SaraEA

For those of us committed to details, this response might not fly. The price of cryptocurrencies changes by the second, and people buy/sell/use fractions of a coin down to many decimal points, so there is no easy way to trace every single buy and sell, and the fees vary just as wildly. The limited regs the IRS has provided says they really don't care how you do it, just be consistent. If you want to use the midnight price, or the 6AM price, do it for all transactions, and use the same exchange for the quotes. They can't keep up with this stuff either, and I doubt they'll drill down into nanosecond prices to raise or lower someone's reported gains or losses. As long as there is some kind of reasonable record, I doubt an auditor would disallow it. My client who mines bitcoins tells me we are among the "elite" 833 people or so who reported their crypto transactions a couple of years ago. I just use his records, which seem to be okay because keeping track is some kind of odd hobby of his.

This was a political decision back then. The credit was based on $2400 until around 2003, when it was raised to $3000--neither of which came close to covering the cost at the respective times. The conservative politicians did not include an inflation adjustment because it was felt that moms should stay home with their kids, and they didn't want to give them too much of a tax break so they would want to go to work instead. What I don't get is how so many parents pay enormous sums for child care, yet child care workers and home care providers get paid poverty level wages. Where the heck is all that money going?

Wait until he dies. I've had survivors come in with letters from IRS demanding 10 years of 1041s. The important piece is how the assets are titled. If they are in the trust's EIN, you have to file a trust return but can make an election to have all income and expenses flow through to the grantor.

Lion, if people give "similar" items to charity and the total FMV is over $5k, they have to have an appraisal, just like if they gave one item worth that much. So if all those receipts contain "clothing, household, misc," that's "similar" and should have been appraised (yea, right). I only allow maybe 15% of cost, maybe 20% if most of the stuff was new. It boggles my mind that the IRS is so picky about having a receipt for every single cash donation but these noncash ones get a free ride. On the other hand, I will not push clients for bank interest under $10 (I do pick it up if it's on the mortgage escrow statement). It will hardly ever make a difference, and I waste enough time getting big numbers out of them like college financial transcripts and out of state property taxes.

I believe all estates have to have an EIN, and the 1041 demands one (no place to put a SS#). If you think about it, estate income under the deceased's Social would flow through to the deceased, which he couldn't have gotten because he was deceased. At least I think I know this. After today I feel like I don't know nothin'. Does CODI income from a PTP get added to basis? One client made a few dozen gifts, many $14k or less, but some to the same people, also gave savings bonds, stocks, and oh yea, his house but retained a life estate. I think when savings bonds are transferred the accrued interest has to be reported by the giver, but then again after today I don't know nothin'.

With the tiny amounts usually involved in "cash in lieu" sales, I usually use a basis of zero. That way they can keep their entire original basis in the shares they do own,. The math is complicated enough trying to calculate basis of each share when they received 1.4087351645 shares for each one they had. Adding a couple of bucks in gains to their tax return for the partial share sold isn't going to change anyone's tax bracket.

IRS considers the value of property sold within six months of death to be the FMV. Some states use a year.

I've had lots of parents who diligently plunked money into 529s and ended up with lots of earnings that escaped tax. Plus in most states they get a deduction for contributions that lowers their state tax bill. UGMA accounts belong to the minor and can't just be taken back--there have been lawsuits filed by grown children when that kind of theft has happened. US savings bonds for education have to be in an adult's name (purchaser must be at least 24 years old), so you'd have to buy them in the child's name and report accrued interest every year. That can be a pain to calculate, especially now that all bonds are "paperless" through Treasury Direct and don't allow the nice "inventory" you could create with the paper ones and quickly see the annual accrued interest. (Just had one today where over $3500 in interest will escape taxation altogether.) I do agree that people shouldn't put all of their savings dollars into retirement plans because if they do need the money the penalties are steep. I thought clients were the ones whose minds were stuck in the 1990s (and before). How many clients do you have who want to deduct their credit card interest? (Went away in 1986.) Who think they have to buy another house within two years to avoid taxable gains? (1997) That they are Head of Household because a working adult child lives with them? (circa 2006)

Chris, if your client already had an existing IRA, it's not as simple as "I put money in one year and decided to take it back out." You have to consider the whole IRA. The prior 8606 shows the after-tax basis. When you take money out you can't say "I want to take this particular contribution out." You have to allocate it to before- and after-tax amounts. I'd put that 8606 back in.

