jklcpa

There isn't a setting that you can change that will affect that function. Maybe you should PM Eric directly.

In my case that I asked about, it is a central air unit for the whole house.

It's never 7 year property, even if practitioners are using that shorter life incorrectly. First, the definition of seven year property includes property with a class life of 10 years or more but less than 16 years (Code sec 168(e)(1)). This includes office furniture, equipment and fixtures that are not structural components. Further, Code sec 1.48-1(e)(2) actually defines the structural components of a building - (e) Definition of building and structural components. (1) Generally, buildings and structural components thereof do not qualify as section 38 property. See, however, section 48(a)(1)(E) and (g), and §1.48–11 (relating to investment credit for qualified rehabilitated building). The term “building” generally means any structure or edifice enclosing a space within its walls, and usually covered by a roof, the purpose of which is, for example, to provide shelter or housing, or to provide working, office, parking, display, or sales space. The term includes, for example, structures such as apartment houses, factory and office buildings, warehouses, barns, garages, railway or bus stations, and stores. Such term includes any such structure constructed by, or for, a lessee even if such structure must be removed, or ownership of such structure reverts to the lessor, at the termination of the lease. Such term does not include (i) a structure which is essentially an item of machinery or equipment, or (ii) a structure which houses property used as an integral part of an activity specified in section 48(a)(1) (B )(i) if the use of the structure is so closely related to the use of such property that the structure clearly can be expected to be replaced when the property it initially houses is replaced. Factors which indicate that a structure is closely related to the use of the property it houses include the fact that the structure is specifically designed to provide for the stress and other demands of such property and the fact that the structure could not be economically used for other purposes. Thus, the term “building” does not include such structures as oil and gas storage tanks, grain storage bins, silos, fractionating towers, blast furnaces, basic oxygen furnaces, coke ovens, brick kilns, and coal tipples. (2) The term “structural components” includes such parts of a building as walls, partitions, floors, and ceilings, as well as any permanent coverings therefor such as paneling or tiling; windows and doors; all components (whether in, on, or adjacent to the building) of a central air conditioning or heating system, including motors, compressors, pipes and ducts; plumbing and plumbing fixtures, such as sinks and bathtubs; electric wiring and lighting fixtures; chimneys; stairs, escalators, and elevators, including all components thereof; sprinkler systems; fire escapes; and other components relating to the operation or maintenance of a building. However, the term “structural components” does not include machinery the sole justification for the installation of which is the fact that such machinery is required to meet temperature or humidity requirements which are essential for the operation of other machinery or the processing of materials or foodstuffs. Machinery may meet the “sole justification” test provided by the preceding sentence even though it incidentally provides for the comfort of employees, or serves, to an insubstantial degree, areas where such temperature or humidity requirements are not essential. For example, an air conditioning and humidification system installed in a textile plant in order to maintain the temperature or humidity within a narrow optimum range which is critical in processing particular types of yarn or cloth is not included within the term “structural components”. For special rules with respect to an elevator or escalator, the construction, reconstruction, or erection of which is completed by the taxpayer after June 30, 1963, or which is acquired after June 30, 1963, and the original use of which commences with the taxpayer and commences after such date, see section 48(a)(1)© and paragraph (m) of this section.

Thanks, Jack. I know very well how that conversation goes, having had it many times over the years. I was just being sarcastic. It's been a rough couple of days, weeks actually.

Right. I think she's going to end up with ~ $13 in additional depreciation this year, and a tax savings of a couple of dollars. I've spend more time answering her emails that this is worth because from the way she wrote to me, it sounded like her rental property on the first go-round. I'm anticipating her next (typical) questions...why 39 years when the unit will last only 14? What happens then? Blah, blah, blah.

ATX always charged my card in May each year also.

Client will spend $6700 on a new A/C unit this year and she takes the home office deduction. Am I correct that this is 39 yr life and can be depreciated based on sq footage of the office to the total just like the home itself is depreciated? No more energy credits either, right?

It would be based on your client's use.

The land is most likely investment property, and its sale would be reported as a capital loss on Sch D. Installment method is not allowed for losses.

Yes, John, it's true. I saw this first hand when I worked as a supervisor and reviewer at one of the larger firms in town. Once computers came on the scene, the newer staff did not have as good an understanding of the interplay of forms within the return or how to balance a set of books. It was especially obvious if a reviewer sent the product (tax or financial statement) back to the preparer for corrections.

John is correct. I assumed that the distribution exceeded the contribution since the OP mentioned taxing the earnings. Follow the ordering rules.

Yes, there will be no penalty because the 5-year rule is moot since he is over 59 1/2, but the 5-year rule applies in all cases before earnings can be tapped tax-free.

JohnH is correct with his statement about forms based entry. If you look at the 1040 form in ATX, other than the demographics at the top of the form, there are almost no fields of direct entry unless you are overriding the program's input and calculations. Almost all of the input is done on other input screens, most having multiple tabs that the preparer has to work in that are nothing like the forms themselves. If you want to renew with ATX, you should contact them soon if you want the discounted price. If it's like past years, doesn't that only extend through the end of this month?

