Lee B

Received this email this morning: Up To $300 Off Your Purchase Your 2014 Tax Preparation Software Is Ready For Renewal We are quickly approaching the 2014 tax season, and we are in the final stages of our software development to ensure that you will benefit from: Increased platform performance to support quick data entry and processing. Intuitive user interface to help you move through each step. Streamlined processes for data collection, client delivery and reporting. Various solutions to help you manage client fees and document management. Renew your tax software by 10/17/2014 to receive up to $300 off your purchase* Call us at 1-800-495-4626 to take advantage of this great deal! *$25 off your ATX 1040 renewal; $100 off your ATX 1040 Office renewal; $200 off your ATX MAX® renewal; $300 off your Total Tax Office renewal. Please call Wolters Kluwer, CCH Small Firm Services for more details. Offer expires 10/17/2014 1. This is a bigger discount than ATX offered last spring 2. What about the users who have already renewed for a smaller discount or full price ??? 3. Never seen them do this before. Wonder if renewals have fallen off ???

Actually, last year the personal efile shutdown was as I remember somewhere between the 20th and 25th of November. I just checked the ATX Blog and they stopped transmitting 1040 efiles at 5 PM EST on November 22nd, 2013.

Good morning, Are you at version 13.6.0.84 of ATX2013? Also, which version of Windows are you running on your PC? The memory issue has been addressed in the 2014 software, but I'm also able to open three large returns in 2013 ATX, using a standalone Windows 7 PC. The program is using just over 1 Gig of memory with three returns open. It is using less than a quarter Gig with one return open. If you are installed over a network, this may be why your system is using more memory. Donnie P. CCH Small Firm Services Lead Customer Service Representative i always love it when ATX runs a scenario on one their their pristine systems and act amazed that any users have problems !

