jklcpa

Sara mentioned Sch D only because her example related to how an unreported stock sale would trigger the CP2000. I agree that you should file the 1040X to document the discharged debt.

Joan, it wasn't held in a trust prior to death, was it? That may change my answer, but I believe if the property was titled in the individual name, then you would use the stepped up basis and depreciation starts over in the estate, covered by IRC 1014(a), I think. If the deceased was the sole owner, any depreciation taken by the estate before death is ignored at the time of disposition, so if the estate continues to rent and depreciate, the basis at disposition would be the FMV at DOD (or the alternate valuation date) less any depreciation taken by the estate. It is more complicated if the property was not solely owned because the other owner(s) continue on with their original basis and depreciation, and they may or may not be the person or entity that inherits the property. Community property states also complicate a situation where property is co-owned. Below is some narrative and an example that may help: Depreciable Assets Depreciation is one of the “events” that affects basis; when a taxpayer has recovered part of his or her investment through a depreciation deduction, the basis must be reduced by the amount of the deduction. However, if you inherit property that the decedent had been depreciating (because he or she had used it in a business or rental activity), the inherited basis of the property may or may not be affected by the prior depreciation that was claimed. If the decedent was the sole owner of the property and died prior to 2010, the inherited basis is the full fair market value at the date of death (or the alternate valuation date, if applicable) – that is, no adjustment is required for the depreciation allowed while the decedent was alive. The inherited basis from decedents dying in 2010 is determined by a more complicated set of rules (see CAUTION 2010 earlier in this article). If the property continues to be used for business or rental purposes, depreciation starts anew based upon the inherited basis. As explained above under “Beneficiary Tax Basis,” when the decedent had jointly owned the property with another individual, the post-death basis is made up of two parts; the surviving tenant’s part of the original basis plus the value of the portion of the property included in the decedent’s estate. For depreciated property, the combined new basis is also reduced by the depreciation that had been allowed to the surviving tenant; the decedent’s previously claimed depreciation is ignored. For example, Mother and Son invested $60,000 each for a rental property that they owned as joint tenants with the right of survivorship. Up to the date of Mother’s death, depreciation of $20,000 had been claimed. The fair market value at Mother’s date of death was $200,000. The inherited basis of the property is $150,000 ((50% x $120,000) (50% x $200,000) - (50% x $20,000)). If the beneficiary and the decedent jointly owned the property, and the beneficiary continues to use the property for business or rental purposes after the co-owner’s death, the beneficiary continues depreciating his or her adjusted basis under the same method used in previous years. Depreciation on the part of the basis inherited from the decedent starts anew as of the date of death using the modified accelerated recovery system (MACRS). A surviving spouse who inherits community property from his or her deceased spouse that was used for business or rental purposes does not reduce the inherited basis by any portion of the depreciation attributable to the period prior to the spouse’s death. The entire new basis (less any land portion if the property is real estate) is depreciable. Below is a link to Reg 1.1250(3)( b ) that also talks of basis, gain calcs, and how the additional depreciation that is normally used in computing depreciation recapture prior to death is adjusted to zero immediately after death. The deprec recapture would only come into play if the property was acquired by the transferee prior to death, and then the gain would be considered IRD and would be subject to recapture. Anyway, the section I referenced starts at the top of the right-hand column on page 2, and continues on with an example on page 3: http://www.gpo.gov/fdsys/pkg/CFR-2012-title26-vol11/pdf/CFR-2012-title26-vol11-sec1-1250-3.pdf

Raven, your client should definitely file a Form 1040 because the statute of limitations on assessments hasn't started until a return is filed. An SFR doesn't consititute a filing and does not start the statute of limitations running.

