Lee B

Drake does have a good comparison including a state comparison. Therefore beginning with this year I have been giving all of my clients a comparison and reviewing it in some detail especially since the changes to the 1040 along with the supplemental 1040 schedules are confusing and hard to explain.

I tried to use Drake Accounting to do both Live and ATF Payroll earlier this year. I ran into problems involving the calculation of Oregon's Worker's Benefit Fund Taxes and Oregon's Statewide Transit Tax. While Drake's Accounting support personnel answered the phone quickly and were friendly, they didn't know anything about these Oregon taxes and weren't able to help. After talking to 4 different support people, I gave up and switched to Medlin Payroll with which I am very happy. I know there are other people happily using Drake Accounting for Payroll. However, I would caution you to make sure that Drake Accounting can do everything you need for your state.

Married couple own home jointly with husband's parents where they have lived together for the last five years. Married couple want to sell there 50 % share to the parents ? Do they qualify for the Home Sale Exclusion ?

Perhaps it depends on how many programs you keep running in the background and whether you are using a big security suite. I have always done well with 8 Gigs of RAM.

Problem Resolved: My client finally went back to the Credit Union who had issued the personal loan for the truck. The Credit Union made a business loan to the Corporation which paid off the personal loan. Then my client transferred the title from himself to the Corporation. Big Sigh - I was really not looking forward to dealing with this mess !

The problem is this is a semi-retired Corporate President, who doesn't come to work every day and when he does it's just for an hour or two. In addition the driver of the truck is his son who is the shop manager.

For the most part, all this does is make the previously proposed regs permanent. So I don't think it provides much more clarity. I did notice one change that will very useful to some clients. The proposed safe harbor did not allow commercial and residential rentals to be combined when a client tried to meet the 250 hour safe harbor threshold. This has been changed to allow clients to combine commercial and residential rentals together.

If this is a viable workaround, the loan interest would also have be included.

Regular Corporation client buys brand new Chev Silverado 3500 for $ 69,000. Truck salesman tells my client that they don 't need to do extra paperwork to title truck and loan paperwork in Corporate Name. All the purchase and loan paperwork ends up in my clients personal name. This isn't the first time this has happened to one of my clients. I tell my client he has to go back and have the purchase and loan paperwork redone in the name of the Corporation, which I have had other clients do in the past. My client is dragging his feet and doesn't want to have the paperwork redone. I can't think of any alternatives to having the purchase and loan paperwork all redone ?

Copied from IRS e News: "Early reporting replaces Form W-2 Verification Code – IRS thanks all participants Because of new wage and income reporting requirements, the IRS announced it would discontinue the Form W-2 Verification Code pilot for the 2019 tax year. Federal law now requires employers to submit Forms W-2 by January 31 each year, which helps the IRS combat fraud and identity theft and superseded the need for a verification code. The IRS expresses its appreciation to the many stakeholders, especially the payroll service providers and industry software developers, who joined in the verification code project."

You don't say, but if this is happening while trying to efile, not all states have to be piggybacked with the federal return. Unselect those states that can be efiled independently,

1. Reboot your computer to clear your printer cache. 2. Hold down your ctrl key and press F5 to clear your browser history. 3. If you have a security suite turn it off, it uses a lot of RAM. 4, Run CCleaner or a similar program to clear out any garbage 5. Use your task manager to minimize any programs running in the background Cross your fingers and try again

If that is what you truly believe, then what you are doing is placing your personal opinion thumb on the scales which may make you feel better but may not always be the right answer for your clients.

