Margaret CPA in OH

I understand that is where the details go on the 8606. My question was about properly entering the data shown on Form 1099R. If I do not put in the whole amount as taxable (although the 1099 has nothing there and box is checked for taxable amount not determined), nothing goes to the right place. Soooooo, I followed my instinct to get everthing to the right place. It was even better when I actually input the basis at 12.31 on Part I line 2. Everything calculated correctly and the carryover sheet is great showing how much will be taxed in 2011 and 2012, lest the client forget. A lesson I take from this is that the software is really pretty good for putting the numbers in the right place but it is helpful to know where things should end up. If I input the 1099R exactly as presented and didn't tweak or look at the forms, errors would have been made. Thanks for insights.

I use Adobe Pro and use a password every time and have done so for a few years. I believe other pdf writers can do that, too, but don't know if the one that currently comes with ATX has that capability. The older version of pdf factory, at least the purchased version, has it. There are likely others out there and hopefully someone will provide some great suggestions.

Client and spouse have converted all their traditional IRA's to Roth IRA's. For each of them, $5000 were in nondeductible IRA's. If I input, per the 1099R, taxable amount not determined, it shows on Line 7 of 8606. If I input that all is taxable and complete Part II of 8606, it seems to calculate correctly. However, Part I, second bullet point seems applicable "You took distributions from a traditional...and you made nondeductible contribution to a traditional IRA in 2010...For this purpose, a distribution does not include a...conversion.." Part II states it's all about conversions. So do I input according to the 1099R or what my instinct tells me supported by correct calculations?

Sigh...so true, so true, describes me to a T-account.

http://www.flixxy.com/my-blackberry-is-not-working.htm

Thanks, LindaB. I will just clarify who is actually responsible for repayment. Between us, I believe the student's mother is actually repaying and cannot fathom how her husband got on this. (I know a little too much about the family finances...)

My structure for about 4-5 years is like Kea's. On my desktop is a folder CPA. Within CPA are 4 folders, Business Clients, Individual Clients, Former Clients Everything Else. Within each Major folder is a folder for each client (business, individual, etc.) with the client name. Within each client folder is a folder Client Name TYXX. Within each Client Name TYXX are scanned copies of the client documents (Client Name TYXXdocs), pdf emails with date, and pdf copy of the client returns with and without password. The returns with password are those sent via email to the client for review and are their copies. My Everything Else folder has IRS pubs, forms letters, scanned engagement letters and signed 8879's per year, and, well, everything else that I want to save. It all works pretty well for me. I burn to disk the folder CPA annually so have all years, all clients, all documents in multiple years. I also utilize redundant backups daily. I thought about having each year in a separate folder but found that not as useful as having a folder for each client. Diff'rent strokes...

But Pub 970, page 29, says "Student loan interest is interest you paid during the year on a qualified student loan. ... Qualified Student Loan - This is a loan you took out solely to pay qualified education expenses (defined later) that were: * For you, your spouse, or A PERSON WHO WAS YOUR DEPENDENT WHEN YOU TOOK OUT THE LOAN (my emphasis). From that I take it that I input the amount for the filer (student's mother's husband) if he is legally responsible for the loan. That I will have to check. They filed jointly so student was his dependent although not related.

Terry, AOC was available for 2009 and 2010 to extend the Hope Credit for 2 more years. Look in your software or irs website, American Opportunity Credit FAQ. It is in QF and I utilized it on 2 students who qualified in 2009.

Client has interest for a Plus loan for wife's daughter. Daughter is not a dependent of client and wife. Where does the loan interest belong? It looks as if I have to confirm who is legally obligated to pay (Pub. 970)regardless of whose name is on the 1098E, correct?

Thanks, grmy2h, I just read right past that, I guess, thinking that a stove would not be "building property." I need to be more careful and assume less. Thanks again!

Pacun, why do think that the stipulation that it can be taken for only 4 TAX years would not apply for 2010 in the taxbrewster client situation? I agree that 2009 would qualify as the client's 4th tax year and should be amended but why would the 5th tax year, 2010, meet the qualification? Thanks for clarifying for me. It would help my client but I couldn't, based on my reading, justify it.

I had a client in a similar situation. Quickfinders (not gospel but pretty good) says "To qualify for the credit, the student, as of the beginning of the tax year, must not have completed the first four years of post-secondary education at an eligible educational institution. THE CREDIT CAN ONLY BE CLAIMED FOR FOUR TAX YEARS FOR ANY ONE STUDENT. (My emphasis)I take from that phrase that, because it is an expansion of the Hope Credit and is a temporary 2 year expansion from 2 years, it is usable for only 4 tax years. In my opinion, being in school for the fifth year, even as an undergraduate still, does not qualify. Other opinions?

Thanks, Achmid, but I think the other form is for motor vehicles. On IRS website for alternative energy credit, a news release states "The cost of certain high-efficiency heating and air conditioning systems, water heaters and stoves that burn biomass all qualify," and references only Form 5695 to take the credits. Quickfinders also references "Biomass Stove" as qualifying and only mentions Form 5695. I just don't see that term on the form. Guess I'll stick with where I have it for now.

