Edward

Client renting out business building (Sch E). New roof added in Mar 2008 replacing old one installed in 1999 with 39Y S/L depreciation. In checking with other preparers I get a variety of opinions - some are saying expense it while others are saying capitalize it. One firm told me if the repair is less than 50% expense it, if in excess of 50% then capitalize it and depreciate for 39Y. Another person belonging to a local Chapter stated that a COURT RULING came out in 2002 stating roofs could be expensed and need not be capitalized, and this has been their policy since 2002. Has anyone heard of this ruling? and too, can we rely on such rulings in our tax practice? I've looked at several publications in which building components are listed but the ROOF is conspiciously absent. In looking at QF book & their depreciation manual; the TAX BOOK, PPC AND GEAR UP, the word ROOF is no where to be found. Does that help us any for expensing, at least for 2008? Repairs vs. Improvements has always been a continuing controversy. Possibly the new proposed regulations may put an end to such. See page 7-6 of the TAX BOOK on details, and take special note on how they define BETTERMENT & RESTORATION as Capital Improvements. Any suggestions?

Client operated Motel from 1995 to 31 Aug 2003. Has been IDLE since but in 2008 began remodeling with intent of leasing some of the units as "office space". Both the motel and office space would have 39Y S/L. The following has surfaced in regards to depreciation planning: a. Page 9-21 of TAX BOOK says: IDLE PROPERTY: Continue to CLAIM a depreciation deduction on the property even if it is temporarily idle. For example, if use of a machine stops because there is a temporary lack of a market for a product made with the machine, continue to DEDUCT depreciation." Not applicable in this situation as business CLOSED in 2003 and there is no need for a Sch C as there is no income. So we can forget this approach. b. QF Depreciation Manual sys: IDLE assets will continue to be depreciated until the asset is sold, retired, abandonded or otherwise disposed of. This too wouldn't apply as they don't say anything about if the asset is again placed back in service at a later date? c. I would think that maybe I should accrue the depreciation from 1 Sept 03 up to the day prior to placing the assets back in service; with depreciation after that date being deducted on the 2009 tax return? d. I also see a problem completing the ASSET ENTRY, like date placed in service (1995 or 2009); would forcing the accumulated depr be a problem & what other elements must be considered? Any ideas would be appreciated. Thanks!

For Catherine: In reference to my earlier post: When you go to the IRS website and download Form 656 (which is a 44 page booklet (& not just the form itself) you'll note that they show steps 1 thru 8 with detailed instructions. I'd think this would be the better place to start.

I haven't had an OIC, but just recently I downloaded Form 656 from IRS WEBSITE. I believe it has all the data to get you going.

Noted this subject & comments on Military.com which began with: Millions of Americans enjoying their small windrall from President Barack Obama are in for an unpleasant surprise next spring. The government is going to want some of that money back. The credit provides up to 400. to individuals and 800. to married couples. But, new taxs tables issued by IRS could cause millions ot taxpayers to get hundreds of dollars more than they are entitled to, of which some will have to be repaid. At risk are those where both couples work; workers with more than one job; retirees weho have FITW from their pensions and Social Security recipents with jobs that provide taxable income. It further states that the IRS acknowledges problems with the withholding tables but has done little to warn average taxpayers. The paper also suggests that you do a W-4 and take a new look at your withholdings so you don't end up short next year. One example: A Single worker with 2 jobs @ 20000. ea job will get 400. boost in take-home pay for each jobor 800.00. Since he is eligible for only 400.00, then the remaining 400.00 will have to bse paid back at tax time - either thru a smaller refund or a payment to IRS. Same problem for marrieds. Soem retirees face even bigger headaches because the Social Security Admin is sending them 250.00 each - if they have earned income in addition, they will get the credit and thus possibly end up owing some of the excess credit to IRS. Treasury Secretary Timothy Geithner has indicated that IRS understands the concerns and were exploring ways to mitigate that effect. Tom Ochsenschlager, VP of taxation for the AICPA says: 'WASHINGTON NEEDS TO GET THE GOODYEAR BLIMP OUT THERE ON THIS SUBJECT. I am retired from the military and have already reinstated the FITW reduction that I will be getting (66.40 x 12 = 800.00). Also added an extra 15.00 per month withholding since I will also be getting the 250.00 from the SSA. Wow, what a strange situation, no??

