SaraEA

Remember when the IRS used to treat us as stakeholders? They couldn't praise us enough for helping them do their job. It changed when Karen Hawkins became head of the Office of Professional Responsibility. To quote her in an Oct 2015 interview with the American Bar Assoc, " I believed (then and now) that the real harm being done to taxpayers and the tax system involved violations of the various due diligence provisions in Circular 230 which occur in epidemic proportions." Every presentation she gave that I witnessed was more like a scolding than a learning experience. I remember once when she went on and on about basis of securities, assuming that we all just make them up. In reality, every preparer in the room likely spent half of their tax season trying to determine a reasonable basis. I was so thankful when she left, but it turns out that her legacy didn't. WE are the bad guys.

I've done this in a case where a couple chose MFS because they thought it would give her child more college financial aid. It didn't and it cost them a lot in taxes. H was listed first on their previous returns so I amended his only. I've also done this for the same scenario giogis has. Do the same thing, amending one return. The only problem I had was the explanation. "Forgot they were married" had to do.

The regs issued last Friday finally make clear that taxable income for purposes of calculating QBI is taxable income from Form 1040 less capital gains AND qualified dividends. In several courses I was told that cap gains are deducted because they already get preferential tax treatment. Well so do divs, but I saw no place for them on any worksheets. From the Regs: Consequently, capital gains and qualified dividends treated as investment income are net capital gain for purposes of determining the section 199A deduction. There is no place on the 1040 that shows taxable income before the QBID. Guess they had to cut lines to make it fit on a postcard. It's all done on a worksheet, which shows the subtraction for cap gains but doesn't indicate that qualified divs are considered cap gains for this purpose. No wonder we're all confused.

In our state those who are furloughed can collect unemployment but have to pay it back when they get their back pay. At least this can help tide them over until their pay comes. Those who are working without pay are not eligible because they are "not available for work" meaning not looking for another job because they are already performing one. I know a couple who both work for IRS, one an auditor and the other in upper level. Both must be home with no income so unemployment should help them. I think there might be a lot of resentment in all gov't agencies when some coworkers get to stay home and play and get unemployment while others have to go to work every day without pay or UE. A private company would never get away with that.

It will knock out all my clients if they have to keep a log of their time spent, when, what they did, etc. It's hard enough getting them to understand the necessity of mileage logs. And the "separate books and records" means what? Most of them give me a handwritten sheet where they list taxes, utilities, repairs, etc (always forget the rental income so I have to ask). I guess this is a separate record, likely gleaned from their personal checkbooks. What does everyone think about that?

I got excited about that too when I read the click bate. The current waiver applies when the taxpayer pays 90% of their tax bill, so this isn't a big deal (and if they don't pay 85% the penalty is still calculated on the basis of not paying 90%). Upper income people who have to pay 110% to avoid penalty get no break. Just another headline that makes it look like the IRS is being compassionate when it amounts to a hill of beans.

Dear IRS: Confusion reigns (see all of the above posts, as well as all of the similar pro and con arguments on countless other boards). Please give us a bright line test! Here it is Jan 14, filing season opens in two weeks, and tax professionals still do not know what to do.

In our state it is illegal for private employers to not pay people for time worked, and the DOL comes down on them hard. How do the Feds get away with this? And who in the IRS (or any other gov't agency) would gladly go to work in this high-stress job if they could just stay home and know they'll get paid anyway? I don't want to go into politics here, but at the very least can't our gov't find a way to pay those who are working? Not only will it incentivize them but it's the right thing to do. I can imagine people calling the call centers and getting very rude responders, who had to get out of their PJs and go to work for nothing and didn't get enough training in the new tax laws to even answer the questions. To repeat myself, I am SO not looking forward to this tax season.

To add to the confusion, this from the recently released draft of Pub 535, pg 2. The draft is dated Jan 7. Emphasis added. https://www.irs.gov/pub/irs-dft/p535--dft.pdf I In general, to be engaged in a trade or busi- ness, you must be involved in the activity with continuity and regularity and your primary pur- pose for engaging in the activity must be for in- come or profit. If you own an interest in a pass-through entity, the trade or business de- termination is made at that entity's level. The ownership and rental of real property doesn’t, as a matter of law, constitute a trade or business, and the issue is ultimately one of fact in which the scope of your activities in connec- tion with the property must be so extensive as to give rise to the stature of a trade or business. However, the rental or licensing of property to a commonly controlled trade or business is con- sidered a trade or business under section 199A.

