jainen

>>I really miss you, and I missed you last year. I wish you would join us again.<< I thank forum members for this kind thread. As a moderator points out, the reason jainen stopped participating in 2013 has been resolved. Still, there is another issue in my own mind that has kept me from posting in the last year. I thank the moderators for allowing my non-tax post here.

Louis Sheffield was always very professional in this forum. He gave solid advice based on the tax code and normal practices. But he didn't argue if someone had some crazy idea to push the limits. He just said what was true, and then shut up.

Thank you for kindly remembering! It's almost enough to make me reconsider participating here. I decided to stop because of personal, named attacks. They were in the Politics Forum, but that is no excuse. jainen

>>refund claims can still be filed for tax years 2010, 2011, and 2012<< In a related FAQ, the IRS explains that the ruling is effective 9/16/13. That means if you have same-sex married taxpayers on extension who want to file as Single for 2012, they only have until September 15. The same is true for any prior year still open.. After Sep 15 they will have to file original returns as MFJ or MFS.

>>when jainen becomes a conservative.<< On the Political Forum this morning I exposed myself as holding positions far to the right of ANY thing else that has been stated by anyone in this community. I meant it, too. My answer in this thread is that many states would have to change their constitutions, perhaps with 2/3 vote, so that's unlikely. I expect there will be general acceptance of legal marriages from other states, just the way it already is with common law marriages. A more interesting question for me is about Registered Domestic Partners. In my state they can be gay or straight, but are never allowed to get married. And many would not want to be reclassified, since RDPs can keep retirement benefits not available to married couples.

>>What is your basis for splitting the refund?<< There are several formulas available, and it certainly isn't limited to refunds. it is actually a three-step process. First allocate the income and deductions. Then determine how much of the total tax liability to allocate to each spouse. Then allocate the withholding and estimated payments to see if one spouse already paid too much. You'll have to decide where to put various credits. Keep in mind that clients can agree to one of these splits regardless of how they actually file. They may want a lower overall tax, or they may want to avoid joint liability. Don't try any of these without an informed waiver of conflict of interest, in writing. If you run into trouble, you might be able to get back on track by talking about the two bank accounts for direct deposit. One of the best ways is 50/50. It is simple to do and easy to understand. I justify it on religious terms, community property, low cost, running out of time, postponing hard choices, lawyer's instructions, de minimus effect, or whatever fits the situation. Form 8958 is an official IRS calculation, so it has the feeling of objectivity. It is designed for community property but can be used as a worksheet in any state. It recognizes that some things in a marriage are joint while some things remain separate. The allocation can be made according to law or agreement. The brief instructions are helpful. Formal isn't necessarily better, so variations are to use your own Excel worksheet or just pencil and paper. Usually I will do a quick pencil draft and quote a fee for a more detailed analysis. Here's a model I've used once or twice but don't like. If one party refuses to share I will draft either an S or an MFS return using just those items. The idea is, "You have to file anyway, so how much extra did my information add?" Or maybe, "I won't pay more than if I were single." This can be very misleading sometimes. I mark the printout draft and planning-only, because it does not follow tax law and can't be used for filing. Nevertheless I charge full price for it. . A variation of that is what I call tax effect. Some items are inherently unequal, such as capital gains with a lower rate, claiming kids for EIC and Head of Household, and high income subject to phaseout or AMT. You can use a special allocation to compensate for this. It sounds harder than it is, and I generally just do a partial for the item in question. I only do it on instructions from one or both attorneys, and I don't bother billing because they won't pay anyway.

>>can do MFJ for Federal and single/HH for VA<< Head of Household based on your stepchild (spouse's child)?

>>Ohio does not recognize the marriage<< Oh, yes it does! Just last month an Ohio court said so! http://www.huffingtonpost.com/2013/07/28/ohio-gay-marriage-victory_n_3665476.html Don't forget to take a good update class this year.

>>something that in some universe could possibly be a deduction<< I agree with MsTabbyKats! If it is "something that in some universe could possibly be a deduction," I put it in. When it makes a difference, I'll look more closely, but if it doesn't change the tax anyway, whether because of standard deduction, AGI limit, AMT, or whatever, I let the client keep it.

>>several more years of job security<< Thanks for posting this right away, Jack! I need as much time as possible to understand it. This is a big help, but we still can't really say there is "certainty and clear, coherent tax filing guidance for all." There are still enormous holes in it, like Registered Domestic Partners. Under California's Family Code, RDPs have exactly the same standing as married in every aspect. But some opposite-sex RDPs don't want to be married under federal law, because it would screw up pensions and other stuff. Anybody know of a state that has a DOMA clause in its Constitution, so it can't recognize same-sex marriages from another state, but still requires the same state filing status as federal? Lots of fun!!

>>some bureaucrats have made an unlawful change in how they carry out their legal responsibility<< Don't expect a slam dunk that the courts will agree with the plaintiff. The tax code is complicated, and half of it is written backwards. The Code itself says "exemption from taxation under subsection (a) shall be denied because a substantial part of the activities of such organization consists of carrying on propaganda, or otherwise attempting, to influence legislation." Subsection (a) includes both 501( c)(3) and 501( c)(4) organizations, but only the ( c)(3)'s are named as subject to this denied exemption. IRS regs properly apply it to ( c)(4)'s as well. The Code itself does NOT refute that "promotion of social welfare" includes influencing legislation. It just makes a point to limit that function, which suggests that it would otherwise be allowable.. One possible outcome of this lawsuit is that ( c)(4)'s will have no limitation on political activity whatsoever! So be careful what you wish for--you just might get it.