The ATX Community Board had a comment from KIM MANUEL - VP CUSTOMER RELATIONS, CCH SMALL FIRM SERVICES IN which he commented on May the 5th with: After Reviewing many of the posts between ATX Community members and TRX over the past few weeks, I would like to offer an Official CCH Small Firm Services response to your purchasing inquires. TRX is not an authorized reseller or distributer of any of our ATX product lines. You will need to contact your CCH SFS renewal representative at 1-800-495-4626 to renew your ATX software". Wow, does this officially close the door on ATX purchases from TRX?

The following is taken from QF Depreciation Handbook on "Repairs vs. Capitalized Costs": Whether a cost is an ordinary repair or should be capitalized has been a source of much controversy. Many courts test expenditures by looking at whether the cost "puts" an asset in working condition (capital expense) or "keeps" it there (repair). Also, amounts expended to restore property to its original condition are repairs. An expenditure can be quite large without prolonging the asset's life or substantially increasing its value. If it dosen't meet any of the three tests (as listed by Jainen), it should qualify as a repair, regardless of the amount".

I appreciate the comments, replies, concerns, etc. Thank you all. Edward

Have new client - they have one child attending college who is 20. He also took a professional bartending class in 2007 and both the college tuition and the 850.00 fee forteh bartending class were combined and he was given the Hope Tax Credit on the combined figures. Is there something wrong with this? Would the bartending class be considered a Hobby type class and therefore not qualify for the Education Credit? Like to get your thoughts on this. Thanks.

IRS website on FIRST-TIME HOMEBUYER CREDIT INFORMATION CENTER says in response to their QUESTION; How are repayments of the homebuyer tracted? then followed by their answer: A memo field will be present on taxpayer records and repayment will be tracted over the 15 year repayment period. I suspect that IRS OR ATX will come out with a tab reflecting this record with tghe 5405? Have you heard anything about this? or I guess we can make up our own record and attach to the form?

Have 1099-Misc KLLM trucker - anyone out there have same? Would like to compare notes with you on some of the problems with them. I've had W-2 truckers before bu this is the first 1099 type and there is much more work with these types. KLLM sends a year-end summary that has alot of figures NOT NEEDED for tax prep, as well as garbled wording/numbers, etc. Had to enter all Recap Trip Reports (some 52 or more) into our accounting program in order to come up with all debits and credits properly placed on the P&L. This is the only way to get necessary tax data. The biggest find here was the amounts of reimbursements that KLLM paid T/P, like "washouts, unloading, scale fees and tolls leaving T/P a deduction ONLY for the amounts exceeding the reimbursements. Another thing that complicates matters is the COM-CHECK account (similiar to a checking account) in which the drivers receive their regular pay, advances and pay business as well as personal expenses. Of course the driver never attempts reconciliation with the RECAP TRIP REPORTS and confirming business expenses as opposed to personal items. Sure would like to hear from anyone handling KLLM clients. Thanks.

For cpabsd: Would be interesting how you eventually solve your problem on the 1098-T in view of what kcjenkins said in his post? I received a 1098-T today (the long version): 9051.00 in box 5 and 3165.00 in box 1. When I looked on the reverse side it showed it provided additional info like the 3165.00 being QUALIFIED and also 4258.00 being UNQUALIFIED. After completing the SCHOLARSHIPS & FELLOWSHIPS - TAXABLE AMOUNT WORKSHEET from QF, I came up with $5886.00 as taxable income for line 7 of the 1040. The benefit of the Long Form 1098-T is that on the reverse side it lets you know the QUAL & NON-QUAL parts of the Scholarship, which the short form dosen't. I believe I have the correct taxable amount. Any comments would be appreciated.

