SaraEA

Thanks for educating me everyone--I had not realized that 1099R income was considered unearned for kiddie tax purposes. Just wait until 2018 when the kiddie tax as we know it goes away and the child is taxed at the highest rate on unearned income above $12,500. Be sure to set up estimated payments.

The study time of course depends on how much time you have to devote to it. I studied relentlessly for six months (I'm an academic bookworm anyway). I studied so hard that I vowed that I HAD to pass all four parts (back then) the first time because I was never going to study that hard ever again. I succeeded. Many didn't, and they just kept trying until they passed. The world doesn't come to an end if you don't do it on the first shot. Unlike very few things in life, on the SEA you get a second chance, and maybe a third or more. There was one guy in my EA prep course who took the exam over 10 times and failed, and here he was trying again. We all respected him. I warn you against feeling "I'm sure I'll do fine on the individual portion." In my prep course at H&R, we all felt that way until we took the first practice exam. We all fell fifteen notches when we scored in the 70 percents and lower. Part of the study process is to learn how to approach the questions. As you know, the IRS is big on double negatives. (You cannot not do this or that.) We also learned that if a question addresses something you never heard of, just pick any ole answer and don't waste time on it. Came in handy when I encountered a question on the optional method of calculating Social Security income. Also examine your motives for wanting to be an EA. The designation may confer some approbation in the tax professional community, but so do your years of experience. You do get to represent clients before the IRS, but do you really want to do that? IRS audits are no fun, and I have encountered some auditors from hell who were especially no fun. If you just want to prove to yourself that you can do it, give it a shot. If you tell yourself that you are just doing it as an experiment, knowing that it may or may not work and really doesn't change your life, the test anxiety level should be minimized. You'll still be the exact same knowledgeable, experienced person the next day. Nothing gained, nothing lost.

This is clearly an "implied" life estate. Mom continued to live in the home, paid the bills and taxes, just like she always did. I don't have the legal sources with me right now, but an implied life estate is included in her estate and beneficiaries receive full step-up basis because of that.

Etax, have a little empathy. Do you realize how much work this entails? IRS has to rewrite software, forms, instructions, and pubs. They have to change a zillion linked pages on their website, FAQs, etc. This was thrown in their lap one week ago. They have reduced staff due to budget cuts and are sort of busy administering 2017 filing season right now. I would be amazed if they could pull it off in one month. We won't be doing any amendments until after tax season anyway--too busy with first runs. New returns that are affected by the extenders can be entered, checked, and put on hold until the time comes. Tell any impatient clients to complain to their congress members (and remember their names come November).

I would do the 3115. Missed depreciation is an automatic acceptance so no need to fill out all 100 pages. The reason is that they should have taken more depreciation in prior years, so claimed higher income than they should have. In the year of sale you have to deduct depreciation allowed or allowable from basis, so they will pay higher cap gains even though they never got the benefit of the higher depreciation. Missed depreciation can be taken on Sch E all at once, so their income will be reduced in the year of sale.

Except by April 1 or so some of us do not feel very "knowledgeable and enthusiastic." This year it might happen by March 1.

Any audit that reveals more than $10k unreported income will automatically open up succeeding years. The taxpayer probably kept reporting morning trips to the coffee place as "meals and entertainment," family vacations as "travel," had no logs to substantiate mileage, put the whole family's cell phone bill on the business, made $4k in noncash contributions every year, you get the picture. Reason why he kept doing it is he wasn't caught yet. Once IRS went back and discovered the crap, they had reason to just keep on auditing.

While the partnership does not determine the step-up basis, only the partnership can make the 754 election, which triggers the 743(b) adjustment. Apparently in this case that did not happen. If within the time frame, the election can still be made for the recently deceased partner. I don't know if the other partner for whom the election was not in effect is out of luck.

Timing out after a period of inactivity is an invention of the Security Summit. I personally think that using a hotkey defeats the security. In UltraTax, you don't time out if you are actively using another program. When I am working on a client's books or eating lunch, I keep email on the screen and periodically click on any message so I don't time out. I also type in the password in the morning verrrrry sloooooowly so I don't mess up and have to prove I'm not a robot.

