SaraEA

I have rarely found the IRS to be wrong about estimates, whether the client says he sent them all and didn't or says he didn't remember sending any but did. I have a client whose installment agreement request was efiled with the return but was never instituted. When I called IRS, they said they sent him three notices that they were having a problem setting up the direct debit, even gave me the dates the notices were mailed. Whatever their weaknesses, they do seem to keep good records for individual accounts. Definitely check with the client to confirm how much was debited.

Way back when I worked at Block, we had a text with required assignments, a bunch of practice problems, and then you went to class every week and discussed the material and did more practice sets. You were immersed in the material and the result is that you learned it. (even before they had required exams that you had to pass with 80% or better). Now that I take CPEs through live seminars and some online courses, I definitely see the difference. The seminars sponsored by the state accountancy boards are often filled with people who have to be there and whose employers are paying. They spend most of the day reading the newspaper or fiddling on their laptops, never ask a question or share an experience. The people who attend the professional association seminars (NAEA, NATP) are more likely to be self-employed and really do pay attention and share. I find that after the seminar I cement what I learned by going back over the handouts (if they even have them anymore) and taking notes, just like I was studying for a college course. I find that webinars generally go too fast or don't go into enough depth and two hours later I'm hard-pressed to relate what (if anything) I learned. With the radical changes in the TCJA, I plan to take as many live courses and webinars as I can. I feel that I have to be immersed in the topic, no matter how it's presented, to digest it. How I long for an old-fashioned Block course with a text and problem sets so I can immediately apply what I read/heard.

I never believed the "charitable deduction" in lieu of property taxes would fly, but I think CT's entity tax might. The problem is that it was passed late in May and not announced until a couple of days before the second estimate was due. Therefore all partnerships and S corps are already behind in their estimates, which they never had to pay before and didn't find out about until it was too late. CT offered to waive interest and penalties if the members have been paying their own estimates and choose to assign those to the entities (no clue how they might do that). Otherwise interest and penalties apply to the entities for not paying estimates that didn't exist until late in the second payment cycle. Parties can appeal to the state legal dept, which never approves anything. The waiver should be automatic because of the late enactment, but now state taxpayers have to pay lawyers to review each instance. Absurd.

A client transferred some valuable stocks to a couple of creepy relatives a couple of days before he died. And some things like bank accounts he owned the year before he died and valuables he bequeathed in his will somehow disappeared. The rest of the family was not happy, some hiring their own attorneys. The justice was that the creeps did not get stepped-up basis and had huge cap gains. The only claw back I can think of is that years ago if you gave gifts within 3? years of death they were added to your estate. With the unified credit, all gifts are added. There is also a rule that if someone gifts you appreciated property within a year? of your death and you bequeath it to them, they do not get step up. I'm fuzzy on this and don't have reference materials with me. Is there something that voids gifts given within a short time of death?

Most of my clients who are divorcing have court orders to file jointly. I've even had some who have court orders to file jointly even when the divorce is final by the end of the year! Love to have to explain to them that federal law trumps civil.

There are several lucrative adjustments and tax credits that are not available to MFS, e.g., EITC, AOC and Lifetime Learning Credits, child and dependent care credit, student loan interest. You really have to run the returns both ways to be sure.

I have fired clients using plain ole USPS. They all got the message, although a couple begged me to keep them on until they got through some complex situations (end of a trust, etc. and one who just couldn't bear to go anywhere else). I did, but at least I got rid of most of the "high risk" and PIAs.

If the trust got the 1099, received all the income and paid all the expenses, just file a regular 1041. In the first post it sounded like its only asset was the house, which it already distributed, but then it turns out it continued to collect income and pay bills. Sounds to me like it didn't end for income tax purposes in 2017, so why go through all the antics to get the 1099 reissued, the beneficiaries' returns amended, etc? It should end when it distributes its remaining cash and stops collecting rents.

Something weird is going on here. The client paid back SS early in the year, which should certainly be on the 1099. Now the IRS is listing a different amount altogether? Wonder if this person had his identity stolen and someone else got the benefits? Or the repayment was credited to someone else? I would recommend that the client go to the local SSA office, receipts in hand, and get an explanation.

Did the trust continue to pay the expenses? In that case, the trust should file as usual, but probably no depreciation because it no longer owned the house. Take a look at the trust document, but remember that just because a trust is technically defunct doesn't mean it's defunct for income tax purposes.

I too don't have the patience to digest 180+ pages, but I did do a search for "rental." All that came up was rental of tangible property to related businesses. So it looks like real property rentals aren't included. I'm not at all sure, and I'm waiting for a digestible summary by people smarter and more patient than I am to be available. I do have to wonder who came up with these intricate, convoluted pieces of the legislation. The formulas for deciding how much of a deduction people get, particularly those in the phase out range, looks like someone put some tax and legal terms into a hat and pulled them out randomly to stick into that particular section. W-2 wages plus depreciable tangible property is part of one formula. Taxable income minus capital gains (except PTP income) is in there somewhere. What do any of these have to do with the other? Is there rhyme or reason? I'll settle for reason. I'll even settle for rhyme if it will help me remember what's going on here. As it stands, it's gobbledegook!

