Pacun

It depends on what you want them to learn while in your class. If you want them to write a research paper, give a lot of little subjects such as “Education credits for 2010”, “Deductible expenses on schedule A” “Schedule E deductible expenses”, “Retirement plans for individuals”. Etc. and ask them to pick a subject and write a paper. If you want them to learn how to prepare a simple return, I would give them a case for year 2010 like this one. A full time sophomore in your university made $30,000 from January to August, then went to school full time and tuition paid for 2010 was $1,500, required books cost $600. Dorm cost was $2,000. Computer for school work was $1,000 and he paid $300 in tutoring for harder classes. He opened an IRA and contributed $1,000 in November 2010 and he made another contribution of $1,500 in March 2011. Both contributions were for 2010. In August 2010, he contributed $2,000 to his ROTH IRA. student is single, US Citizen, 22 years old and provided more than 50% to his own support but his parents paid his tuition, books and computer. His W-2 shows that he was covered by a retirement plan and Box 1: $30,000, box 2: 3,000, Box17, (state taxes paid) $1,250 If you want to make it harder, give Schedule A expenses that won't pass the standard deduction and maybe a little schedule C income and expenses. For schedule A, you can say... student paid $500 to have his taxes prepared ($300 for his personal return and $200 for preparing his schedule C), donated $500 to the US Red Cross and gifted $10,000 to his uncle. He spent $3,000 in deductible medical expenses. For schedule C, you can state: Student had his own business as a computer technician and he was paid cash $3000 and $10,000 in checks he was provided 1099s for the amount of $7,000 which was already included on those amount above. For his clients, he purchased, 2 computer for $1,400 each, 3 hard drives, for a total of $350, memory for $80, a motherboard for $85 and his business mileage were 516 miles. He spent $1,800 in newspaper ads and his business donated $900 to his church to promote good will. The final question should be... maximizing his legal refund, or paying the least legal taxes, what is the amount of his refund or amount due on his return You should give 15% if you come up with correct answer and 2-5 points for each entry entered on the correct spot. You should have 15% discretionary points for people who verbally defend and explain certain entries. Remember that some of your students will go to their tax preparer and pay to have the return prepared. You should collect papers and ask questions depending on what they entered on the return and use the 15% discretionary points to be fair. If you want to discuss the final answer, please send me a personal message since your students might join this forum

The IRS has a new program to allow you to voluntarily classify workers correctly and, in return, to have "relief" (that's the IRS term) for payroll taxes not paid for these workers in the past. Here's the deal: Maybe you have incorrectly classified workers as independent contractors instead of employees, and you are worried that if you are audited or you get reported to the IRS you will have to pay payroll taxes (FICA taxes, unemployment tax, and others), and fines and penalties, for all the time these people worked for you. Now, if you meet certain criteria, the IRS will allow you to correct the mistake and classify the workers as employees. And, you won't have to pay all those back payroll taxes. To qualify for this Voluntary Classification Settlement Program (VCSP), you must have: • Consistently have treated the workers in the past as non-employees (that is, as independent contractors), • Have filed all required Forms 1099 for the workers for the previous three years, and • Not currently be under audit by the IRS, the Department of Labor or a state agency concerning the classification of these workers. You will still have some payments to make based on amounts paid to these workers for the past year, but no interest or penalties will be applied, and you will not be audited on payments made to these workers for prior years. How to apply: Use IRS Form 8952 to apply for the VCSP.

I love when people give this type of response.... "read the instructions for form 5895, especially for lines 23, 24, 25 and 26". I also love when you ask a question and they send you a link to the tax code or to a publication.

"Taxpayer claimed the stock as worthless in the year the company declared bankruptcy (yes, erroneously) and took a $100,000 loss" Since you are saying that he erroneously claimed the loss, you should amend.

Report income on the current year. There is no statutue of limitations when you owe money. You can amend any year if you owe the IRS. Technically, this is a good answer but I think there is an exception and that makes answer b the best answer.

If it is not earned income, then it is hobby income. Report income and remember that going from home to pick up the child would be considered commuting miles.

Rental of the property to a related party is a personal use unless a fair rental is charged. So you cannot depreciate it. This could be their second home and take the deduction on Schedule A. This is regarding a beach house (or any other) that you rent and use it for, let's say, 2 months. "In applying the expense limitation rules for significant personal usage, interest, taxes and casualty or theft losses must be deducted first from gross rental income, then expenses not involving adjustments to basis, and finally expenses involving adjustments to basis. Otherwise, a taxpayer could circumvent the loss limitation by deducting these amounts as itemized (personal) deductions and offsetting the rental receipts with such expenses as depreciation, utilities, and repairs."

Either way you will have the same results, so the IRS wouldn't care if you add it to the basis or use it on Sch E. Now, if it is personal, then it is not deductible. I would go with intent, provided the unit was ready to be rented and efforts were made to rent it. (Keep the records).

Not that matters, but it will help us understand your position, is there a profit o loss on the sale?