FROM FORBES by Tony Nitti A Tale Of Two Activities: How To Beat The Hobby Loss Rules Over the weekend, I regaled you with the ballad of Susan Crile, who landed in front of the Tax Court after the IRS alleged that her 40-year run as an accomplished artist amounted to nothing more than a “hobby.” Crile came away victorious; you can read all about it here. The Crile case attracted quite a bit of attention from the art community because it provided some useful guidance on how aspiring artists can strengthen the position that their activity rises to the level of a trade or business. Today, the Tax Court took on another hobby loss case that should be of great interest to a specific sect of the population; namely, those odd yet loveable man-children who continue to collect baseball cards long after reaching adulthood. This case did not end well for the taxpayer, with the court concluding that his memorabilia activity was a hobby. In Akey, the taxpayer had a day job as a quality insurance engineer, earning over six-figures in 2001, 2002 and 2003. During those years, the taxpayer also generated large net losses ranging from $$97,000 to $143,000 from a sports memorabilia activity that he conducted and reported on Schedule C. As you’ve probably realized by now, this didn’t end well because, well…Day Job Income - Large Schedule C Losses + Recreational Nature of Second Activity = IRS “Hobby Loss” Audit. On it’s own, the decision in Akey isn’t particularly enlightening or memorable. When we take a step back and compare the facts and Tax Court analysis in Akey and Criles, however, we start to get a clear picture of what we should do — and, much more importantly, not do — to beat the hobby loss rules. As a reminder, the distinction between trade or business and hobby is an important one. A trade or business can deduct its expenses in excess of its income, thereby generating a net loss that can be used to offset other income. A hobby, to the contrary, can only deduct its expenses to the extent of its income, and is thus incapable of producing a net loss. Last week, I introduced the nine factors provided in the regulations to help determine if an activity is a trade or business or a hobby. And while no one factor is determinative, by identifying a couple of key factors where Akey and Criles handled their activity with varying degrees of formality, we can learn a few things. Factor #1. The manner in which the taxpayer carries on the activity. Does the taxpayer complete accurate books? Were records used to improve performance? In Crile, the taxpayer kept detailed records, including the sale price and identity of the buyer of one of her works. She hired a bookkeeper, and used the resulting financial records to market her works to collectors, galleries, and museums. She tracked her inventory carefully and conducted extensive marketing efforts. To enhance her profitability, she switched art galleries and tried new media. In Akey, the taxpayer failed to maintain complete and accurate books and records. He did not hire a bookkeeper. He did not prepare budgets, income statements, balance sheets, forecasts or any other financial statement that he could utilize to help improve his bottom line. He failed to undertake any steps to improve his profitability. All of this was within the taxpayer’s control, and by failing to conduct his memorabilia activity in a businesslike manner, he did himself no favors. While you can’t win a hobby loss case on the first factor, you can certainly lose it here, and that’s likely what happened here. Factor #2. The expertise of the taxpayer or his advisers. Did the taxpayer study the activity’s business practices? Did he consult with experts? In Crile, the taxpayer was an acclaimed artist with works hanging in many major museums, board rooms, and governmental buildings. She had over 40 years of experience and had sold over 200 pieces totaling over $1,000,000 in sales price. In Akey, the taxpayer did nothing to acquire expertise in baseball card collecting aside from purchasing price guides, which as the court pointed out, is pretty much the one mandatory acquisition for anyone interested in buying and selling cards, even if it were merely as a hobby. As a result, this purchase did nothing to differentiate his activity as a business. While not everyone can achieve the level of success enjoyed by Crile, the taxpayer in Akey could have established that he routinely attended trade shows, conducted sophisticated research, and consulted with industry experts about buying and selling tactics to bolster his argument that his activity was a business. Factor #3. The time and effort expended by the taxpayer in carrying on the activity. Does she devote much of her personal time and effort? In Crile, the taxpayer spent over 30 hours per week – over a 40-year span — working on her art. In addition, she spent a great deal of time on the mundane tasks that tend to separate business from hobby, such as marketing and networking. In Akey, the taxpayer testified that he spent 15 hours a day, every day, on his memorabilia activity. And yes, this was in addition to his regular full-time job. If we do the math, assuming his full-time gig was a 9-5er, the taxpayer asserted that he worked 23 hours a day from Monday through Friday, an outlandish, ridiculous claim that can only be rivaled by, well…pretty much every CPA I’ve ever worked with. Because the claim was so preposterous, the Tax Court ignored it. The lesson? Be reasonable, but also establish that you work very hard at your activity by showing the results of your research, and proving participation at conferences, conventions, and networking events. Factor #4. The expectation that the assets used in the activity may appreciate in value. Is the plan to generate profits through asset appreciation? In Crile, the taxpayer tracked her inventory in great detail, and took care to make sure it was secure and adequately preserved in hopes of maximizing a future sales price. In Akey, the taxpayer could not even produce an itemized list of the individual items he held in his inventory, meaning he had no apparent means of tracking which items to hold and which to sell. Don’t do that. Factor #6. The taxpayers history of income or losses with respect to the activity. Has the taxpayer become profitable in a reasonable amount of time? In Crile, the taxpayer had a long history of losses, though the Tax Court noted that the start-up period is generally longer in the arts. More damning, however, was that she appeared to greatly overstate her expenses, claiming deductions for what appeared to be numerous personal items that will land her back in the Tax Court soon. In Akey, the taxpayer took the inspired approach of blaming his history of losses on steroids, arguing that the PED era devalued his entire inventory and resulted in his large losses. The Tax Court was unmoved, though it’s not as ridiculous an argument as it may seem, and probably should have been given a little more weight by the court. We already knew how these two stories ended: Crile won, Akey lost. By going through these few factors, however, you should hopefully see that while Akey couldn’t be expected to have the same level of skill and experience as Crile, he could have taken steps within his control to strengthen his position that his baseball card activity was a trade or business. follow along on twitter @nittigrittytax

Another revenue enhancement opportunity

I did the exact same thing earlier this year. I amended this 1120 S. It's the right thing to do. Plus, do you really want your client to get a letter from the IRS.

In the past, I have considered it to be SE Income because my clients were renting personal property plus providing services i.e., Receptionist and phone, Janitorial Services, Merchant Card Services, Advertising etc.

In Oregon the only exempt preparers are CPAs and Tax Attorneys. Enrolled Agents has been having an ongoing fight with the Oregon Board of Tax Preparers for some years as the Tax Board is almost to the point of not acknowledging EAs.

FYI: From the very start the PTIN application processing and renewal process was contracted out to a subcontractor.

It's a Federal Holiday. All Federal Employees get the day off except for safety reasons like prison guards, Air Traffic Controllers etc.