Client has documentation for wood stove insert qualifying (per instructions and form from company) for the energy tax credit. However, there isn't a place on Form 5695 for wood stoves, only natural gas, propane or oil furnace. Thats's where I put the cost but not comfortably so. Other ideas?

I certainly didn't know about this but my clients with School District tax haven't arrived yet. I did check on the Ohio tax website and read where SD returns could be filed separately. I did not find anything about a separate acceptance if filed at the same time as the state return. It may be possible that, if filed together, the acceptance means for both, but it surely isn't clear! Guess we had best get to the bottom of this soon. I will make some efforts and report back.

I didn't ask but am fairly certain an appraisal was not done. I imagine that the realtor priced it at what he thought it would sell for. The client said it was pulled from the market when it didn't generate a single inquiry at $120,000. My guess is that he owes at least that much and couldn't afford to pay the difference. Okay, tax valuation is the figure, then. I just truly doubt that it will sell any time soon for that amount. So many people are in this unfortunate situation, too. So sad...

Thanks, Pacun. My inclination was actually to use $125,000, sort of splitting the difference between the tax valuation and the no sale asking price. With the comp sale within the year of $125,000, I also thought that might be substantiation. What a mess! And who knows what the ultimate sale price will be if/when he does sell? At least I don't have to try to split out land! And the depreciation amounts won't be that much different, either. I just wanted some other opinions.

Client relocated to another state and couldn't sell condo. He paid $175,000 in 2007. It was pulled from the market when it didn't sell at $120,000. Recent comp within the year in the building for similar unit but updated kitchen was $125,000. Property tax listing is $150,000. It was leased in November but what would be the depreciable value? I know it's lower of purchase or fmv but what is fmv when it didn't sell at $120,000?

They are rules promulgated to reduce identity theft. Originally all entities deemed creditors (you had an open account with a customer or client) were subject to them including CPA's. You know, we don't always get paid immediately for bookkeeping, tax prep, etc. Invoices are sent. Finally at the end of December we were excluded from the definitions of financial institutions or creditors. Here's more: http://www.aicpa.org/InterestAreas/InformationTechnology/Resources/Privacy/FederalStateandOtherProfessionalRegulations/FairandAccurateCreditTransactionsActof2003/Pages/Identity%20Theft%20Red%20Flags.aspx The decision came right after I reviewed my security and instructed my 3 hours weekly assistant on protection of client identity and established a plan. My computer still has the password.

Wouldn't it be possible to drag and drop those clients that are listed to a flash drive or isolated to a separate folder and provide access only to that folder? If you haven't already done so, you could password protect the primary folder of client data to prevent "accidental" access. You could also print off or isolate the 8879's, assuming they are in electronic form, too. Even if you don't have the names before the agent arrives, I should think that you could say something to effect of "Please wait a moment while I access those files for you." If you had a paper file cabinet you would pull them and isolate rather than giving free rein to the cabinet, wouldn't you? At the very least you could/should password protect your computer I should think. I work out of my home, too, and didn't orginally password protect until the red flag rules deadline loomed large. It's now off the table but I did do that much. My internet is quite secure thanks to my IT guy.

You might try to see a property tax bill whether it is taxed separately. Most that I see at least have the land value listed separately. Also on our county website improvements are listed and valued when they occur even if prior to the current ownership. It is not too hard to make a rational decision as to relative values. Perhaps the outbuilding was added later. Did the buyers pay extra for the property because of this building? What about comparable sales for homes in the area that do not have such a building? And don't forget the depreciation would be lower of fmv or purchase. Renovations and upgrades would be depreciated as of the date of availability depending on whether remodeling or appliances, etc. Look at the class. The resale issue may be trickier but I would think it would be treated as a recapture of depreciation. The problem I see is that, as an outbuilding, it was not part of the principal residence. Hmmm, have to ponder that one. At least it will be a 2011 issue. Just be sure to collect all data possible in the interim.

Newspoodle? How did you ever find that one?

What a great breakthrough that would be! I do appreciate the comparison feature in ATX, though. I just can't seem to get it out to the client fast enough. I guess what I should do is send that along with the email that responds to the breath holding question minutes after I receive their documents - "How much is my refund?" I am so grateful for the majority of my clients who never ask because it really doesn't matter. And the tax planning takes care of it. It's just these early young folks who use IRS as their savings account and piggy bank. Sigh....

Speaking of this credit, I have been alerting folks to the possibility that this will not be a permanent credit and suggesting that their planning include saving the 2% that the ss is not being withheld. I already have complaints about why their refund is less this year from those with higher incomes. One overlooked an energy credit of $890 in 2009 that they didn't get in 2010. The other finished college and had almost no education expenses so no longer qualified for the $4981 in education credits received in 2009. And with an income $10,000 higher, no longer qualified for the saver credit. It's going to be a long season as has been noted elsewhere.