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Easytax, you are correct that unless he mechanic receives reimbursements not included on the W-2, the tools deduction or the depreciation would be entered directly on the Sch A as a miscellaneous deduction subject to the 2% limitation. If the tools are expensive and have a life of more than one year, the taxpayer would enter that as a depreciable asset and could elect to expense it using the sec 179 as long as he is otherwise eligible to use that.

I only wear it to take the dogs out when it's super cold and never drive in it. I like to drive with lighter clothing on anyway, and I can feel the seat heater on my back better. Definitely a first world problem. lol

It was cold and windy here last night. Lows tonight and the next few are to be 11, 4, 0, and 6. High wind advisory in effect until Sun 2pm with winds 25-35, gusting up to 60 mph and that may cause power outages. I'm getting out the big poofy coat that makes me look like the michelin man, or the little brother Randy in the movie "The Christmas Story" that fell down in his snowsuit and wasn't bendable enough to get back up. Yep, that will be me.

Well, maybe. I think we still need to consider the facts and circumstances for 2014 and possibly ask what's happened in the business so far in this year, or if that client has major repair costs that are anticipated even for this 2015 year, before jumping to the automatic assumption that applying this prospectively is always the best course. For example, if the client has a substantial repair in 2014 (or anticipates making one) that should be capitalized under the new rules because it is a betterment (roof is always a good example) and the depreciation schedule previously only showed "building", the preparer might want to consider going back to break down that building into the components so that when the new roof is capitalized, the client gets the advantage of writing off the old roof component in that same year. At least at this moment I think that is what I think.

From Pub 529 - Miscellaneous Deductions Tools Used in Your Work Generally, you can deduct amounts you spend for tools used in your work if the tools wear out and are thrown away within 1 year from the date of purchase. You can depreciate the cost of tools that have a useful life substantially beyond the tax year. For more information about depreciation, see Publication 946 Pub 535 under business expenses implies the same thing - Under Capital vs Deductible: Tools. Unless the uniform capitalization rules apply, amounts spent for tools used in your business are deductible expenses if the tools have a life expectancy of less than 1 year or their cost is minor. Jack, I know you don't want to believe me, but the general rules for business expenses apply to all the schedules whether it is on Sch C, 2106, or on the Sch A itself, or is incurred by an entity other than an individual. In addition to meeting the general criteria that all business expenses must meet (incurred in trade or business, or for production of income, ordinary & necessary, and economic performance test met, profit motive), the other rules regarding expense vs capital can't be ignored simply because you say it is on the 2106. An expensive toolbox, rolling work carts with drawers, scanners, air guns, multi-tools such as testers: those will all last beyond one year and should be capitalized unless the cost is minor.

Hmm, there's some little nasty component to this simplification in sec .08 that says if you don't apply the law retro to periods prior to 1/1/14, there's no audit protection as described in sec 8 of rev proc 2015-13.

Ok, I'm a little groggy today, so forgive the repeat question about mechanics. If we apply the new rules prospectively starting with 1/1/14 that means there is no scrubbing of the fixed asset schedule and no 481(a) adjustment claimed for any of that on the return. Start to apply the rules in 2014 and file the returns with the usual forms, right? If we want to scrub and have a 481(a) adjustment for that or other things because we are applying the law retro, we still need to file the 3115, right? I love the part about "administrative convenience". Truly if ever there was a statement that proved how the lawmakers are not in touch with reality, that is it! Ain't nobody got time for that.

Not true. We don't know this ^ unless we ask what is included in that $6000 of tools. What if that mechanic purchased a new Snap On tool tool box included in that $6000 figure. Just the bottom portion of those boxes start around $2800 and go up from there? Middle quality around $5-6,000. Top end is more. There are tops for those too. There's a reason why companies like Snap On and other offer financing. Mechanics getting into the trade can easily spend $10K or more just to get rolling with the job. ETA - I was typing when JMovichEA responded. I agree with him. I was responding to MaxW. I know all about mechanics tools because my husband was in the trade for 42 years.

I agree with that ^, sort of. He can only consider those purchases made in 2014 as current year acquisitions. For the tools of prior years, if there are any, he possibly should have capitalized and depreciated those. He may have some deduction of unrecovered cost if they weren't already fully expensed or depreciated in prior years. Allowed or allowable. I disagree with this ^. This type of tangible property that is used for the production of income is considered business equipment, and if it has a useful life of more than one year its cost should be recovered through depreciation. If it is a small tool that has a useful life of less than one year it could be expensed. Again, I'd look at the invoices to decide what needs to be capitalized, report it as an asset on 4562, use the bonus or 179 deductions if you are able and want to, and have it flow either directly to Sch A subj to the 2% limitation or to the 2106 and then onto Sch A from there.

You'll have to first apply the new repair/capitalization rules first. If an individual item or invoice is under $500 you can deduct it as "supplies". If it is over $500 for an item, capitalize.