Alert Subject: Extended Maintenance Window for the Modernized e-File (MeF) Production and ATS Environments The MeF Sunday maintenance build window is being extended on Sunday, October 5, 2014. The system will be unavailable from 1:00 a.m. until 10:00 a.m., Eastern. The build will deploy critical system updates. This extended window impacts the MeF Production and ATS Environments. Thank you in advance for refraining from accessing the MeF Production and ATS Systems during this period. Posted by Stephanie Bradford at 5:53 PM Labels: ATX, Efile

FROM ATX : Re: 2014 tax program from Stephanie B Director of Customer Care The 2014 software will be available the last week of November. The CS rep may have been referring to version 13.7 update, which we will post after Oct 17th- to activate the client organizers. Within the last 24-hours, you may have received an email with the product activation code for the soon to be released ATX™ 2014 software. You don’t need to do anything at this time. We’ll be sending you instructions for activating the 2014 software by the last week of November. At that time we’ll again provide you the software activation code for the 2014 tax preparation software

IRS Announcement: Issue Number: 2014-40 7. Modernized e-File (MEF) Production Power Outage for Columbus Day IRS will conduct its annual Columbus Day Power Outage beginning Saturday, Oct. 11 at 3:00 p.m. and ending on Tuesday, Oct. 14 at 5:00 a.m. The MeF Systems will not be available during this time. Important Note: States that schedule retrieval of their state submissions may have to change their schedule in order to retrieve submissions in time to validate returns and submit acknowledgements by 2:30 p.m. on Oct. 11. Anything not retrieved through MeF by 3:00 p.m. cannot be accessed again until MeF re-opens for Production on Tuesday, Oct. 14

Question: Would this deduction also include any state estate taxes ?

From The Journal of Accountancy Under the safe harbor, local lodging expenses will be treated as an ordinary and necessary business expense if: The lodging is necessary for the employee to participate fully in or be available for a bona fide business expense if: The lodging is necessary for the employee to participate fully in or be available for a bona fide business meeting, conference, training activity, or other business function; The lodging does not exceed five calendar days and does not occur more than once each calendar quarter; The employer requires the employee to remain at the activity or function overnight; and The lodging is not extravagant or lavish and does not provide a significant element of personal pleasure. In response to a comment, the final regulations clarify that expenses that do not qualify for the Regs. Sec. 1.162-32(b ) safe harbor may nevertheless be deductible under the facts-and-circumstances test. Taxpayers may apply the new rules to any tax year that is still open

FROM ACCOUNTING TODAY September 25, 2014 By Jeff Stimpson The federal government has filed eight civil injunction suits in Florida to shutter 192 “Loan Buy Sell Tax Services” Tax Services locations and bar Walner G. Gachette, founder of Orlando-based LBS, seven LBS franchisees and three LBS managers from owning, operating or franchising a tax prep business and preparing returns for others. The seven franchisees and three managers sued are Douglas Mesadieu, Jean R. Demesmin, Kerny Pierre-Louis, Demetrius Scott, Jason Stinson, Wilfrid Antoine, Jacqueline Nunez, Tonya Chambers, Jehoakim Victor and Lauri Rodriguez. According to government documents, in 2013 LBS operated at least 239 stores (192 owned by the defendants) in Florida, North Carolina, South Carolina, Georgia, Texas, Tennessee, Alabama and Mississippi, and prepared more than 55,000 federal income tax returns last year. The complaints add that this year some of the defendants’ LBS stores began doing business as Milestone Tax Services, Tax Giant, AWA Tax, Tax Master Xpress, BPTS Tax Services and Nation Tax Services. The suits allege that the defendants target primarily low-income clients with deceptive and misleading ads, prepared and filed fraudulent returns to inflate refunds and profit through “unconscionable and exorbitant fees.” One case highlighted in the complaints suggests that potential clients can receive a refund of more than $3,000 “per child.” According to the complaints, the defendants directed LBS preparers to, among other activities: Falsely claim or increase the EITC; Claim improper filing status; Fabricate businesses and related business income and expenses; Fabricate Schedule A deductions, particularly for unreimbursed employee business expenses; and, Charge deceptive and unconscionable fees. Among the many examples cited in the eight complaints was the case of a client in Tampa, Fla., who was allegedly waiting at a bus station when an LBS employee approached him and offered to drive him to an LBS store to have his return prepared. According to the complaint, despite knowing that the client did not have a car, LBS reported on the return that the client drove his personal vehicle 30,256 miles for business purposes, resulting in a bogus $17,589 unreimbursed employee business expense claimed on the return. On another occasion, an LBS preparer allegedly approached another client at a flea market and told her that she had to file a return, showed her a badge and said that he was a police officer and “would not do anything that was wrong.” That preparer allegedly prepared the return and falsely claimed that the client had more than $10,000 in income to qualify for an EITC and subsequent falsely inflated refund. In other cited cases: LBS prepared a return for a $250,000 lottery winner in Houston that allegedly claimed several phony deductions to offset that income, including $30,141 in charitable contributions and $10,279 in unreimbursed employee business expenses, resulting in a bogus claim for a refund of $8,247. On the return of one Jacksonville, Fla., client, LBS allegedly falsely reported that the client had a mechanic business, though the customer did not work in 2012 and was in fact denied Social Security disability benefits the following year based on the false income and a proclaimed ability to work. The IRS reportedly estimates that LBS activities cost the government tens of millions of dollars for the 2012 tax year alone.