I have read a lot and gone to several seminars on the topic, and virtually all of the authors and presenters said "stay tuned" after giving their yes or no opinions. After the IRS released the reg last fall they asked for areas in need of clarification. One of the national accounting boards shared their response and whether rental activity qualifies or does not was one of the first items on the list of things that needed more explanation. At this point I'd say we still aren't 100% (or even75%) sure. The 2018 UT software is calculating the QBI for Sch E activities. Do they know something we don't?

At this time I'm usually psyched up for tax season, but not this year. I've done hours and hours of training and reading, but what's weighing me down is that I don't feel competent in the new tax law. Now when a client calls with a question (can I still claim my kid, should I pay my RE taxes in Dec instead of Jan, should I add up my medical expenses), I used to be able to blurt out the answer and sound like a real professional. Now there are so many moving parts I'm uneasy about delivering a quick, simple response. I panicked the other day when I entered some data into the 2018 UT software and went to view the form. I of course saw the new form and thought "where are my numbers?" After I enter tax docs, I view the form and check the totals with the originals (add up all the W2s, withholding, bank interest, etc.). That's how I double check my data entry. Very fortunately, UT has a new selection to view the first two pages of the 1040 like they used to be, where all the totals are in one place. I also review the final return with each client. Right now I don't know where anything is so I'd better practice so I don't seem as confused as they are. My second biggest fear is that clients won't be getting the refunds they are used to getting. A bunch gave me their paystubs after the new withholding tables went into effect so I could do projections (who knows how accurate they were since the specs have changed), but most have probably been enjoying their larger paychecks without realizing that now that they are losing their three kids as dependents they may be in trouble. And I don't want to think about the business owners who believe they won't have to pay tax on 20% of their profits.

If she's lived in and owned the home for 2 of the past 5 years, you don't have to bother her with cost basis info. Well, you could ask her if she remembers how much she paid for it and give the HUD a glance for sale expenses, but you don't have to make her frantic looking for original sale docs, improvements, etc. Even if you put the whole $80k in as the sales price and zero basis, you could still exclude the whole gain under Sect 121. Because she got the 1099S, however, you do have to report it.

I'd send each to the address for that year--they all end up in the same system anyway. I'm assuming no gift taxes are due (are they ever?) With the IRS employees on furlough, I've read that paper returns aren't being processed so no worry about being late on that count either. I did hear that if the shutdown isn't resolved very soon, they may re-categorize most employees as "essential" so they can get them back to work and into training.

I got an email from TT today. It said hours were flexible. They actually called my home a couple of years ago during tax season. I told them that I didn't have any spare time and if I did I would spend it sleeping.

Roberts, that is correct if the estate makes the 643(g) election and files Form 1041T by March 6 (if a calendar year) or 65 days after the close of the fiscal year. I still don't know how you would calculate how much to pay in estimates. It might work with one beneficiary, or maybe a few if all get equal shares of distributions and are in the same tax bracket, but how would you know that? It would be cleaner if the fiduciary encloses a letter with the distribution warning each B that taxes will be due when they file a return.

You can make a Section 643(g) election to do this, but there are a lot of restrictions. See the instructions for Form 1041. But why would you want to do this? The estate is not responsible for the beneficiaries' paying their taxes. Further, you have no idea what each B's tax bracket is so you might pay in way too much or way too little. Let them handle it.

Vanguard has warned its clients to make a copy of the check. Theirs are payable to the charity from the "IRA of ...." and sent to the taxpayer. The entire distribution will be on the 1099R, with no indication that a QCD was made, so I anticipate CP2000s down the road. The copy of the check might be the only proof.

I was in a seminar where we went over all the new schedules. What the redesign has done is cram the totals onto two "postcard" size pages where the font on page 2 is so small it's difficult to read (should be illegal) and there is not enough room to write legibly--IRS will have a hard time deciphering those mail in returns and I don't know how small the font in our tax programs will go to cram all the digits into the 1/2 inch spaces allotted. Notice that all the pages on the new schedules have line numbers that correspond to the old 1040. Maybe even the IRS doesn't believe the new format will work and is keeping those line numbers so they don't have to re-re-write all the instructions? There are two schedules devoted to "tax," one of which has two whole lines and another to total them. A whole sheet of paper for three lines??? Oh, and if you want your tax preparer to be able to converse with the IRS, that's a whole schedule too (coupled with foreign address for some reason)--it used to be just a check box. As for increasing traffic, in our office we've already decided we don't want this traffic. People are going to DIY and be unhappy with their refund, not realizing that their withholding was lowered so they had much less taken out to get refunded, and even though tax rates went down they may have lost enough in exemptions and itemized deductions no longer allowed that it doesn't make up the shortfall. We will do what we always do--accept no cold calls from potential clients going through the phone listings and maybe take some referred by trusted existing clients. We are not inclined to meet new clients who really just want us to double check their Turbo Tax results!