If mom needed more and he wanted to give more, he can actually do that and still not pay gift taxes. He would have to file the gift tax return, use the $14K of annual exclusion, and then the portion that exceeds $14K uses up some of the unified credit allowed over one's lifetime. The gift tax return will calculate the tax on the excess over $14K and will allow a credit of the same amount to offset, so there still wouldn't be any gift tax due. Everyone gets hung up about the $14K limit, but that is the point under which you don't have to file a gift tax return, not the point at which you actually will pay tax. Of course, that is assuming that this wealthy individual hasn't already made such gifts in earlier years that the unified credit is mostly used up and won't cover the gift tax in the current year. If anyone reading this doesn't understand what the unified credit is or what it represents, it is the amount of gift/estate taxes that will never be paid because estates are currently allowed assets of up to $5.43 million (for 2015) and not be taxed. In other words, that is the total amount of wealth the tax law currently allows one person to transfer to others without ever paying tax. Those transfers can be made either by gifts during one's lifetime or after death from his estate, that is why gift and estate tax works together, and why it is called the "unified" credit. The gift tax return asks for all prior gifts made during one's lifetime that exceed the annual limit and accumulates them so that the IRS knows how much wealth has been transferred during one's lifetime via gifts, because that amount ultimately reduces the $5.43 million amount. As a very simple example, if an individual makes gifts exceeding the annual limit during his lifetime that total $2 million, then his estate can only have up to $3.43 million of assets and still be considered small enough to not be taxable. Disclaimer: That is for federal purposes only, and anyone reading this should consider any implications at the state level also to determine if gifts in excess of the annual limit will create any taxes currently payable under existing state laws.

Terry, this transaction actually results in the recipient being taxed on the difference between proceeds and exercise price, and is ultimately taxed at ordinary rates because it is considered compensation on his W-2. Here's how it works: He got $44K. That is proceeds. Report on 8949. The basis has two parts. It is the exercise price shown on the paper from Morgan Stanley, the gross amount before withholdings, AND ADD TO THAT... The basis ALSO includes the amount shown on his W-2 because he is going to pay tax on that at ordinary rates, so he gets to use that as basis too. Those 2 figures added together should come out to very close to the proceeds because there were some trading fees or transaction costs to sell the stock. That will generate the small cap loss that everyone is talking about. Yes, you need the 8949 to report the part that is the cap loss from the transaction fees.

How did you complete the schedules? Did you show each year or use an abbreviated approach? Reconciling all this crap is like being a junior accountant again playing with these depreciation schedule tie ins. I FINALLY finished my client's review financial and returns. He is coming at 8pm tonight. I may not get dinner until very late. I'm so glad for e-filing of the federal. The state gets a copy of the entire federal with all attachments and it is so thick that I had to staple it in 3 separate parts for even my heavy duty stapler for extra thick packages to handle it. Then I put in more staples to hook the 3 parts together. I have spent WAY TO MUCH TIME on this because of the 3115 issue. This is ridiculous!

I updated the title of this topic to draw more attention to the problem so that hopefully people will see it before updating.

Right, I've been wondering if we'll see some adjustment to the payback caps because situations like this one.

Another topic here brought this back to mind, so I thought I'd start a new topic. For those of you that operate businesses from your home and meet with clients there, you have risk exposure should someone be hurt on your property and that person was there for a business-related purpose. Your homeowner's insurance will not protect you from this exposure. My business was required to purchase a separate general liability to cover that risk.

That would depend on the insurance coverage. If someone sues an LLC in the case of a building, the liability stops with the assets of the LLC. The personal assets of the owner are protected, and that is the reason to form an LLC such as this. As it was before the LLC was formed and until that building is transferred into the name of the LLC, if someone sued because of something that happened with the building, all of the owner's assets were at risk. Hmm, this brings up another topic for those preparing taxes and meeting with clients at their homes. I'm going to start a new topic for that one.

The 1120S beer company isn't a charitable organization, so no deduction is allowed. My sister tells me she spent a lot of time in the coat closet at Catholic school. That was the nun's version of sitting a child in the corner. Me, I missed out on that and attended public school.

I received this email message today: The IRS recently issued Notice 2015-9, providing limited penalty relief for qualified tax returns which have a repayment of the advanced premium tax credit. Generally, taxpayers who do not pay their entire tax liability by the return due date would be penalized under §6651(a)(2); however, taxpayers who have a balance due attributable to the reconciliation of the premium tax credit could have these penalties abated for the 2014 tax year. Additionally, taxpayers with an underpayment of estimated tax penalty under §6654 (a) might have this penalty waived if a repayment of the advance premium assistance credit is present on the return. Relief is only available for the 2014 tax year.

He didn't receive any funds thought, right? Sean-the-beer-expert has no donation because there is no value placed on one's time. Shawn-the-1120S-guy got the benefit of free advice as far as I can see, and no 1099 should have been issued. The nun would hit your wrist with a ruler.

Well, after the 21 last night I now see that more must have come in. I have the icon showing indicating that there are some more to be installed when I shut down and restart.

Ron, thank you, thank you! That gave me the clue to find it in my software where it was listed immediately below the other one (you know, right where it should be ) and the last words of the title were cut off so that I didn't instantly recognize it. I'm so tired already, what will I feel like a month from now?!

I agree with Tom, and I think the exchange should direct them to Medicaid. I think you meant to say Medicaid, not Medicare.

Thanks for that reminder, Lynn. I did realize that too, and my client and the rent example would fall still be well within those limits. I'm going to draft up something to attach that will cover this election. I don't see anything in repairs to capitalize, mostly small $3-400 items, but it totals close to $2,700 for the year for the one store, and this election would cover them nicely.

Margaret, it looks like this person is single and needs about a $20K reduction to be below the 400% of FPL. There might be nothing to do, but is there any possibility that the pension distrib was late enough in Dec to still be within the 60 days to consider a rollover of enough funds? If the person has a HD plan that would allow a contribution to an HSA, you could play with the figures to have a somewhat smaller rollover of the pension (if that is even still a possibility), and use the tax refund to partially or totally fund the HSA. When a person is closer to the FPL and has a large payback, retirement contributions and funding HSAs are an easy sell if they can afford it because they get to keep their money and save for retirement too.