return that Block preparers are better trained to help them. But geez, we can't turn away every new client who has children! Fortunately, we take very few new clients.

This memo just came out from one of the insurance companies on the CT exchange. They probably know more about what's going on than most of us. We know there has been a lot of news around the president’s Executive Order to Repeal and Replace the ACA or Affordable Care Act (also known as Obamacare). Here are some facts: >Did the executive order repeal or replace the ACA? No, it did not. The ACA has not been repealed or replaced at this time. >How does the executive order affect 2017 coverage? It Does Not. The Connecticut Insurance Department assures us that plans that customers enroll in during this Open Enrollment will be honored for the entire year according to state regulation. >Do I still need to enroll? Yes. The law still requires residents to have coverage. >What happens if I don’t enroll? You could pay a tax penalty of $695 or more, and you won’t have coverage for your healthcare needs.

Ultratax requires an entry on the "verify ID" tab for all states, even though most states don't require it. A rep told me the IRS requires it (wrong) and that it came out of the security summit (maybe as an idea?). We can mark "none provided" and the diagnostic goes away because we made an entry. In other words, you can't just ignore the screen even if the client's state doesn't ask for ID info. I thought marking none provided was an easy way out but the boss says enter the driver license info anyway because we'll likely need it in the near future. BTW, NY and GA also require the info. NY will be a problem because they want a document number which is on the back of the license. From what I've picked up, AL, GA, NY and OH require state ID. Anyone know of other states?

We started using a Client Contact Sheet last year and so far it's working okay. If a client calls with a simple question--what should I put on my W4--I don't bother filling it out (standard answer: Single, Zero). For questions that take more time--what will my tax be if I sell this building, if I sell that business, if I gift the building--we fill out the sheet and file it in the current year electronic file cabinet. In addition to recording the query and response, there's a place on the sheet for how long it took and what the charge should be. We add it to the tax prep fee. Interestingly, about half of my clients who take up 15 minutes of my time on the phone or come in for a brief meeting tell ME to charge them. Do I have great clients or what? (At least half of them.)

Illmas, are you giving out free advice on Facebook? No wonder it's taking up so much of your time. We are starting to set limits. A client came in 5 or 6 times recently. He was getting divorced and the attorney wanted this and that or said this or that and what did we think. Recept finally sent him to me and told him there would be a charge and that he already owed us $X for his previous visits. He walked out in a huff and said he wouldn't be back. Bye. All he was looking for was free advice. We had a client actually tell us once that he was asking us because the lawyer charges everytime he calls. So why are you giving away your knowledge for free?

Yes. Look at the letter the IRS sent with the EIN. It clearly states a 1065 is due March 15, so they'll be expecting one. They need to file. Mark the box "final" return. If they registered with the state, they have to unregister or they'll be charged annual fees (depending on the state).

And only now we're hearing that NJ will not release any refunds until March 1. GA won't begin processing returns until Feb 1 and says they will take about 90 days. Any word on other states planning refund delays? As the IRS filters got more sophisticated, crooks did start targeting states. I had several clients who received 1099Gs from states where they had never filed. Now the states are fighting back as best they can. The driver license requirement is a bit much. Most have a million digits, which we have to type and double check. I would love it if some of these software companies would build in verification, where you have to enter critical numbers twice. HRB had that way back when I worked there and I hated it. Now I miss it, especially when it comes to bank routing and account numbers (and soon driver license numbers). Half of my clients don't get refunds, or if they do they apply them, but for the rest we'll have some 'splaining to do.

The one I got this week asked me to "process their employees refund." Hmmmm, already knew there was a refund. Then asked me to "revert as soon as possible." Cheap translation software I guess. I did not bother to open the "financial affidavit" attachments. In the past year or so I have gotten over a dozen of these, some using better English. WHY does the IRS publish/sell our contact info? They are taking all these steps now to warn us about crooks trying to get our info, yet they are causing the problem or at least enabling it.

There is also a British Virgin Islands, which is treated as a foreign country. Make sure you have the right VI.

That's harsh Tom. Often one spouse controls the accounts and the other will never see any of the refund. The bigger issue here is the conflict of interest--doing what's best for one may not be best for the other--a Circular 230 violation. In our office the policy is to split the spouses between two preparers so one of us never does both. Only exception is when the court has ordered that they file jointly (although I think that's an overstep of judicial authority). Many places have written agreements both spouses must sign that they are aware of the potential conflict and want to proceed with the same preparer anyway.

Lion, I'm no fan of EITC, but I've always disagreed with the argument that people know how much to make and then quit so they can maximize the credit. Most recipients aren't qualified for big-bucks jobs. Take someone who makes $10 hr X 40 hr work week X 50 weeks = $20k income. If they have a child they are eligible for a big credit. Someone who makes $20k isn't likely to stop working mid-year because they really need the money. Someone who makes $30 an hour isn't likely to quit after four months just to maximize EITC. EITC was expanded to replace welfare during the Clinton years. It was pretty successful in getting people to work because there were lifetime limits on welfare benefits. Now to get the money you had to have EARNED income. The biggest problem with the system is that it's so easy to cheat. The IRS should never have been given responsibility for administering the program. Welfare used to handled by social service agencies, but Congress wanted to make it look like EITC was not welfare so handed it to IRS. It wasn't welfare--people had to work to receive it--but they were ending "welfare as we know it." I think it should be administered by social services, real people who look at actual documents to determine eligibility. Instead of being IRS police, we tax pros will just prepare a normal return, hand it to the client, and let them take it to social services for their EITC. End of fraud (and much refund ID theft).

