Margaret CPA in OH

Sigh, here's another one. A tiny new 501(c)(3) SMLLC wants to publish a book and movie. $5000 has been paid to another person to assist in writing the screenplay and marketing to producers. There is a lot of legalese but it seems to state that the other person will shop the idea around and, when a producer acquires the exclusive media rights, the writers will split the income. Client thinks of this as an investment, I think of it as, well, not exactly sure. Is it a payment from the LLC that needs a 1099 of some sort? The income is well below, very well below, $25,000 so 990N is easy. Client is no notice to find someone else after this year but what to do, if anything, about a possible 1099?

I have a Fujitsu ScanSnap IX1500, my second. It's fast, scans double-sided and takes up very little space. I thought it was also a good price.

Yep, I didn't pay attention to the time, just trying to get it out before my gym class. Sent again and received another message - Thank you for using e-File. I hope that doesn't appear with every return.

So about 30 minutes ago, 8am here, I submitted the most basic of returns. W-2 income only. It was rejected as Form 1040 was not being accepted. Was I wrong in thinking efiling was open today?

My old phone died and I had to rush to get a new one. I have the authenticator on the phone for a few reasons. I called support for help to renew (or whatever the term would be) access for the program and payroll. Although I was on hold for probably 30 minutes, the tech was very helpful and knowledgeable. I have the authenticator on my desktop now and am quite happy to not have to scramble to find my phone every time to access the software. I didn't expect to prefer this option.

We did, indeed, sent that BBQ picnic and received a huge thanks and photo. Those folks were the epitome of customer service and tech support. "The good 'ol days..."

Thanks again. I will review - again - and plug in what may be different numbers taken from the exchange company documents and the 8824. Client did receive the $386,000 from the selling price of $679,000. And paid a lot of taxes to IRS, OR, the municipality and others, I think. I'll see what I come up with from the original documents.

Thanks so much, DANRVAN and Judy, for these additional comments. I still have the client's folder with all the exchange documentation in it and a pdf of the 2022 return. I will review with the 8824 Judy most kindly provided and see what next. Client changed preparers because prior person was hard to reach and didn't answer questions (I also think client really didn't know what to ask). I think client wants to better understand and manage his properties now that he is retired from Delta. That's why there are so many different states for the rentals as he was stationed in different places. First, though, I have to better understand the 1031 situation in 2022 flowing to 2023 so I feel more confident in 2024. Thanks to this amazing board and generous folks chiming in, I think it is possible.

Thanks so much for all this valuable input. I will review the documents again with better understanding. The recognized gain was $386,321 and unrecaptured Sec. 1250 was $96,025. On Form 8824 Part III line 18, adjusted basis of property given up, $6352 (I see this on the asset report for mostly appliances not fully depreciated). Line 16 is FMV of property and it's blank. The sale price was $679,900. Cash received $392,698,lots of commission expense and other selling expenses and $217,000 to and Exchange group who 'purchased' the replacement property. The closing statement for the replacement property shows a purchase price of $212,000. I haven't found where the $5000 difference between the $217,000 the exchange group received and the $212,000 of the cost of the replacement property might be, probably some fee. So I am comfortable that the replacement property has 0 basis. But what of the land? It seems client paid gain on the sale of the original land but doesn't the replacement property have land valued at ? Sold property was a 2 family rental purchased in 1993 so fully depreciated. Replacement may be a condo as it has HOA fees. I have to ask so maybe no land. Does this $217,000 equal the deferred gain? There seem to be some missing numbers here. Does the client have an expense of $5000 between what the exchange received and what it spent for the replacement property? On that closing document I see title and closing charges to client of $500. Shouldn't that have been amortized? If so, over what time period as there is no mortgage? Or does it go to basis and depreciated? But there is no basis. Why, oh why, did I take this client?

New client had a 1031 exchange in 2022. Rental property in OR was fully depreciated and sold for nearly $700K. Client went through proper intermediaries but paid tax on about half the gain and selected a replacement property for about half. I was puzzled when I saw no assets listed or depreciation on one property until client explained about the 1031. So there is no asset listed for either the replacement rental, even as fully depreciated, or the land. What happens if client sells this replacement as some point? I've never seen one of these but don't feel comfortable having nothing listed. The prior preparer put in land for $1 I guess so it would make sense to the real estate tax paid. The only results of my research so far mention the tax deferral even to death not replacing with a non-depreciable property. Ideas? (Yes, I get them. This is the guy with 7 rentals in 5 states who bought and sold an AirBnB within a year but over two tax years.)