How much money are we talking about? Wouldn't it make sense to pay ss since he is collecting early? Since he was a programmer, this is schedule Cincome. Remember that presidents are not writers and that's why they get a break if they only write one book.

There is a wave of testing and continue education coming. EAs are not required to do that but they need to comply with maintaining their status. One of the requirements to maintain EA status is to have continuing education credits.

Let me rephrase my sentence just in case you are thinking that I told the auditor at the very beginning.... I told the auditor at the beginning of the 2010 audit and when the auditor said that he was going to use "industry standards" to come up with a salary for the owner.

There must be a time limit for this. I do believe is no longer than 3 years. Let's say that I lended that money to the corporation above and the corporation is now in default, I repossesed the land and I issued a 1099-A listing how much the corp owes me and what's the FMV of the land at the time I repossesed the land. The corporation should report the sale/abandonment of the land and whatever else is required. I believe that there is a time limit because: What will happen if I decide to sell the land right away at FMV? I will issue them a $20K debt forgiveness. What if I decide to sell 5 years from now and sell it for $3,620,000? Will I tell the corporation, here is a million dollars after I recovered my money? What if I have it on the market for 10 years and it doesn't sell and then I decide to leave as inheritance to my children and I die 50 years later? Imagine that that the 1099-A was given in 2005 and I didn't sell the land right away while the FMV was close to the money the corporation owed me. 5 years later, I decide to sell the land for $1,620,000. and I send 1099-C to the corporation showing a $1,000,000 debt forgiveness. Don't you think that the lawyers from the corporation will argue that I didn't sell while the prices were high and that the 1099-C is not valid?

The audit was for 2009 (in both years, owner's income (payroll) was very low), since they found a lot of mistakes on that return, they audited 2010 and I told them from the beginning about those 12K "loan" that the owner took out. His salary was low that the 12K dividend... (you know what I mean). My return looked good and that was welcomed by the auditor because I told him from the beginning that the taxpayer was disorganized but I was putting everything in order.

Let's say that the bank doesn't issue a 1099-C but the corporation knows that the debt was forgiven. The corporation received a 1099-A that reads: "outstanding loan 2,620 ,000 and FMV 2.6 million".... Are we in agreement that the amount of debt forgiveness is $20K?

I'll wait for others to give their opinion.

This is what happened... The IRS audited 2009 and found a lot of mistakes from previous preparer. The audit was extended to 2010. During the audit, we told them that the owner took out $12,000 as a "loan" from the company and he was going to pay with interest. The IRS said that they were going to transfer that money to the personal return. I suggested to be transferred as dividends and the IRS asked me if there were retained earnings... I said, "no, but after the audit, the company will have enough retained earnings to cover those $12K and the IRS agreed. They transferred 12K as dividends and we are all happy. Maybe I did get a big break from the IRS on this one. Of course client got punished for 2009 but I didn't prepare the return and we didn't have a leg to stand on. One last question... could you have a different retained earnings for the books and a different one for the IRS? I have noticed that Quickbooks will add to retained earnings (for next year) the amount to which the corporation paid taxes on.

What other information would you need in order to calculate retained earnings after the audit?

"1099 A received for 2010 showing balance of principal outstanding as 2,620 ,000 and fmv listed as 2.6 million" I am reading 1099-A the same way CPABSD is reading it. It reads, "We are giving you this 1099-A because we are repossesing our house. You owe us $2,620,000 and the FMV of the house is $2,600,000"

Coming soon to a theater near you!!!!

I would add the 20K to other income and attach explanation. Keep in mind that that amount might change when the bank sells that land and maybe you will need to amend. Since you have a big loss, amending shouldn't be a big deal. You should ask your clients to keep an eye on the mail since the bank might or might not issue a 1099-C. I believe the bank will send that form when they sell the land. If the books were done correctly, you should have loans from the banks when the land was purchased. Maybe there was more than one loan. You should have the HUD-1 or similar document that will give you an idea how much it was borrowed.

I understand that taxes paid to the IRS for form 1120 are not deductible next year and that's one of the reasons the books and the tax accounting botttom line don't match. Can you elaborate on that? What can the corporation deduct on 1120 for 2011 if: Corporation (one 100% onwer) is audited for 2009 (expenses for the amount of $50K were not honored) and in 2011 it pays to the IRS: $15,000 taxes, $2,000 accuracy penalty $600 interest. After the audit was conducted, the corporation incurs the following expenses. $30 in postage to send payments to the IRS regarding the audit $20 in cost of money orders to pay IRS. Based on the information above, let's say that the corporation had 0 retained earnings ALL the time, what amount becomes retained earnings after the audit? (Nothing was transferred to the owner's personal return.) How about in quickbooks, how do you record those transactions for 2009 after the audit?

It seems that MD has its own exam for tax preparers this year. Have you heard anything from DC or VA? http://www.dllr.state.md.us/license/taxprep/

It seems to be working now. Thank you.

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