CT is getting desperate! This week we had four clients bring in letters from DRS saying the agency got info from IRS (citing an official sounding code section that refers to nothing more than the IRS's permission to share tax info with states) that the client lived CT in 2013 (3 three clients) and 2014-15 (1 client) and never filed a CT return. The letter gave them the "generous" offer of paying up before the Ides of March and not paying interest. In all cases the clients had moved and filed full-year resident returns in their new states. I just made copies of those returns and told the clients to send them to CT, but after reading the above I'm not sure that will be good enough. One of the clients had one tax doc out of many addressed to a parent's house in CT, but the others had all of their docs addressed to their new state. I really think the DRS is grasping at straws at this point and will end up having spent a big sum on man hours to determine who gets letters and then producing and mailing them with the result that 99% of the recipients can prove residence in another state. Going back FIVE years is ridiculous. We had an audit once when the state wanted year-end credit card statements to see where they were using their card. These states should clean up their fiscal messes and stop picking on people in a last-ditch effort to squeeze out some more revenue.

Whatever it costs, buy it. We are being hounded by constant messages from IRS, states, and the professional associations that tax offices are the hottest target right now, don't open anything, report phishing emails, tell everyone in the office and on and on. Today I got an email that appeared to be from someone who knew me..said they finally got their docs together, gave a list of what was attached and a phone number to call with questions. Spelling and grammar were fine, and there was a business address. I noticed that the message just started with "hi," not "hi Sarah," like most clients usually say, and the person had an unusual first name that I didn't recall. I checked our client list and there was no such person. Later I read the NATP blog and someone there reprinted the exact same message. They looked up the business and it's a real business in TX. It's a scary world out there.

Roberts, I have a retired teacher client and a piece of his pension is sent directly to his ex. He said he was paying her and deducted it as alimony for a couple of years until I found out that she gets her own 1099R from the state for her portion. This is a smart man but he couldn't get his head around the fact that because the amount isn't included in his taxable income he can't deduct it. Maybe I should have taken the route that if she gets a 1099R and he also claims it, she'll have to pay tax on the money twice. Clearly this was a division of his retirement assets at the time of divorce. I've never heard of an individual issuing a 1099R.

You can't really charge for the research unless there were odd items on the return that you needed substantial authority for treating them the way you did. I would charge $2500-$3k, depending on how many K-1 packages I had to prepare and how hard it was to get info from the client. Was this a trust or an estate? I have never had anyone balk at my fee for either one, since they seem to know that this requires specialized knowledge and care. I usually give them a ballpark with caveats first and then let them know if it's going to be considerably more. I've had times when an estate has already distributed its funds and left exactly what I quoted in the account. I usually let it go but once I didn't and the heirs paid me out of pocket. Most are just glad to be done with it.

Most of the time I have no idea what g is (and neither does the client, who also has no idea of what FMV is). I leave g blank and the returns go through just fine. In the line-audit from hell I just finished, the auditor disallowed all cash donations because no receipts but had no problem accepting the non-cash, which were substantial. The clients had a list of what they donated and attached Goodwill's "what's my stuff worth" list. Go figure.

Tape??? Use Excel, one column for initial entry and the next for "verify." Makes it easy to spot the numbers that don't match if totals don't agree. I understand that some accountant types don't feel like they're working unless they hear the loud grind of the adding machine, but c'mon make life easier.