The QB summary of Sec. 121 mentions ownership and use tests. "The individual must have owned and used the home as a principal residence for at least two out of the five years prior to the sale..." I think May 9, 2023, to January 9, 2025 misses the two years out of he five years prior to the sale. It seems part of the five years prior to the second sale, TP was still in the first residence, a different principal residence. "The exclusion applies to only one sale every two years.." November 14, 2022, to January 9, 2025, is more than two years. BUT both tests don't appear to have been met, just the second one.

IYKYK, otherwise, out of luck

It's been posted before to have a second login with either a phone authenticator or web. I'm adding my husband with his phone in case I lose mine or something worse happens. Has any prior employee had a different login from yours in the past? This is much the same with the extra 2fa step on their phone or online. I'm not great with finding the prior posts with step by step instructions but the ATX help had them, too.

Congratulations, Sara! I have to decide by year end whether to renew my license for another 3 years. Most of my clients will not be happy when that time comes and, like you, I am an academic and love learning so do not begrudge the continuing education and refreshers. And I think I would be a bit rudderless without this routine. I am beginning hammer dulcimer lessons soon and am a CASA volunteer with one case at present and am church treasurer so not totally without things to do. One thing that occurred to me is that I'm not sure how I would do my own tax return without my software! I've been using it since 1996 tax year in all its iterations.

I have discussed this with the client and she has decided it just isn't worth all the tracking and rationalization. She clarified to me that in the past she and partner stayed with partner's mother renting space in the basement to sleep or with friends and occasionally an AirBnB and not just with a friend every time, as I thought. They decided that wasn't working reliably or well as they are both over 60. She also stated that the primary reason she continues to come to OH so often is work to maintain those in person clients. She sees them on the first and third Friday and Saturday of the month. The 4 1/2 drive from TN does not work with commuting especially when seeing clients on both Friday and Saturday. When both come to OH, only one drives and it could be either so determining mileage isn't easy nor is meals away as they were a combination of dining with family or friends or cooking or eating out, etc. I just wonder what other folks in similar situations might do. I think it not at all unlikely that a sole proprietor in a variety of fields may have work locations in more than one state or at a distance too far to commute but still have ordinary and necessary business expenses. I trust there is no disagreement that the office space she rents in OH for the in person counseling is not in dispute even though she does not do her billing there and does most of her counseling via telehealth from TN but not in a rented office space. Thanks again to all for the thoughtful discussion. Always more to learn...

I guess we shall see in about 90 days!

I have easily accessed prior year programs. I don't think the technology was programmed into them. I was a bit concerned as I had not yet printed out the few organizer details for some clients - py rental info or Sch C data - which I like to include with the engagement letters. I think it helps them to see what they might need for current year.

I charge an hourly rate but include that time, more or less, when questions are during the season as they normally relate to the returns. During the year, it depends. For short calls or rather simple things, no charge. I would rather folks keep in touch and ask 'permission' rather than beg 'forgiveness' which can be costly.

I was understanding that a second login and authenticator thingy was possible and probably advisable. I was doing to set up my husband's phone as a back up in case that Mack truck gets me. Does your secretary have a smart phone to do this or can you set her/him up with the online version?

Who knew this would generate such lively discussion? Obviously there is no (I think) clear easy answer. I will ask whether she will continue her in person consults in OH if deducting an allocable amount of rent for a place to sleep as she obviously cannot commute is disallowed (by me, not necessarily by IRS as they don't know and chances of audit are about 0). Her answer will matter. Then she can be upset that her previous free accommodations were removed by her friend's relocation. Have a good evening. I will enjoy another snow day tomorrow with the 8-10 inches we received today. Our cul-de-sac is not cleared yet.

I don't have an answer to that but am in your corner yearning for the easier days! I had to get a new phone and am terrified to even begin the transfer. I have 4 authenticators and no clue as to whether they will work. I use the fingerprint method successfully now. I think I have to go to the phone store but we have 10-12 inches of snow now.