Article in yesterday's NY Times: Russian Hackers Amass Over a Billion Internet Passwords By NICOLE PERLROTH and DAVID GELLESAUG. 5, 2014 A Russian crime ring has amassed the largest known collection of stolen Internet credentials, including 1.2 billion user name and password combinations and more than 500 million email addresses, security researchers say. The records, discovered by Hold Security, a firm in Milwaukee, include confidential material gathered from 420,000 websites, including household names, and small Internet sites. Hold Security has a history of uncovering significant hacks, including the theft last year of tens of millions of records from Adobe Systems. Hold Security would not name the victims, citing nondisclosure agreements and a reluctance to name companies whose sites remained vulnerable. At the request of The New York Times, a security expert not affiliated with Hold Security analyzed the database of stolen credentials and confirmed it was authentic. Another computer crime expert who had reviewed the data, but was not allowed to discuss it publicly, said some big companies were aware that their records were among the stolen information. “Hackers did not just target U.S. companies, they targeted any website they could get, ranging from Fortune 500 companies to very small websites,” said Alex Holden, the founder and chief information security officer of Hold Security. “And most of these sites are still vulnerable.” Mr. Holden, who is paid to consult on the security of corporate websites, decided to make details of the attack public this week to coincide with discussions at an industry conference and to let the many small sites he will not be able to contact know that they should look into the problem. There is worry among some in the security community that keeping personal information out of the hands of thieves is increasingly a losing battle. In December, 40 million credit card numbers and 70 million addresses, phone numbers and additional pieces of personal information were stolen from the retail giant Target by hackers in Eastern Europe. And in October, federal prosecutors said an identity theft service in Vietnam managed to obtain as many as 200 million personal records, including Social Security numbers, credit card data and bank account information from Court Ventures, a company now owned by the data brokerage firm Experian. But the discovery by Hold Security dwarfs those incidents, and the size of the latest discovery has prompted security experts to call for improved identity protection on the web. “Companies that rely on user names and passwords have to develop a sense of urgency about changing this,” said Avivah Litan, a security analyst at the research firm Gartner. “Until they do, criminals will just keep stockpiling people’s credentials.” Websites inside Russia had been hacked, too, and Mr. Holden said he saw no connection between the hackers and the Russian government. He said he planned to alert law enforcement after making the research public, though the Russian government has not historically pursued accused hackers. So far, the criminals have not sold many of the records online. Instead, they appear to be using the stolen information to send spam on social networks like Twitter at the behest of other groups, collecting fees for their work. But selling more of the records on the black market would be lucrative. While a credit card can be easily canceled, personal credentials like an email address, Social Security number or password can be used for identity theft. Because people tend to use the same passwords for different sites, criminals test stolen credentials on websites where valuable information can be gleaned, like those of banks and brokerage firms. Like other computer security consulting firms, Hold Security has contacts in the criminal hacking community and has been monitoring and even communicating with this particular group for some time. For people worried about identity theft and privacy, the discovery by Hold Security of a giant database of stolen data is highly personal. But there are steps everyone can take to minimize the hackers’ impact. The hacking ring is based in a small city in south central Russia, the region flanked by Kazakhstan and Mongolia. The group includes fewer than a dozen men in their 20s who know one another personally — not just virtually. Their computer servers are thought to be in Russia. “There is a division of labor within the gang,” Mr. Holden said. “Some are writing the programming, some are stealing the data. It’s like you would imagine a small company; everyone is trying to make a living.” They began as amateur spammers in 2011, buying stolen databases of personal information on the black market. But in April, the group accelerated its activity. Mr. Holden surmised they partnered with another entity, whom he has not identified, that may have shared hacking techniques and tools. Since then, the Russian hackers have been able to capture credentials on a mass scale using botnets — networks of zombie computers that have been infected with a computer virus — to do their bidding. Any time an infected user visits a website, criminals command the botnet to test that website to see if it is vulnerable to a well-known hacking technique known as an SQL injection, in which a hacker enters commands that cause a database to produce its contents. If the website proves vulnerable, criminals flag the site and return later to extract the full contents of the database. “They audited the Internet,” Mr. Holden said. It was not clear, however, how computers were infected with the botnet in the first place. By July, criminals were able to collect 4.5 billion records — each a user name and password — though many overlapped. After sorting through the data, Hold Security found that 1.2 billion of those records were unique. Because people tend to use multiple emails, they filtered further and found that the criminals’ database included about 542 million unique email addresses. “Most of these sites are still vulnerable,” said Mr. Holden, emphasizing that the hackers continue to exploit the vulnerability and collect data. Mr. Holden said his team had begun alerting victimized companies to the breaches, but had been unable to reach every website. He said his firm was also trying to come up with an online tool that would allow individuals to securely test for their information in the database. The disclosure comes as hackers and security companies gathered in Las Vegas for the annual Black Hat security conference this week. The event, which began as a small hacker convention in 1997, now attracts thousands of security vendors peddling the latest and greatest in security technologies. At the conference, security firms often release research — to land new business, discuss with colleagues or simply for bragging rights. Yet for all the new security mousetraps, data security breaches have only gotten larger, more frequent and more costly. The average total cost of a data breach to a company increased 15 percent this year from last year, to $3.5 million per breach, from $3.1 million, according to a joint study last May, published by the Ponemon Institute, an independent research group, and IBM. Last February, Mr. Holden also uncovered a database of 360 million records for sale, which were collected from multiple companies. “The ability to attack is certainly outpacing the ability to defend,” said Lillian Ablon, a security researcher at the RAND Corporation. “We’re constantly playing this cat and mouse game, but ultimately companies just patch and pray.” Nicole Perlroth reported from San Francisco and David Gelles from New York City.