Your clients actually read the transmittal letter?

Connecticut has AMT (along with gift and inheritance tax, $2mm exclusion).

What's affecting us in addition to the extenders is that the 2018 ES vouchers aren't ready yet. At first I couldn't believe it because all IRS has to do is change the date from 2017 to 2018, but then someone pointed out that there's a whole booklet that goes along with the form, and I imagine that has to be recalculated to conform to the new tax rates and lack of exemptions. All I can think of to do is make a list of clients who need their vouchers and mail/email them when available. Why oh why did policymakers do this to us, to the IRS, to zillions of taxpayers at the last minute??? This tax season is going to be a disaster in terms of our own client service, but likely nothing as bad as next filing season when those $2000 refunds turn into $40 ("but you already got the money in your paycheck" isn't going to cut it).

Around here you need an appointment at the IRS "walk-in" center (oxymoron).

Abby, isn't it a bit, um, dangerous, to use a computer without security software running?

I too am seeing client projections all over the place. Some with incomes well under $100k seeing increases, others with higher incomes getting big breaks. I am uncomfortable being entirely dependent on the software to do the projections because there are so many moving parts to this tax law that I don't have any internal sense of what the result should be. The software is brand new and likely contains errors that we aren't aware of yet, so I'm telling clients this is less than an educated guess. I agree with Abby that the biggest concern is that withholdings are going down. I had a couple today whose projected 2018 liability went down by $2800. They both had reduced withholding in their latest paychecks so I did the math and discovered they will have $4500 LESS withheld=big tax bill next year at this time. The problem is that everyone is going to be happy seeing their paychecks go up and realize they were duped when they file in 2019 (after the Nov elections of course). We really shouldn't do projections until people give us paystubs after their employers instituted the new withholding tables (was supposed to be mid-Feb deadline but now extended to end of Feb). The problem, of course, is that we are up to our scalps in returns at that time and won't be able to spend the time. I read an article in Accounting Today that the increased child tax credit doesn't cover the loss of exemptions for taxpayers above the 15% bracket. For those in the 25% bracket, for example, the exemption was worth $4050 X .25 = $1013 + 1000 CTC = $2013, or about the same as the new CTC with no exemptions. For those in the 28% bracket, they lose money. This higher exemption isn't what it was cracked up to be.

What a nightmare! Today we went through the list of completed returns and flagged those that could be affected by this change. Someone will have to go through each one (not until May) to determine if it is worthwhile amending, and we have to determine if/how much to charge for those paper returns. As for incoming returns, and the deluge is just starting, we will have to put hundreds on hold to await software updates and approval. We had only efiled about 80 returns as of 9AM today, with another dozen or so complete but not yet signed for, so the task will be daunting but not nearly as great as those big practices and chains that are at "peak" and have already filed zillions of returns. I remember years when congress passed tax law changes after Christmas and IRS miraculously managed to get the most common items reprogrammed in no time. One year we had to wait until mid Feb for education credits and a bit later for AMT. But NEVER do I recall congress changing the rules when tax season was already underway. Do those fools know what they did? Do they even know what was in the bill or what "tax extender" means?? I guess the POTUS, who "knows more about taxes than any CPA" (his words, not mine), didn't read it either because any no-nothing CPA would have said "don't do it." Not being political here, I am disgusted with all of them, administration, congress, red, blue alike. As I was moaning about the extra work and delays this is going to cause us, I got a message from IRS that made my heart go out to them. It said that they were reviewing the task ahead and will give us some guidance as soon as possible. Thinking about it, they have to reprogram their computers, accept software companies' tests, rewrite forms and instructions and zillions of linked pages and FAQs on their website, all while in the height of tax filing season.