Lion, her tax home is TN but she has regularly, for a few years, also earned income and paid for office rent in OH when seeing clients in person. The majority of her counseling is done via telehealth from TN. Her billing, etc. is done in TN. From QF, "(w)hen the taxpayer regularly works in more than one location, the tax home is the main place of business where most of the time, income or degree of business activity occurs. This is when there are two or more business locations as she has, in OH and TN. Also in QF, 'No Main Place of Business' "Taxpayers who do not have a main place of business have a tax home that is the same as their main home if: 1) The taxpayer performs some work in the vicinity of his main residence, and the residence is used for lodging while doing business there. 2) The taxpayer incurs duplicate living expenses while on business travel. 3) The taxpayer: a) Has not abandoned the vicinity in which his historical place of lodging and main residence are located, b) Has family member currently residing at his main residence, or c) Frequently uses the main residence for lodging. Results: * If three factors are met, the tax home is the same as the taxpayer's main home; away-from-home travel expenses are deductible. * If only two factors are met, there is a possible tax home, to be determined by examination of the facts and circumstances. * If only one or no factors are met, the taxpayer is a transient and travel expenses are not deductible. In my opinion the facts and circumstances show that her tax home is TN and she meets all 3 factors of No Main Place of Business although she really does have a main place for telehealth and a main place for in person counseling. She, like many self-employed folks I think do not work exclusively in a home office. I know I actually go to several client locations and take a home office deduction. A cot in her OH office would not invalidate her home office deduction which she does not, in fact, take. My head hurts. I think she can deduct the allocable portion of the apartment rent in OH as she also deducts the rent paid for the office she uses for consulting. She is away from her tax home.

Lee B, I was inclined to allocate her share of the rent per diem only on the nights she was counseling clients either the day prior or the day after. It is fair to say that she does mix business and personal time but I suspect there are very few business travelers that are 100% business, i.e., enjoying some television or some such when overnight is necessary because commuting is unreasonable given the distance. PapaJoe, I suspect that if she had no clients in Ohio, she would still travel here but not likely twice monthly as that is her counseling schedule. She certainly would not have a private office space for counseling or paying for an OH license or for the income tax now not earned in OH. I believe that she still maintains activities in the church when in OH because she is here. There are other deacons that live outside the area and serve electronically and services are now online so I doubt she would be here often - unless her partner continues practicing and comes as often. All good questions I need to ask.

Again thanks, Judy. With your reply, however, does that mean she also does not qualify to deduct the rental for the OH office used exclusively for in person consults? That is also of indefinite duration but, to me, clearly valid even though the majority of her income is derived from telehealth in TN. Again, somewhat facetiously, should she just buy a cot and sleep in that office when in OH? What if she paid for a motel on those nights? Is she expected to commute because her only physical in person counseling office is in another state and used only twice monthly? She had to have a business license and registration in the OH municipality. I've been trying without success to think of other similar self-employed folks or those that work indefinitely but regularly outside their tax home. What do traveling nurses do, for example? It's hard for me to believe my client's situation is so very unique but perhaps it is. In which case, as in some others, I think so very unfair. I guess she is expected to give up her business in OH, maybe. Sigh... I hate to have to tell her.

Thanks, Judy. I think the client is not at all proposing or trying to claim the efficiency rental for OIH. She uses TN home for billing and virtually all of her telehealth consults. It seems she is asking for herself - not her partner who is not my client - if she can claim any portion for overnight stays when doing business in OH in person. She comes to OH twice monthly for the in person consults and for personal time, as well. I would have to ask whether her primary purpose is for business. Kinda doubt it but not sure as her consulting practice was well established before moving to TN. The telehealth portion took off during COVID but she maintained several clients to see in person wearing masks and continues to meet them. In any event, an alternative would be for her to stay in a motel as it is certainly too far to commute from TN overnight. She does rent office space in OH for the consults. Should she buy a cot and sleep there? /s The calculated amount may be very small and not really worth it, as you mention, but not sure. If it costs $1200, just a guess for calculations, per month and she pays half or $600, that would be $20 per night or $40 per month, not nothing for her small practice but more that when she stayed with a friend and less than a motel would cost. FWIW, she has never claimed mileage or meals but does pay income tax on the related earnings to the municipality where her OH office is located. Re costs: as a leased efficiency apartment, I would be surprised if there were additional charges for utilities, etc. I suspect and will confirm that she only uses her telephone directly or as a hotspot. I doubt there is renter's insurance either. It might even be furnished. Several unknowns so thanks for the prompts. I find it an interesting thought exercise and realize that not every situation fits neatly into the IRS prescribed boxes.