Exactly, John!

I'm with Lion in that I won't efile a return that I haven't prepared and agree with what the others here have posted. There's more going on with this woman and her return. Be glad she left your office. If she had her return completed by hand without using a software program, she would have been exempt from the e-filing requirement in NY. Why didn't she just mail it herself?

It's not new and it's not secret. I think it came out of the PACI in 2004. Found this: http://www.irs.gov/pub/irs-tege/final_paci_report.pdf and this: http://www.irs.gov/Charities-&-Non-Profits/Political-Activity-Compliance-Initiative-%282004-Election%29

The NOL dies with the dissolution of the old C corp. It doesn't affect shareholders' basis or pass through, it just goes away.

I agree with not making an issue over the few minutes too. We don't know that this employee left early though. I was wondering more about this employee not taking a lunch break, or if the OP is just giving a generalized simple example to get an answer to her question.

Link to US DOL and FLSA re: rounding of hours: http://www.dol.gov/whd/regs/compliance/whdfs53.htm

Good one, Jack! lol I still have my slide rule too, and an abacus.

Yes, I moved it, and just because it mentions arguments from both side does not mean that it isn't a political piece. The article mentions the benefits of the credit to outline what is possibly at stake, but the main points of the article are that this is part of the comprehensive tax reform, the cost savings if it is eliminated, budgetary offset considerations, possible veto by the President despite his past support for R&D, and what the role of the government should be to administer or support programs such as these. I really like this sentence: "The role of any government is to defend and promote the interests of all its citizens and to administer programs that are beneficial to all, including those who are underrepresented." My opinion is this: This program has been successful since its inception and I think it should continue. It is part of our government supporting the welfare of our citizens, it fosters research and innovation, and patients with less rare conditions might also benefit from the research. What I don't know and would be interested to find out is how many drugs that do work were developed under this program that are now not being manufactured because big pharma decided that particular drug did not benefit enough people or was not profitable. I'm sure that many of us here have read stories along those lines, or might know someone personally where this was the case. I don't know the statistics on that. Does anyone have the stats on drugs that were developed under this program that aren't being manufactured because big pharma deemed them to not be profitable enough? KC, you didn't specify why you had mixed feelings on this, but mine come from trying to find a balance between supporting a program that works toward the general welfare of the population vs supporting the for-profit big pharma corporations.

Yes, it should be grossed up if the company is paying the employees' share of FICA and Medicare. The new gross would be the net check received divided by 0.9235. That is the gross amount that the FICA and Medicare will be based on, not the net amount that was actually paid to the employees.

NECPA, technically you may be in violation of the ATX agreement, but you really only have one place of business that you are providing service to your clients, and your situation is not unlike someone bringing some work home with them. The OP has a different setup because he actually has more than one place of business, he has employees working at that second location, and is presumably meeting with clients and delivering services and returns there also. If that is the case, Jack is correct that he is in violation by accessing ATX remotely in his circumstance.

I got snail mail from ATX last week bragging about how the ATX team recognized the troubles of the 2012 season, how they listed to their customers, and touting the 2013 season as being trouble free. They think their customer service is outstanding and want to earn back my trust and want me back next year. There was no mention of anything being free. I only glanced at it as it went in the bin but seemed to be the same old thing and similar pricing with the usual 10% markup.

The one thing that stands out to me is that in your gain calculations at sale you are recapturing 100% of the depreciation taken. I think that only 50% should be recaptured because the one time that depreciation recapture can be avoided is death, and since the 50% of the unit owned by the deceased was included in the estate assets, it had the potential to be taxed at the estate tax rates.

Joan, that sounds like you've picked up some adware or malware.

I also have a gas station client and agree with what Rich and DevM said above. I use FIFO for the inventory and the POS system and client's summary of gallonage. He knows how many gallons he has in those tanks at the end of each day. It's not that hard to determine ending inventory and see if the cost of sales makes sense. My bigger challenge is that the supplier nets the electronic debits charged against client's checking account for the gasoline purchases against the credit card sales owed back to the client. There's no logical pattern for how they combine or net the activity. Believe me, inventory and COS is a snap compared to reconciling cash, deposits in transit, and ending payables because of the netting.