Jack, re: cred65's post, rev proc 84-35 applies to partnerships and does not include S corps, although I suppose it may not hurt to try to apply the same logic in your situation with the income being properly reported on the timely filed personal return. Also, unless you have a POA, technically only the taxpayer can request penalty abatement, so if the letter you sent was on the firm's letterhead and the firm didn't have a POA, it will most likely be ignored by the IRS. I agree with Margaret, that unless you filed the extension electronically and received a valid acknowledgement, you don't know whether or not the paper-filed extension ever reached the IRS.

No, this won't work to fix your error with 2013; it would be a contribution for the 2014 tax year. If no extension for 2013 was filed and the return that was filed included a SEP contribution that was not made by 4/15, then you should amend that return because that SEP contribution is not a valid deduction. If the return didn't include the SEP contribution then no amendment is needed, but as michaelmars pointed out, the client will owe additional taxes, penalties and interest because of your mistake.

Congratulations on your grandson, Jack, to you and your family.

lol , well keep it in mind for next year. There have been some posters here that would argue that the contents of the closet would cause you to fail the exclusive use test, but the tax court also has a de minimus factor that has been applied in cases too. Iirc, we had a topic on this very issue within the last year where personal photos were mentioned to be a no-no. I'm sure others here can attest that with the things people get away with on their returns and are never audited, that you wouldn't have any worries. I picked up a new client that had oih on the return in prior years, and the things the former preparer included in those expenses would make your head spin; items deducted that are clearly spelled out in the pub as NOT being allowed, and this was from a mid-sized CPA firm in my area. I think you should take the deduction, Eric.

This season seemed easier than in many years, and I attribute that in part to Drake. I, too, used much less paper, file folders and toner than in the past. I went totally paperless for the individual returns and also launched my scanner from within Drake's document manager with its predefined document names. I found that to be a great feature along with the ability to add names to that list that I used all the time. I made some big changes this year: paperless, the new scanner, the secure drop off box, and handled some returns totally by electronic means, accepting payments via Paypal. It was nice not having to worry over the software and to know that Drake would handle the returns. I didn't have any trouble with the software and didn't have any rejects, including those with one of the spouses as deceased.

My last return was p/u at 8:45 am 4/14. Just waiting on the DE state acks that take 24 hrs to come back. DE isn't due until 4/30 anyway, but I don't expect any problems with the return. Sure felt good to take the day off!

There's too much cloud cover here to see the eclipse too. We should be able to see the Lyrid meteor showers in a few days though. I finished the extensions, first quarter estimates and the couple of payroll taxes over the weekend, and my last return was picked up at 8:45 am 4/14. I took the day off and will take tomorrow off as well. Mom has doctor appts Tues and Wed, and then other errands with her that have been on hold on Thursday.

I filed my 3 extensions and have one return left for the client to pick up on Monday. He wanted to come over tonight or tomorrow, but I think not. Monday will have to be the day. I have 3 people to calculate 1st quarter estimates for and that is it. Feeling pretty good now, just very, very tired.

What was actually referenced in the settlement for the portion that relates the emotional and physical distress? I was trying to find something about the future medical expenses for you. I came up with a case of someone named Niles in Rev Ruling 79-427 where the future medical expenses weren't allowed as a deduction because the tax court said it would be excluding them more than once (implied that they were taxed when the settlement occurred). I am frustrated with the results of the searches in my research materials, must not have correct key works to get to the answer, but I found these on the internet that have references to some Rev Rulings that you could look into. http://www.lanepowell.com/wp-content/uploads/2012/07/Babener_Article_MedExpenseDed-Master-2012-v-6.pdf http://openjurist.org/710/f2d/1391/niles-niles-v-united-states

If the $5702 in direct medical expenses were deducted in a prior year and provided a tax benefit, those are taxable if the deduction produce a tax benefit, or if in 2013 then they would reduce the current deduction since she was reimbursed for them. The part of the settlement for her emotional and physical distress might be taxable too, unless you can tie that back to a physical illness or injury, so it seems the settlement would have to be because failed tubal ligation is a physical injury or physical illness. I don't think you can exclude the portion of the payment that relates to the future medical expenses because she hasn't incurred those expenses yet. IRS pub on settlements: http://www.irs.gov/pub/irs-pdf/p4345.pdf

I just filed NC and DE extensions online for 2 clients too. All were zero balances owed.

Short article from Pennsylvania Inst of CPAs website: http://www.picpa.org/ask/public/View.aspx?id=100&ReturnUrl=Search.aspx%3Fi%3D3%26k%3D%26c%3D2 Another from Investopedia, a nice summary & bottom section covers your situation, and talks of the 2 approaches: http://www.investopedia.com/articles/pf/05/annuitylosses.asp Not great sources to rely on, but both are saying and referencing the same thing and same Rev Ruling.