NEW YORK (AP) — The parent companies of the Supervalu and Albertsons supermarkets say they have uncovered another breach of their computer networks, potentially compromising data from consumers. The companies say that in late August or early September, malicious software was installed on networks that process credit and debit card transactions at some of their stores. Albertsons says the malware may have captured data including account numbers, card expiration dates and the names of cardholders. Supervalu says it believes most of its stores were not affected. Supervalu supplies information technology services for Albertsons, Acme, Jewel-Osco, Shaw's and Star Market stores. It sold those stores to Cerberus Capital Management in 2013. The companies disclosed a data breach in August, and they say the two incidents are separate.

There have been numerous posts about users running ATX back to 2001 on Win 7

The payroll abatements for my clients have all been situations where they made their deposits several days to 10 days late long before the IRS would have issued a letter.

The one that I am familiar with relates to payroll tax deposits.

This the email response that I received from ATX: "No, itemized lists are not included in an efile. If you want this information to be included in an e-file, use a blank statement which you can find by adding a Elections/Statements form. Locate the Blank Statements tab at the bottom, and enter the information here. " If you need further assistance, please contact our customer support department at 1-800-638-8291. Thanks for using our products! Tabitha Ervin Customer Service Level 4 Representative So i will go ahead and use a blank statement.

FROM THE PROCEDURALLY TAXING BLOG september 26, 2014 by Keith Fogg In Briggs v. United States, 511 B.R. 707 (Bankr. N.D. Ga. 2014), Bankruptcy Judge Wendy Hagenau carefully examined the facts of the case and the applicable law in concluding that a Form 1040 filed after the IRS assessed taxes based on a substitute for return procedures met the requirements for filing a return. I previously blogged about the mess created by the litigation and legislation in this area. Judge Hagenau worked her way through existing precedent and arrived at a conclusion that offers hope to many taxpayers who fail to timely file their return and later seek relief through bankruptcy. The Briggs case presents a classic set of facts. The taxpayer did not file his 2002 return by the due date as extended. Eventually, the IRS calculated his liability using IRC 6020( procedures and sent him a statutory notice of deficiency. He did not petition the Tax Court within 90 days. The IRS assessed the tax (over $200,000) and began collection. He eventually filed a Form 1040 showing that his correct tax liability was $149,870 rather than the $226, 536 assessed. The IRS accepted the Form 1040 as a claim for abatement and abated his tax to the lower amount. The IRS partially collected the lower liability through levy and offset but he still owed a substantial liability for 2002 when he filed bankruptcy on March 23, 2013. The IRS made two arguments in support of its position that BC 523(a)(1)((i) excepts the 2002 taxes from discharge. First, it argued that the tax “debt” arose from the IRS assessment and not from the late filed Form 1040, making the debt one from which the debtor had an unfiled return at the time it arose. This argument represents later thinking by the Government than its original position on this issue and seeks to create a bright line test not available through the Beard test. Second it made its original argument slightly modified by the passage of BC 523(a)(*), that an untimely return filed after assessment does not qualify as a “return” under applicable non-bankruptcy law. The Court first addressed the “debt” argument and used bankruptcy definitions to reject it. My guess is that the IRS will appeal the case because it has had several successful outcomes with this argument and it represents a clear path to victory. Judge Hagenau, citing Rhodes v. United States (In re Rhodes), 498 B.R. 357 (Bankr. N.D. Ga. 2013), rejected this argument because the term “debt” in bankruptcy focuses “on the nature and source of debt . . . not on the mechanism to determine debt.” Under bankruptcy law the debt to the IRS arises at the end of the tax period and not when assessment occurs. The assessment or non-assessment of a tax does not “change the fact that the right to payment existed.” So, Judge Hagenau placed no importance on the assessment as creating the debt before the later filed return since the debt for bankruptcy purposes arose long before either of these events. Her interpretation makes the most sense given the bankruptcy definition of debt. The IRS will continue making this argument because of its ability to create a clear statement regarding