Copied from The CPA Journal: "On May 16, 2019, Oregon Governor Kate Brown signed into law House Bill 3427, which established an annual Corporate Activity Tax (CAT) based on commercial activity conducted by businesses, effective for tax years beginning on or after Jan. 1, 2020. The CAT is $250 plus 0.57% on a taxpayer’s Oregon-sourced taxable commercial activity above $1 million and would be imposed in addition to the corporate income and excise tax already imposed by the state. (Note that Oregon is one of the few states that does not impose a state sales tax.) The tax is not owed if the taxable commercial activity does not exceed $1 million. Overview of the CAT The CAT is to be imposed on each person with taxable commercial activity for the privilege of doing business in Oregon. The term “person” is broadly defined to include individuals, combinations of individuals of any form, receivers, assignees, trustees in bankruptcy, firms, companies, joint-stock companies, business trusts, estates, partnerships, limited liability partnerships, limited liability companies, associations, joint ventures, clubs, societies, entities organized as for-profit corporations under Oregon Revised Statutes Chapter 60, C corporations, S corporations, qualified subchapter S subsidiaries, qualified sub-chapter S trusts, trusts and entities that are disregarded for federal income tax purposes, and any other entities. As such, the new CAT is imposed on all types of business entities, whether domestic or foreign. Persons excluded from the tax, or “excluded persons,” include, but are not limited to, various Internal Revenue Code (IRC) section 501 entities, certain hospitals, governmental entities, and any persons with commercial activity that does not exceed $1 million for the calendar year, other than a person that is part of a unitary group (defined below) with commercial activity in excess of $1 million. For sourcing purposes, commercial activity will be sourced to Oregon using the following methods: For real property, the sale, rental, lease, or license of property located in the state For tangible personal property, the rental, lease, or license of property located in the state, or the sale of property delivered to a purchaser in the state For services, the sale of a service delivered to a location in the state For intangible property, the sale, rental, lease, or license of property that is used in the state. The bill also includes a statement that the tax is imposed on the person conducting the commercial activity and is not a tax imposed directly on a purchaser. Substantial Nexus The CAT is imposed upon persons with “substantial nexus” with Oregon. As set forth in the legislation, “substantial nexus” exists when a person— owns or uses a part or all of its capital in the state, holds an authorization to do business from the Oregon secretary of state, has a bright-line presence in the state, or is a resident or is domiciled in the state. To have a bright-line presence, a person must— have rented or owned property in the state with an aggregate value of at least $50,000, have payroll in the state of at least $50,000, have commercial activity (i.e., receipts before deductions) sourced to the state of at least $750,000, or have at least 25% of its total property, payroll, or commercial activity in the state. Tax Base and Rate As stated above, the CAT is imposed on a person’s taxable commercial activity for the privilege of doing business in Oregon. “Commercial activity” means the total amount realized by a person arising from transactions and activity in the regular course of the person’s trade or business without deduction for expenses incurred by the trade or business. Notably, receipts from commercial activity do not include certain interest income; pension reversions; proceeds from the issuance of the taxpayer’s own stock, options, warrants, puts, or calls, or from the sale of the taxpayer’s treasury stock, contributions to capital, tax refunds, and other tax benefit recoveries and reimbursements; gifts or charitable contributions; rebates and transactions among members of a unitary group; dividends; and distributive income received from a pass-through. These receipts are excluded because they do not reflect receipts from the sale of goods and services in Oregon. There are 43 specific exclusions in total. “Taxable commercial activity” is commercial activity sourced to Oregon using the sourcing rules detailed above. The calculation of taxable commercial activity can be complicated. On the one hand, the legislation requires a taxpayer to include in the measure of taxable commercial activity the value of property the person transfers from another state into Oregon for the person’s use in the course of a trade or business within one year after the person receives the property outside Oregon. Certain exceptions apply in the case of a unitary group, which is a group of persons with more than 50% common ownership, either direct or indirect, and engaged in business activities that constitute a unitary business. On the other hand, the legislation also provides that to arrive at taxable commercial activity, a taxpayer shall subtract from commercial activity sourced to the state 35% of the greater of the cost inputs or labor costs paid by or incurred by the taxpayer in the tax year. “Cost input” means the cost of goods sold as calculated under IRC section 471. “Labor cost” means the total compensation of all employees, not to include compensation paid to any single employee in excess of $500,000. Nevertheless, the subtraction may not exceed 95% of the taxpayer’s commercial activity in the state. This new tax will have far-reaching tax implications for businesses operating in Oregon, as it will apply to all types of business entities in the state. For a taxpayer with multistate operations, the amount deducted for cost input and labor costs must be apportioned. This means that businesses operating in states in addition to Oregon must not only keep track of the numbers going into the computation of labor inputs and costs of goods sold for federal purposes, but also must figure out the ratio of the portion of Oregon sales to the total nationwide sales and multiply it by those labor costs or cost inputs. Reporting and Penalties Any person with commercial activity in excess of $750,000 in the tax year must register with the Oregon Department of Revenue. In addition, any person doing business in Oregon with commercial activity for the tax year in excess of $1 million must file an annual Corporate Activity Tax Return with the department by April 15 of the following year. The calendar year is the tax year for all taxpayers, irrespective of their income tax fiscal year. A taxpayer is subject to the CAT for doing business during any portion of such calendar year, although, as stated above, only taxpayers with “taxable commercial activity” in excess of $1 million will be subject to CAT. Note also that a unitary group will register and file the tax as a single taxpayer and may exclude receipts from intercom-pany transaction among its members. For CAT payments, the tax shall be remitted quarterly to the department. For the 2020 tax year (the first year the CAT is imposed), a taxpayer must pay 80% of the tax due for the quarter or be at risk of being subject to a penalty of 20% of the amount of the tax. The CAT is essentially a gross receipts tax measure, based on gross receipts sourced to Oregon, and as such is not subject to protection of U.S. Public Law (PL) 86-272. Under PL 86-272, a state is prohibited from imposing an income tax if the only business activity within the state is mere solicitation of orders for the sales of tangible personal property, provided that the orders are approved and shipped or delivered from outside the state. Since the protection applies only to income tax, non–income-based taxes, such as a gross receipts tax, are not protected, and the state will actively assert nexus for such taxes. This new tax will have far-reaching tax implications for businesses operating in Oregon, as it will apply to all types of business entities in the state, with some statutory exceptions for not-for-profits. Needless to say, CPAs need to be aware of these requirements in order to advise their multistate clients." The attempt to pass this tax failed several years ago, but after negotiating with the business community a number of compromises were made to placate the business community. A surprising aspect of this tax tax is that it is assessed at a unitary level. One of my clients, a C corporation, has a good sized Truck & RV Brake & Alignment shop. A Family LLC owns the building and land, which it leases to the corporation. Under this tax the gross rents paid to the LLC will added to the gross receipts of the corporation to arrive at the taxable gross receipts. I have another client who has a mixture of 7 or 8 commercial/residential rentals.This client also has an operating S Corp whose taxable gross receipts are not large enough to be subject to the tax but when the gross receipts from their rentals are added to their S Corp gross receipts their combined gross receipts will be subject to the tax. The state of Oregon has not written an rules or regulations yet. If you have 3 or 4 entities which are required to file a one unitary return, do you allocate the tax to the various entities ? Does each entity write a check for their share of the tax ? The tax goes into effect January 1st, 2020 with the first return due in April 2021. Unfortunately, quarterly estimated payments are required with the first estimated payment due in April 2020. The total of the 4 quarterly estimated payments must equal or exceed 80 % of the final tax due. More work for accountants Oregon has also passed a statewide Family Leave Law which will go into effect January 2022, which will have both employee tax withholding plus an employer tax. On top of that the City of Eugene, where all of my clients are located has passed a so called "Public Safety Tax" which goes into effect July 1st, 2020. The Public Safety Tax also is both an employee withholding tax plus an employer paid tax. My fees and workload will both be going up !