Good for you Ron! Hope retirement is all you've dreamed it would be. It made me wonder how many seasoned tax pros will take that step now that we have to deal with the TCJA. When I go to seminars, it isn't uncommon for the speakers to mention how there are a lot of "grey heads" in the audience and implore us to encourage yoiung people to get into the business. I think with the new tax law, it will be easier for less experienced people to adapt than it will be for those of us who have been doing tax prep for awhile. We have to UNLEARN so many things that are burned into our brains--dependents, allowable itemized deductions, impact of AMT--and figure out the new 20% deduction on business income, result of reduced withholding, etc. I think a lot of tax pros who have been thinking about retiring "someday" may decide that day has arrived. This tax season will probably be horrible with many unhappy clients who expected their usual $2k refund and now owe $200, or partners and business owners who banked on that 20% and discover they get nothing. If not this year, we may see many more retirements in 2019.

I too ran projections for most clients. I also offered to calculate from a paystub whether their reduced withholding would cut it. I said I'd do it after tax season, and quite a few did forward recent paystubs. I warned every single client that most projection software has weaknesses, that with the old software I knew where they were and what I had to watch or calculate manually, but with the brand new law there was not enough experience with the new software to catch the bugs. I also told them that the new law is filled with errors and contradictions and will undergo loads of technical corrections. Every client I did projections for was told that my results were a notch above a guess, not even an educated guess at that point in time. It looks like no technical corrections will be made because the Democrats refuse to vote for them (need a true majority vote, unlike the tax bill itself). They don't want to look like they supported anything to do with the TCJA. I'm not taking political sides here. One side rushed the bill through, the other side refuses to help them fix it, and taxpayers and tax pros, whom both sides are supposed to represent, are left in limbo.

I always thought the federal gov't could pass retroactive tax decreases but not tax increases. CT has passed retroactive increases before and gotten away with it. I really don't want to spend the summer reading CT's code, but you posters tempt me.

If your S corp operates in CT, there is now a state entity tax of 6.99% so it will have a CT liability. The shareholders will get a 93.01% credit on their individual returns. This was passed to dance around the $10k cap on SALT deductions for individuals. If any of you have partnerships that operate in CT, they too are subject to the entity tax. And by the way, although this wasn't signed into law until the end of May, pass-through entities are now two quarters behind in their state ES payments. Penalty waivers will be granted if the individuals paid their own ES on time and elect to let the entities claim the payments. Otherwise the entities will have to pay penalties for not following a law that was not passed until it was too late to make payments they didn't know about. CAN YOU BELIEVE IT???

AMT is pretty much gone for all but the really high earners. I have a NY client who will be able to claim $10k SALT on federal return but not the usual $88k in state and city income taxes and $28k in property taxes. The lack of AMT will make up for some of this but by no means all of it.

When congress first started drafting the new tax law, almost all itemized deductions were taken away (only charities and maybe mortgage interest left I think). The higher standard deduction was supposed to make up for it. (At that point in time no one realized that the loss of exemptions would eat up the increased sd.) Then the lobbyists came out in force, they needed this, needed that. Congress was in such a rush to give the American people a "big Christmas present" that they just gave the loudest voices what they wanted. The result is that most deductions were put back in and, instead of being revenue neutral, the tax cut is adding trillions to the deficit. Misc 2% deductions and casualty and theft losses were the only things dropped, although taxes and mortgage interest were limited for some taxpayers while contribution limits were raised. The point is that the intent was to do away with most itemized deductions, but the result was to put most things back in in haste. I live in a high tax state that is suing the feds over this. CT tax is based on federal AGI, itemized deductions don't count. The state's participation in the suit therefore must center on state residents missing out on their federal taxes because they pay so much in state taxes. Some states that do allow itemization can and have upped the amount of state taxes their residents can deduct. I'm with Jack on this one. These states are claiming that the federal gov't is harming their residents, when the harm is coming from the states themselves that impose such high taxes on their residents.

EXCEPT if the alimony agreement is modified after 12/31/18. Then it is subject to the new law.

The gift tax exclusion for 2018 is $15k. The donor can contribute $75k and elect to have it considered donated over a 5-year period, thus avoiding gift tax. The custodian is the firm that runs the 529 plan; your clients are likely the owners and the family member is the beneficiary. The school will not issue a 1099, only the custodian will. It is up to the taxpayers to reconcile the distribution on their tax return. This is an area of audit. As long as you have the financial statement from the school showing what was paid for what, no problem. Note that 529 plan distributions can be used for room and board, which the education credits cannot. I've had clients who have gotten into trouble because they paid the entire bill from the college from the 529. If they are eligible for the AOC, $4k is used for the credit and can't be counted as a qualified education expense from the 529 (no double dipping). Example: Tuition is $20k and room and board is $8k, so $28k is taken from the 529. For the AOC, $4k is used. Thus the qualified ed expenses for the 529 are $24k--but they took out $28k, so the earnings portion of the $4k is taxable.

No Sch B? Where do taxpayers attest to the fact that they have no foreign accounts or trusts? And how does one show cap gains/losses without Sch D or 4797? I don't see a line for cap gains at all. This is obviously a ROUGH draft. Thanks Judy for the info on the sd for dependents. We knew it was too good to be true that kids would not be taxed on $12k of income. I have clients whose kids make over $10k in dividends. Not only will they get the same tiny sd, but they now get taxed at the trust rate. Guess I'll have to recalculate their estimates.

I see the box "someone can claim you as a dependent." Does that mean dependents don't get the $12k standard deduction? We must await all those technical corrections they say are coming. By this time of year I've usually taken a chunk of CPEs, but this year I'm taking the advice of smart folks on this board and waiting until IRS figures out what the heck congress meant, congress to clarify and amend what they meant, and it all gets translated for us.

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!

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.)

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.

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.