Terry, the right words are that the standard mileage rate includes a depreciation component (24 cents a mile for 2016). Also tell your client that the IRS will not believe any vehicle is used 100% for business (except a cement mixer I was told). To solve your conundrum, just complete a 2106 and see if the software makes the excess taxable. If it does, go with the standard!

If you gift real estate, some states do follow the public property transfers and demand 709s (including late filing penalties). Problem with your approach is that if someone goes into a nursing home prior gifts are part of the Title 19 application. You can't just wait until someone dies to reveal them.

efile doesn't even start until Jan 23. This smells to me like something HRB has offered for awhile--a refund advance you could get in Dec., offered mainly to returning clients (ones who had a history of getting their real refunds without offsets). The no fee, zero percent seems to me like "if it sounds too good to be true....." Someone has to pay for the risk that the client doesn't return/repay/qualify for a refund, and I'm sure it isn't JH or the bank. Sad that some people are so desperate for their refunds. Maybe this year when the money doesn't show up until late Feb the mindset will start to change.

Will mid-month convention mess up this plan?

Why are people so afraid of the gift tax? I've had many clients believe they can't give away more than $14k a year (or $12k if they're stuck with what they heard in the past). You can give as much as you want away, but if it's over $14k you must file a gift tax return. Unless you've given away $5.45m ($10.9m MFJ), you will pay no gift taxes. You file the return only because that's how the gov't keeps track of your lifetime gifts. If what you've gifted plus what's left over when you die is more than the above threshholds, you will pay some estate tax. This affects very few people. Those with that kind of wealth usually set up trusts, whatever to avoid it. Note, though, that some states have lower threshholds. Instead of dancing around with joint accounts and such, tell your client just to give the person the money and file the 709. All they'll loose is your fee. I charge $350 for federal and state.

You want them to go back to their old preparer! I wouldn't touch this one. First anyone who needs $10k a month for their lifestyle ain't eligible for EITC. Second, a return like this is worth $800-$1k, but they're going to expect to pay $100. Not worth it. Long-distance truckers do have a lot of expenses. The rigs depreciate over 3 years only, so that may be why you're not seeing depreciation. Fuel is of course a huge expense, plus fuel surcharges and over-the-road taxes. Tires alone can be a mortgage payment. My trucker clients have something on almost every line of Sch C, and for this I charge them. Heck, I wouldn't even do an Avon Sch C for $100.

If you scroll the cursor over the link (don't click it!) the entire address will be visible. Oftentimes you'll see addresses with weird extensions. Delete. As for bad websites, you just have to depend on your security software. A few years ago I read that a lot of sites that showed up in Google Search were dangerous, but I haven't read anything recently so I trust they've cleaned up their act. Yahoo's email accounts were often hacked so I never trusted messages from Yahoo (even though lots of my clients have them). I get a lot of weird messages from Linked in too. Now that Yahoo has revealed the two biggest hacks of all time, nobody should use it for their home page. I too use irs.gov for the home page at work--saves a lot of clicking.

How long does it take you to complete an EITC return? Those are a lot of questions. We do very few EITC returns but have many with the CTC (a few with ACTC). I think we are in a worse position than most because we know almost all of our clients, remember when their kids were born or how happy they were when they got into their first choice college, so we may tend to skim over those due diligence requirements because we already know the answers. Now even that's not enough, we have to have documentation. Prices going up....... The AOC will be the worst because we have to have the account payment transcripts. I usually only request those when there is an audit letter (quite common where there are 529 plan withdrawals and education credits claimed). Now we'll have to see them for everyone. They are not easy to decipher. Would anyone just accept the 1098T when there is like $35k tuition billed and $5k in scholarship? I am so mad at IRS for giving the schools another year before they have to fill in the "expenses PAID" box. They've already had nearly 20 years to get their computers reprogrammed.

I just did one of these. You have to do two 2848s. The living spouse signs the form of the deceased with the title of "executor" or "personal representative."

Saving on SE tax is not a forward-thinking plan. Does your client want to collect SS someday? The more she makes the higher that monthly benefit will be. I remember some time ago when SSA started to send everyone a statement of projected earnings each year. Amazing how many self-employeds suddenly showed huge increases in their profits. Wonder if looking at those statements that showed they could expect to collect $200 a month had anything to do with it.

The election to report accrued interest must be made on a timely filed return (including extensions). You cannot go back and amend the decedent's return for this. You will have to amend the estate return. Hopefully the estate made enough distributions not to have to pay income tax. With this amount of interest alone, you are looking at the 39.6 bracket. If it's not too late, perhaps the bonds themselves can be distributed to the beneficiaries. They will have to pay tax on the accrued interest, which they will have to do anyway if the estate has been distributed, but at least they won't have to go back and amend their own returns. Going forward they will just have to pay tax on the interest accrued each year, but that's not your problem unless they are also your clients. I am working on one right now where bonds are still earning a guaranteed minimum of 4 percent. The beneficiaries would be foolish not to want the bonds instead of cash--where can you get risk-free returns like that today? Fortunately in this case I can declare the interest on the deceased's 2016 return, where it will be mostly negated by medical expenses.

Sounds like a good idea to automatically file extensions but use them only for the federal filings. We always waited a few weeks after issuing W2s and 1099s to file the federal and state because invariably some recipients would call to say their address/SS#/amount was wrong. On the other hand, since the purpose of the earlier deadline is to allow IRS matching before refunds are issued, would filing an extension and delaying federal reporting hold these clients' refunds until the 941s are filed?