New York Releases Guidance on Economic Nexus Threshold and Requirements for Remote Sellers Effective Date: June 21, 2018, the date of the United States Supreme Court decision in Wayfair Threshold: $300,000 $500,0000 in sales of tangible personal property and more than 100 sales (On June 24, 2019, New York enacted legislation to raise the state’s economic nexus threshold to $500,000. The number of transactions threshold remains the same.) Measurement Date: Immediately preceding four sales tax quarters Includable Transactions: $300,000 gross tangible personal property sales When You Need to Register Once You Exceed the Threshold: Next transaction On January 15, 2019, the New York State Department of Taxation and Finance released a notice stating that businesses without physical presence in New York that exceed the state’s economic nexus threshold must collect and remit state and local sales taxes. New York did not pass specific legislation to enforce the remote seller collection responsibility. In the notice, the Department states that following the South Dakota v. Wayfair decision, “certain existing provisions in the New York State Tax Law that define a sales tax vendor immediately became effective.” Businesses that fall within the definition of sales tax vendor and make taxable sales into the state are required to collect and remit sales tax. Remote sellers without physical presence will be required to collect and remit sales tax, if in the immediately preceding four sales tax quarters the seller: Has made more than $300,000 $500,000 in sales of tangible personal property delivered in the state; and Conducted more than 100 sales of tangible personal property delivered in the state The sales tax quarters for New York are: March 1 through May 31, June 1 through August 31, September 1 through November 30, and December 1 through February 28/29. Sellers that meet this threshold and are not yet registered as a vendor with New York are expected to do so immediately. For more information, visit the Department’s webpage on the new requirement. (N-19-1 Notice Regarding Sales Tax Registration Requirement for Businesses with No Physical Presence in New York State, New York State Department of Taxation and Finance, January 15, 2019) UPDATE: On March 26, 2019, the New York Department of Taxation and Finance released a bulletin related to registration requirement for businesses with no physical presence in New York state. This bulletin states that New York’s economic nexus rules became effective on June 21, 2018, the date of the United States Supreme Court decision in Wayfair. Previous bulletins were not as explicit in naming June 21, 2018 as the effective date. UPDATE: On June 24, 2019, the New York Governor signed S.B. 6615, which raised the state’s economic nexus threshold to $500,000 from $300,000. The number of transactions threshold remains the same at 100 sales.