I have been to a couple of seminars on the QBI, read the NAEA journal article published before the regs were released, and read a lot of point and counterpoint. Right now even the authors/presenters are saying we have to wait and see. Some are leaning toward recognizing rental income of small landlords as QBI, others say probably not. All are concluding "not sure yet." At issue is that "trade or business" is defined differently in two parts of the code, and the TCJA and regs refer to both of them. Earlier this fall (after the regs were published) the national accountancy board responded to an IRS request about what areas of the new law most needed clarification. At the top of their list was the issue of rental income for non-real estate professionals. It is too early for any of us to know the answer.

And we still aren't sure whether rental income counts as QBI. Or if improvements to retail and restaurant properties will have to be depreciated over 39 years, as the law now reads.

How about when a client comes in with a child and you ask if there is no school today. "Oh, he's sick so he didn't go to school." Well, thank you so much for bringing him and his germs into my office. And the poor kid should be home in bed if he's sick!

It's going to be tough trying to explain to clients who no longer have to itemize why their tax prep fee went up! Possi said she is not going to REDUCE the price of those returns, but those planning across-the-board increases will have more explaining to do with these clients. We all feel that we had to spend huge amounts of time to learn the new law (and we're not done!), but can we really charge the clients more for this when their return is simpler, or do we explain that they now have five or six more schedules than before? Of course, we're going to have to do a whole lot of work to complete new W4s when clients are upset that their $3k refund is now $30, and it's fair to charge for that. Sch Cs, S Corps and partnerships should get big increases because of the Section 199A complexity. I believe that most of our firm's clients don't want to do their own returns and will be okay if their fee stays the same now that they no longer itemize. If you raise it too much, you may very well push these clients to DIY or to find someone else.

Many IRS notices are comprehensible, this one is gobbledegook. I don't know what it's saying, except that employees can still use number of "allowances" now that there are no more dependents. It seems to say that employers must furnish employees with the new W4 by April 19 2019, but that may mean only if they want to change the number. I have an awful feeling that many clients will be presenting us with these forms during tax season, when we have the least amount of time to deal with them. One thing the old and new W4 calculations do not take into account is that most taxpayers like to get refunds. They don't want to calculate their tax withholding to match their tax liability; they want to pay a bit more and then delight in getting something back. And I don't like the feeling I have that I am no longer confident in telling clients to just claim single, zero. Although we may be able to still do that with the new W4, we have no idea how much withholding will be the result.

On ebay, those are the asking prices. You have no idea if anyone will actually pay that amount. Facebook marketplace does have a huge audience; we recently moved our office and sold a bunch of items there very quickly (they were priced low). Then again, you have to respond to a million questions so it is time consuming. Craigslist could work, but you'd want to meet the potential buyer at a safe place--police stations around here offer their parking lots for this purpose. Check to see if you have a local business that will sell items on ebay for you. They handle the listing, sale, and shipping and of course charge a fee, but it seems easy. I'm with you. If it still works and someone might want it, I could never just toss it. I am amazed by shows like American Pickers. They find and buy the oddest things because they know they can make a decent profit. Where do they find someone who wants to buy a can of motor oil from the 1940s for $100? Beats me.

In my earlier post I didn't want to detract from the main point that you can only deduct the lower of 20% of either taxable income or net profit. Taxable income for this purpose is what is shown on your tax return MINUS cap gains and qualified dividends, which already get preferential tax treatment. Even this simple step is not simple! What scares me about the complexity is that I, and I presume everyone on this board, am not comfortable entering numbers and "letting the software figure it out." Software is not perfect, and I want to be able to see that my data entry was accurate and flowed to wherever it was supposed to on the return and the result makes sense. There are so many moving parts to the QBI deduction that I'm not sure I will ever trust the numbers that the software spits out, and I sure won't have time or inclination to do them all by hand. UT had a worksheet in the projection software that showed the calculations which I think I can follow once I have more experience with it. Up until now I've had a reasonable amount of confidence that I knew what I was doing most of the time and could produce an accurate return. This coming season that confidence is diminished, and I don't like the feeling.