KC, I'm wondering what type of device you are posting from, or if you experience a delay in the post and are clicking 'post' again, or if something else is going on with the forum. Yesterday I deleted a duplicate posting of yours entitled "IRS prodded...." There were 2 identical posts with the exact same posting time of 1:41pm. I deleted the one that no one was viewing at the time. Then last night at 11:23pm the same thing happened with the gas station post by joanmcq. Again, 2 identical posts with the same time stamp. I deleted one of those also. Both of the deleted posts are still on the moderator's control panel. Eric, if the system is allowing 2 posts each time KC posts, this might explain why she was getting that spam warning, because it was thinking she was making multiple posts at the same time. Now that the control has been turned off, it's easier to see why the might have been happening.

Does that happen even when you spend time typing something out, or is it always on the new topics that are a cut-and-paste from another website? I could see where the system could think you are posting too fast if you open a new topic, do a CnP, and click on post that could all be done within a matter of a few seconds.

Even if ADP wasn't administering the plan, it's possible that a smart customer service rep would catch this and code it to be reported as taxable wages, BUT I've also had dealings with the less-than-smart reps that will report the compensation which ever way the client tells them. mrichman333, it doesn't make any difference about the 50-or-less employees, but if the company has an HRA plan, that in itself is considered a medical plan and the employees applying for individual coverage would need to know this when filling out the application. I agree with Jack that it sounds like this employer doesn't know what he's doing, and the reimbursement was reported incorrectly. At least the employee called and questioned it so that it can be corrected before any more time passes.

You're welcome, Jack. KC, you spammer, you! No idea.

I agree that we don't know whether or not the W-2 is correct or not, and neither does mrichman333. I also think Jack's assumption is reasonable and the client should be able to provide, or obtain, a copy of the HRA plan summary if a proper plan really exists.

All of the attachments you've made on the forum are found by clicking on your user name at the upper right then My Settings > Manage Attachments. The limit is 8 mb, so that may be your only problem and not the size of any given picture.

This will almost certainly be challenged, and it does nothing to solve the problem of unethical preparers. http://www.accountingtoday.com/news/irs_watch/aicpa-says-irs-voluntary-tax-preparer-certification-program-is-unlawful-71073-1.html Full test for those that don't like clicking links: The American Institute of CPAs has sent a letter expressing strong concern with the Internal Revenue Service’s proposed voluntary certification program for tax return preparers, saying it “would cause significant legal problems that may ultimately frustrate the IRS’s goals, confuse the public, and lead to litigation.” The AICPA expressed its concerns to IRS commissioner John Koskinen in a meeting and letter last month, but has increased its level of concern in the latest letter (see AICPA Opposes IRS Voluntary Tax Preparer Certification). In a letter Tuesday to Koskinen, AICPA chairman Bill Balhoff and AICPA president and CEO Barry C. Melancon wrote, “We have repeatedly expressed to you and your colleagues that our members have very significant concerns regarding a voluntary certification program and urged the IRS to have a formal comment period to obtain and consider the public’s views prior to moving forward. … However, it is our understanding that the IRS has no intention of slowing down or considering viable alternatives. Therefore, we feel compelled to consider our next steps, and to raise more formally our legal and policy concerns with the IRS’s current path.” Under the proposed voluntary program, tax return preparers would receive an IRS certificate for display in return for completing a continuing education program that includes a comprehension assessment. The AICPA’s letter emphasizes the following points: • First, no statute authorizes the proposed program; • Second, the program will inevitably be viewed as an end-run around Loving v. IRS, (a federal court ruling rejecting an earlier IRS attempt to regulate tax return preparers); • Third, the IRS has evidently concluded, in developing the proposed program, that it need not comply with the notice and comment requirements of the Administrative Procedure Act. This is incorrect; and • Finally, the current proposal is arbitrary and capricious because it fails to address the problems presented by unethical tax return preparers, runs counter to evidence presented to the IRS, and will create market confusion. Describing the proposed program as “unlawful and improper,” the June 24 letter stated that it is essential that any regulatory approach instituted by the IRS to address this issue has a firm legal basis and reflects sound policy. “We continue to believe that additional regulation of tax return preparers might yield significant benefits and that the IRS can achieve these objectives while remaining consistent with Loving and other statutory limitations on the IRS’s authority,” the letter stated. “We have sought to work with the IRS to achieve workable solutions to regulate tax return preparers and protect the public, and we stand ready to continue these efforts,” the AICPA wrote.