I'm not a pro at partnerships, but I did handle this situation for a partnership with 8 partners, who kept dying off until only one original was left and the rest were inheriting spouses/estates, and one trust with 15 beneficiaries. The distinction between outside and inside basis is just that--the partnership maintains its original basis in its assets (inside), and the new partners get a different basis that is calculated off (outside) the partnership's books. The partnership should have made the 754 election when the first partner died. It is too late for that one, but you can do it for the most recent one if the dates are right. The election doesn't affect the partner's basis in their partnership interest--the first one gets stepped-up basis at the time of inheritance, the new ones will get a different stepped-up basis. The election allows them to claim more depreciation since their basis in the assets is greater than that on the partnership books--typically reported in Box 13 code w. In my master's in tax program the professor told us about how much $ can be made maintaining these separate off-books depreciation schedules for incoming partners. There are a lot of caveats in case property (not cash) is distributed, built-in losses, etc. The basics of the election are explained here https://www.forbes.com/sites/anthonynitti/2014/03/11/tax-geek-tuesday-tackling-the-dreaded-section-754-adjustment/2/#7ee2e40442c7 What do do about a missed election: https://www.thetaxadviser.com/issues/2015/may/tax-clinic-07.html

Exactly right Lion. I doubt the student claiming $1100 of taxable income will cost more than the parents forgoing the exemption though. As others have said, try it both ways. I for one would never claim the AOC for $900. It can only be taken four times, and maybe the student will go on to another college where tuition is at least $4k and will get the full credit. Don't waste it on $900. How would folks handle this one I had today? Student has full scholarship. 1098T shows about $10k in scholarships and grants. Amount billed is there but as we all know useless. Amount paid is zero because scholarships paid the whole thing. When I enter just the $10k, it comes up as taxable income because nothing was paid. I am thinking of just not filling out the 8863. Or should I put in the "amount billed," which is more than the scholarship amount, and just not calculate the credit? I have the bursar's record and there is the usual amount billed in one calendar year and the scholarship paid in Jan the following year, but the point is that all the scholarship money went for tuition and the student paid nothing. Should I do an 8863, and if so how to fill it out?

To get the property tax credit in 2017, you have to be at least age 65 or have a dependent on your federal return. Not sure how this will be handled in 2018 when there are no more exemptions. Also, CT keeps decreasing the AGI threshold to be eligible for the full credit. It could be your client is too "rich" to get any. I've only done a few returns so far this season but all got zero credit except one who got $20! When I did projections last year, I put zero in for the credit on every worksheet, because that's about what it's worth.

If you're talking about mortgage insurance premiums (PMI), that deduction has expired and has not as yet been extended. If you're talking about your homeowner's insurance you pay through your mortgage company, yes a portion is deductible on the 8829.

I don't get it. I don't use ATX for tax prep (use UltraTax) but just for information returns. How can you have a research program--any research program--that gives you various levels of research? When one researches how to do something, always start with the form instructions. If that doesn't answer the question, go to the regs, the Code (best explained if there are regs), and finally to court cases and maybe private letter rulings. This is called research. Do you only get half research with one level and more research with another? Kind of like doing a term paper using only web sources without viewing an actual book--teacher gives grade F. I always thought that research is research.

I believe that real estate investors, even those with more than $25m gross receipts, are exempt from the interest cap. Tax attorneys are still trying to figure out if rental property is a "trade or business." We'll just have to wait until IRS issues guidance and/or Congress makes technical corrections, hopefully in time for us do to some tax planning before the 2018 filing season. Isn't tax simplification fun!

Add to the list the dreaded, "I just have a quick question."

Years ago the IRS declared war on males heads of household. I worked at a chain back then, and the number of audits was overwhelming. Now that a number of states offer EITC, they are the ones doing the audits. CT audits every single one the first time EITC is claimed. Never could get a straight answer from them about whether they share their results with IRS, but I suspect they do. IRS is happy for the states to do their work for them.

Let's not get carried away here. Form 886-H-EIC is sent by the IRS when they question a taxpayer's EIC eligibility. On the other hand, Form 8867 gives a list of acceptable documents but states that none of them is "specifically required." A birth certificate shows the child's parents, child care statements show names and addresses--good enough for 8867 but not the 886 under audit. In fact 8867 has a line where you mark if you asked the taxpayer if s/he could provide the underlying documentation. It doesn't demand that the preparer see it. I do very few EIC returns, and we know our clients, so I don't anticipate that someone else will claim their children. If you have a lot of walk-ins, that might not be the case and you may want to do more to CYA.