1. You have condensed the details to the point that it's unclear as to what the actual situation is ? 2. Who did the bank loan the money to ?

Patrick, If you go the Drake Software main website, then click on "Service and Learning", then click on the last selection on the dropdown list, "Videos", you will find a lot of short videos that will give you a brief introduction to many different parts and aspects of the software.

Actually my decision making process in a gray area like this is based on: 1. Discussing the issues/risks with my client. 2. Evaluating my client's level of risk taking or risk aversion. 3. Asking myself whether this is a "red flag" potential audit triggering issue. In 27 years, I have only undergone 3 audits, all over 20 years ago. One was for representation work on a return for a commission salesman prepared by H & R Block. One was limited scope, only involving whether my client had basis to deduct his large S Corp losses. The third was an audit of bank account deposits looking for unreported income. The auditor did find several deposits of totaling $ 3,000 or $4,000 from the sale of used equipment that my client didn't tell me about. To my surprise, the auditor closed the audit without assessing my client any additional tax ??? I will admit to being too lax in several areas. This year as I am easing into semi-retirement I have been tightening up on my client's compliance in those areas.

Copied from Forbes: The Internal Revenue Service audited only 0.59% of individual income tax returns last year, the lowest audit rate since 2002, according to the IRS 2018 Data Book released today. A closer look shows that it’s the highest earners whose audit rate has dropped the most. For the highest income taxpayers—returns showing adjusted gross income of $10 million or more--the audit rate dropped from 14.52% in 2017 to just 6.66% in the latest report. For households with AGI between $5 million to $10 million, the audit rate dropped from 7.95% to 4.21%. For households with AGI between $1 million to $5 million, the audit rate dropped from 3.52% to 2.21%. For households with AGI between $500,000 to $1 million, the audit rate dropped from 1.56% to 1.1%. For households with AGI between $200,000 to $500,000, the audit rate dropped from 0.70% to 0.53%. Today In: Money By comparison, for households with AGI under $200,000, the audit rate dropped slightly, stayed the same, or climbed (from 0.48% to 0.54% for $50,000 to $75,000 AGI households). The report covers data from returns filed in calendar year 2017 and audits in fiscal year 2018. The nearly 1 million audits the IRS completed included more than 892,000 individual income tax return

I had a client who flipped 5 houses during the 3 years ending 2017. I reported them on Schedule D and they went thru. I claim no special insight, however I do think that I pushed the envelope.

Usually an S Corp would not be desirable in this situation, because down the road if any of the properties need to distributed back out to any of the partners, departing or otherwise the properties have to come out at FMV which could trigger unwanted taxable income. You don't mention, "What is the rationale for these partners to combine together ?" The combining of partners and LLCs into one umbrella organization seems to me to be overly complicated both for both accounting and tax purposes. Inevitably, with this many individuals involved, one or more partners will need to leave whether because of death, financial problems, disagreements etc.. Getting this many individuals headed in the same direction would be like herding cats or watching a train wreck !

An honest objective response: This is my second tax season with Drake after 20 years with ATX. To be honest the input is more than a "little" different. Some of the worksheets are very busy with several links to subworksheets. Until you get used to it, sometimes trying to find the right worksheet is frustrating. If you are doing mostly straightforward 1040s, I don't think the transition would be too bad. I do mostly business entity returns and complex 1040s so that transition was more difficult. Drake has Oregon business entity returns available several weeks earlier than ATX which was a big deal for me, plus Drake efiles all of the Oregon entity returns which ATX did not do at the time I left. Honestly it still takes me a bit longer to process returns on Drake than it used to on ATX. However that's more than offset by reduced stress and frustration ! I like Drake and I don't regret changing.

Copied from IRS eNews: The IRS will present a webinar, Tax Withholding Estimator , at 2 p.m. ET on Sept. 19. This 120-minute webinar will illustrate the improved features and design of the new IRS Withholding Estimator and teach tax professionals how to use it. Tax pros can earn two continuing education credits by participating. Go to irs.gov to Webinars for Tax Practitioners in order sign up.

The problem is that the definition of a trade or business is not based on rules & regulations but on an aggregation of administration guidance and a number of court cases, some of which happened decades ago. The peace of mind that you are looking is not currently available ! Perhaps clarity on this issue will evolve over the next ten years.

Edsel, You have a tendency to ask incomplete questions and then dribble out additional tidbits of important details over your next 2 or 3 posts, so that when someone answers your first post, our posts are usually wrong or not useful. My personal choice is that I will not reply to any more of your posts.