Have several clients that have lost their jobs and are currently drawing unemployment compensation from the state. I believe I read somewhere that such compensation will be taxable for 2009 for WHEN IT EXCEEDS A CERTAIN AMOUNT. Have any of you read about this change? I need this info so I can start working on 1040ES for them. Thanks.

DAVID1980: This answered my question - I believe it would be to her benefit to allow her to claim the tax free benefits until the investment has expired. Thanks again - This saved alot of further research for me. We couldn't survive without this board. Your're great!!!!

T/P retired from civil service in 1987. Had been recovering investment via the Simplified General Rule up to his date of death. Unrecovered balance of 3800.00 was taken as itemized deduction "not subject to 2%". Now spouse gets 1099R and it shows "deceased spouses ORIGINAL INVESTMENT.? In addition in "taxable amount" it has UNKNOWN? I would assume its fully taxable, and if not what am I missing? Thanks for your comments.

I note that the morning update included 1040 and also Sch A; but it has created a problem. Had client with following situation regarding the addition of real property taxes & the error was highlighted in RED and said: 1040 error - RE taxes included in standard deduction cannot be greater than $500.00 and wouldn't let me e-file - maybe an error in the new 1040 version (#52) or the Sch A version (#21): LINE 40 - STANDARD VS ITEMIZED DEDUCTIONS: A. Line 4 5450. single B. Line 5 1350. over 75 C. Line 7a 226. RE taxes paid D. Line 7c 226. E. Line 8 500. F. Line 9 226. G. Line 10 and 12 7026 (5450 + 1350 + 226) = 7026 the amount that appears on line 40 of page 2 1040. Anybody else having this problem? Any immediate solution and than action by ATX?

When I put "various" in box 6b - it won't clear. After going thru CHECK RETURN it suggests "1099 TAX" be entered. I did and it cleared; then on to box 7a "foreign country". The 1099 from broker dosen't identify. "various" won't work and CHECK RETURN says I need country. Called broker and they said IRS no longer requires this data. Total Tax is 48.00. Anyway, since CHECK RETURN has this as a WARNING (IN BLUE), It will efile. Will appreciate any guidance on this item.

You get the FIRST ONE FREE and after that, subsequent editions cost around 60.00....

I called ATX Tech Support today and they advised that the 16th of Jan is also the first day we can TEST e-file to them.

Go to Forms Window and call up the form - Consent Form. Bear in mind that the ATX form is provided for "Illustrative Purposes Only". Read the rest of the RED PRINT. You'll have to create your own Consent Leter, possibly after consulting with your legal advisor. wow!!!

I note that Form 8829 (OIH) is still in DRAFT form. Could it be that H.R. 6214 (Home Office Deduction Simplification Act of 2008) may be implemented for Tax Year 2008? The bill proposes a "Standard Home Office Deduction" which would become "The LESSER of $1500, or GROSS Income derived from the individuals trade or business."?

From ATX Support: Customer Care Holiday Closings: Customer Care closes at 6pm Wed, Dec 24th and reopens Monday Dec 29th at 8am. We will also close at 6pm Wed, 31 Dec and reopen MOnday January 5th at 8am.

Several items I neglected to emphasize in my original post was: (1) In reading the ATX "red print istructions" at the top of the Consent Form, note that it suggests that tax preparers seek legal advice in regards to specific requirments regarding section 7216 compliance; and (2) IRB 2008-29, Section 2 (Background) states that a violation of Section 7216 is a misdemeanor, with a maximum penalty of up to one year imprisonment or a fine of not more than $1000, or both, together with the costs of prosecution. WOW!! No wonder "Margaret said in her post she was seriously thinking of retirement".

Has anyone seen this document. Just downloaded it yesterday while updating ATX forms. Of course this action relates to section 7216 rules regarding same subject which is outlined in IRB 2008-29. You got to see these new rules. Any comments?

erc - you are running the show, do what you feel has to be done to keep the board clean. Appreciate your efforts and concern along with the outstanding job you're doing.