Jack from Ohio

Not just California, trust me!!

How about an IRS wage and income transcript for the kid for that year. Find a college with intelligent people in positions like financial aid.

Form 9325

I will no longer ask any questions on this board. If you read my original question, you would know the reason I posted. Ban me if you like. Fed up.

Tell them there will be no refund, charge for preparing the return and tell them to pray for divine intervention.

You suggest ignoring Circular 230? "...known or should have known..."

No ambiguity about the reason for the settlement. I am hearing that my instincts are correct. Lawsuit was for sexual harassment and illegal termination. No physical injury involved. I will contact the attorney for documentation about the settlement.

Court awards and damages. To determine if settlement amounts you receive by compromise or judgment must be included in your income, you must consider the item that the settlement replaces. The character of the income as ordinary income or capital gain depends on the nature of the underlying claim. Include the following as ordinary income. Interest on any award. Compensation for lost wages or lost profits in most cases. Punitive damages, in most cases. It does not matter if they relate to a physical injury or physical sickness. Amounts received in settlement of pension rights (if you did not contribute to the plan). Damages for: Patent or copyright infringement, Breach of contract, or Interference with business operations. Back pay and damages for emotional distress received to satisfy a claim under Title VII of the Civil Rights Act of 1964. Attorney fees and costs (including contingent fees) where the underlying recovery is included in gross income. Do not include in your income compensatory damages for personal physical injury or physical sickness (whether received in a lump sum or installments).

Surely you jest...

Client received 1099-Misc with $25,000 in box 3. She states it is settlement of a lawsuit against a previous employer. 1099-Misc issued by an insurance company. Client's "attorney" INSISTS that it is all non taxable. Part is punitive, part is for missed wages. I think it is all taxable, although I also believe the 1099 was issued incorrectly. Lost wage recovery should have been in box 7 subject to SE and the remainder in box 3. However, the insurance company will not even talk about reissuing the 1099. Therefore, I believe it is all taxable on line 21. Here is my question: The "attorney" (not sure if it really fits) says there is a place to make an entry on the tax form to make it non-taxable. Client refuses to believe anything else. We have no documentation of how the settlement was allocated. "Attorney" says such documentation is not needed. Before we send this client packing to the attorney for him to prepare her return, does anyone know of a method like the "attorney" had described? He swears it will work and no CP2000 will be issued next year. I do not think so but wanted input from all the experienced people here.

Courts disagree.... http://blog.aicpa.or...h.IpCB1xvT.dpbs http://scholar.googl...t=6,36&as_vis=1

Read the court ruling. For the record, IRS charges late payment penalties for any tax due that is paid after April 15. There is no extension to pay.

http://scholar.google.com/scholar_case?case=4733398767833132327&q=Ridgely+v.+Lew&hl=en&as_sdt=6,36&as_vis=1

The ruling made no distinction. Here is a link to the court decision. http://blog.aicpa.org/2014/10/getting-to-the-bottom-line-about-contingent-fees.html#sthash.IpCB1xvT.dpbs

Tax court very recently ruled that preparing a return is NOT practicing before the IRS. Therefore, contingency pricing is allowed.

Unfortunately, stock brokers and the like do not have fiduciary responsibility under the law. They are not required to do what is best for the client. They are the used car salesmen of the financial world. They can lie and cheat the client with impunity. I tell all my clients to hire a fee only financial planner and do the purchasing themselves. This eliminates the possibility of situations like this.

Pay attention to #2 & #3. Explain that away....

"Fixed income" only means that their income does not change for the whole year even if they do nothing. It is not reason for me to "feel sorry" for them. I grow weary of the retired folks using that term to garner sympathy. I wish I could have a steady stream of income that would not change, then if I needed more, I can do part time "something." "Lack of retirement planning on your part does not create the need for me to donate to you on my part."

Those are numbers for the entire year, not just tax season. 2 of our preparers do not do office appointment and only do mailed in returns. When you factor in 9 months instead of 3, the number is not so daunting.

Yes. We have 2 year round and one seasonal. They also do all copying, collating, mailing and sorting.

AMEN!

4 preparers year round. During season we add 3 more. From Feb. 1 to April 14 we are open Mon-Fri 9-9. Sat-Sun 9-4. The rest of the year we are open Mon-Thu 8:30-5:30. During off season I don't work on Tue. Total filed returns for 2013 tax season was 2,903.

We have used MAX since 2003. It is the way to go.

2,246 I know the number exactly because processing the e-files is one of my responsibilities.