discharge. The Court next addressed whether the late-filed Form 1040 qualifies as a return. This is the original issue on which the IRS won in In re Hindenlang, 164 F.3d 1029 (6th Cir. 1999), although now with the overlay of BC 523(a)(*) adopted in 2005. Remembering the peculiar facts of Hindenlang provides important background information. Like Briggs, Mr. Hindenlang did not timely file his return and the IRS made an assessment after using the substitute for return procedures and issuing a notice of deficiency from which he did not petition the Tax Court. Mr. Hindenlang’s subsequent Form 1040, however, merely mirrored the substitute for return prepared by the IRS. He did not report any more tax or, like Mr. Briggs, any less tax than the IRS determined from its examination. That unusual fact pattern must have influenced the 6th Circuit as it reviewed the Hindenlang case. The late filed Form 1040 submitted by Mr. Briggs reported a tax liability over $75,000 less than the amount assessed by the IRS using the substitute for return procedures. The IRS accepted his Form 1040 and abated the liability down to the amount shown on the form. Mr. Briggs’ form had meaning while Mr. Hindenlang’s form really added nothing to the situation. A Form 1040, such as the one Mr. Hindenlang filed, really does not seem like an honest attempt to file a return under the circumstances; however, a return like the one Mr. Briggs filed had meaning and the IRS abated his liability based on that meaning. Judge Hagenau drew from that fact. Before simply applying the facts in the Briggs case to the Beard test she analyzed BC 523(a)(*) to determine what new requirements the 2005 changes imposed, if any, since the Hindenlang decision started the inquiry regarding late filed returns. Judge Hagenau’s analysis of the requirements led to a discussion of the cases decided after 2005. A line of cases, led by McCoy v. Miss. State Tax Comm’n (In re McCoy), 666 F.3d 924 (5th Cir. 2012), interprets the 2005 amendment to encompass a timeliness element that makes any untimely filed Form 1040, even if only one day late, something other than a return for purposes of the discharge provisions. The IRS does not agree with this interpretation but the Court here looked at this line of cases before concluding – correctly in my opinion – that the term applicable non-bankruptcy law in BC 523(a)(*) “does not incorporate the timeliness requirements of the tax code.” Judge Hagenau explained that the interpretation in McCoy and its progeny does violence to the overall workings of the bankruptcy code. Judge Hagenau then turned at last to the Beard test, which requires that a document must meet four tests to be a return: (1) purport to be a return, (2) be executed under penalty of perjury, (3) contain sufficient data to allow calculation of tax, and (4) represent an honest and reasonable attempt to satisfy the requirements of tax law. In these cases the focus is almost always on the fourth test. Remember that Hindenlang’s Form 1040 really served no purpose except to seek to start the two year period for discharge. Here, the Court agreed with the minority view of cases lead by In re Colson that a return such as the one Mr. Brigg’s filed does meet the Beard test. Therefore, the Court determined that the remaining 2002 taxes were discharged. This issue bears careful watching. The IRS chose not to file a petition for cert when it lost Colson in 2006. If its new argument that the debt arose before the late filed return fails and it does not adopt the McCoy argument, it is left with the fact specific Beard argument. Without a bright line legal argument the IRS takes on a lot of administrative risks with this issue because it is not discharging taxes in these situations. It leaves these liabilities on its books and restarts collection action after bankruptcy. If it ultimately must concede this issue, fifteen years or more of post-discharge taxes will exist on its books that it must address. Similar to the situation that now exists in the post-Rand concession, the IRS will need to clean up its assessment records and with the discharge injunction hanging over its head the burden will clearly be on the IRS and cannot be pushed off to the taxpayer. The path it has taken on post-Hindenlang is a risky path and one that is difficult to administer. It tried to fix the problem in 2005 but got language that has proven inadequate. Keep an eye on this issue if you have clients with late filed returns who may need bankruptcy as a refuge

The first time every day that I use ATX.

Or perhaps it's theft loss.

After some trial and error, I linked an itemized list to the $ amount box on Line 11 of Schedule A and entered the two individuals payee info on the itemized list. Everything flowed OK and the program accepted it. Haven't created the efile yet. Film at 11.