Puzzling that the new W4 has exemptions on it. The formula is wild--if you have a child eligible for the CTC you add 4 to the exemption line. With the old W4, if a single person w/ no children followed the math they ended up with two or three exemptions. I have a childless client who donates a lot to charity and thus deducts a sizeable amount on Sch A. Following the formula told him to claim 17 exemptions. I can't imagine what the result is on the new one. Now that everyone's withholding has been reduced, I have lots of clients sending me paystubs to calculate if their new withholding amounts will be enough. I don't have time for this, but I realize they need to know before it's too late to do something about it. There is no way to get a sense of it either. I have clients making $200k whose tax bill will go down by almost $5k, another with the same income will pay $2500 less; an older client with $16k taxable income will see her tax rise $300. Either the projection software or the law (or both) is just as confused as I am.

I too have clients who have very nice incomes and little in the way of interest or divs. When I call them and say they can put $28k into their SEP, owe IRS and state $10k, and need to make first-quarter estimates of $5k, they say "okay." Where is that money coming from? Most are not in cash businesses and are smart enough not to keep their cash under the mattress.

IRS has only released updated software to handle mortgage insurance, tuition and fees adjustment, and cancellation of debt on primary home. The other extenders have not been updated yet. Keep that return in the "waiting" pile.

Did you know that under Circular 230 Sect 10.51(a)(12), a practitioner can be sanctioned for "Contemptuous conduct in connection with practice before the Internal Revenue Service, including the use of abusive language...." So all you EAs and CPAs out there, watch your mouth!

The IRS liaison has told us that if you zero out line 21, the side notations don't go with the efile. Always leave $1 on the line so the statements are sent. I have had my card compromised twice and never received a 1099C, nor has anyone I know. The card issuers routinely remove charges that don't belong to the cardholder. Are you absolutely sure that the C relates to the false charges, or did this client really have forgiven debt?

Who paid the mortgage? That's who gets the deduction.

Sarypion, the code can only contain letters A through F. Anything that looks like l is a one, and 0 is a zero.

If the house is sold before Mom dies, the children's basis is the same as hers was. The implied life estate generates step-up basis only when she dies while still using the house. Since that is the case, the children who sold might have a loss if the value increased and they only got $30k. They can't take the loss because the sale was to a related party. A stay in a nursing home is considered "temporary" up to a certain amount of time, so if she entered a home for a few months before death step-up rules still apply. The only ones who will have to do tax reporting are the sellers IF they received 1099-S forms.

Stay away from giving advice on this one. The client needs an attorney. The IRS is aware that this is a loophole and contests these transfers all the time (and wins).

The house must have been in the estate but was eventually re-titled to the beneficiaries as they are the ones who apparently owned it when it was sold (they are the ones who got the 1099S forms). If the estate had no income in 2017 and no expenses, no 1041 is needed. The depreciation "allowed or allowable" is the estate's problem but I wouldn't do anything about it at this point. With depreciation, the estate would have had lower income and now the heirs will have higher income = a wash (except theirs is cap gains income, while the estate might have had ordinary gain/loss, but the IRS is getting paid one way or another). The 2016 $300 loss could have passed through to the beneficiaries if the estate return was marked "final." It might be too late now, but cap gains tax of 15% on each person's share of the loss = $15 (or $24 if they are high income) and isn't worth fretting over. Handle the sale on the individual returns. The heirs got the 1099S forms and the IRS computers will be looking for that $100k on their 1040s. Your basis calcs are correct, but add any expenses of the sale (realtor, title transfer, attorney, etc.). You can file a 1041 if the estate had expenses in 2017, e.g., the cost of transferring the title to the heirs as well as your tax prep fee for that return--yes, you can deduct it even if not yet paid. Then you can mark it as final. With three beneficiary packages, I would charge at least $750 for the 1041. Whatever you charge, make sure it is divisible by three so each can pay the same amount.