>>Circular 230 prohibited her from doing both<< That is correct. Section 10.29 requires "informed consent" in writing. With the limited knowledge a tax preparer usually has about a client's circumstances, especially non-financial issues, it's pretty hard to adequately inform the client of potential risks. Missing something could have enormous consequences to the client, and to yourself because it's an ethical violation. Referring to a lawyer is good, but if you have already "run MFJ/MFS report" then you have already transmitted information that may have an adverse effect. Maybe one spouse doesn't want the other to know about that big investment account, or what the W-2 really shows, or details about those business trips. Maybe they don't even want the other to know that they don't want the other to know. Maybe that's the whole point of the divorce!

>>they could care less where that leaves you.<< Unfortunately, Marilyn, their attorneys could care. To use your example of small children, we often see that custody orders do not follow federal tax law. Your involvement could easily affect the outcome, so one party could easily claim that it benefited the other in violation of your fiduciary obligations. An informed waiver would be good protection, though not as good as only having one client.

>>I think I am complimented by your intense attention???<< Certainly!! I consider your posts in this forum to be among the most important, Jack from Ohio. We can always rely on you to highlight potential weaknesses in our client service, whether tax theory, customer relations, or technical problems of filing. I also enjoy the different persona you project in the very entertaining Political Forum.

>>a client challenges me on an issue of ethics or following the regs I fire them (I am sure jainen will jump in here)<< No, jainen did not jump in there. >>Seems that my naysayers missed these key words<< Well, jainen is your principal naysayer, so to prove he didn't miss these key words he will now jump in after all. A week or two ago Janitor Bob asked a perfectly good question about how to report a loss on the sale of a rental house ["4797 Loss"] You replied, "Don't forget recapture of depreciation... This is often a spoiler when a rental owner sells for what he/she thinks will be a loss." Nobody bothered--but suppose Janitor Bob as your client had challenged you on following the regs Section 1250 for rental real estate, under which there isn't any recapture of depreciation. Would you have fired him? Not, if he fired you first!

>>they should waive any conflict of interest.<< I disagree. It would be impossible to pull this off, because in order to obtain an informed waiver you would have to advise the clients of possible adverse consequences. There is simply no way for you to know what could come up in this hostile divorce! The CPA apparently has reason to believe one party is lying about income--how can you be fair to the other party if that turns out to be true? It can have major non-tax consequences such as family support and property division. In my opinion, the advice given to the clients in the original post was improper. Pick one side; don't get in the middle.

>>it appears as if the shareholder (reduced his basis) was repaid X amount of dollars, but technically he didn't<< No, technically he DID. When he loaned money to the corporation he increased his basis, so now he can't keep that higher basis when he is repaid, even if the repayment is in the form of debt relief. On the other hand, corporate debts owed, even to a shareholder, did not decrease his basis like they would in a partnership, so cancelling those loans can not bring his basis back up. Frankly it looks like he artificially increased his basis with offsetting loans so he could deduct losses. Now he is on the other end of the same deal. And frankly, I think he knows all about it. He's just hoping you don't. "Clean up the BS" indeed!

>>I am still a he by the name of Pat << I thought you said Marco. I like Pat, though. It's consistent with your forum profile.

>>the Scottish university<< WHICH university? On this list? http://studentaid.ed.gov/sites/default/files/international-schools-in-federal-loan-programs.xlsx

>>What do you think... it was her fault?<< No, it wasn't her fault but that's irrelevant. She trusted the sales people in the front office, as we all do, without seeing how screwed up the management is. So the paperwork isn't there, so she can't prove it, so it's not eligible for automatic approval. Tell her not to feel bad--nobody is ever eligible anyway! Draft a sob story to the banking commission. Have her show it to the bank manager and ask why she shouldn't mail it, and demand they pay the user fee for a Private Letter Ruling. And her accountant's fee too, of course. By the way, the IRS published three of these just in the last week--all approved!

>>so generous of you<< Poor Mas! All he or she wanted was to "talk about tax myths" Although all of us are cyber-fantasies, I don't think we qualify as mythical.

>>I just want to know if the Rev Proc is still in effect.<< Yes, it is still in effect and I don't think you have to do anything except report the rollover in the ordinary way. But I'm not familiar with the banking technique of giving away money without being told to. Are you SURE the client completed all the paperwork at the new bank? Have you actually seen the paperwork? Because that Rev Proc you cite is particularly pointed on that particular point.

>>do this as a "service" to our clients without charge<< I for one will not charge for that service. It's no different than advising clients who to name as their beneficiary or heir, what entity to use for their new business, when to buy or sell stocks, how to structure their mortgage, or where to retire. Clients expect all these services, and I never charge for ANY of them. Of course, I never perform any of these services either.

Expired provisions: I support my girlfriend's kids so I'm head of household.(eight years ago) or They didn't send a form, but the car I donated has a blue book value of $7500 (seven years ago) or, my favorite I had lots of overtime and a big bonus, so I'm going to do income averaging this time. (twenty-seven years ago)

>>I would challenge the IRS to find a spot in their place of business where any administrative work is carried out.<< The rule is "administrative or management," and it sounds like the partners do manage the business themselves, buying and selling and answering their phone at another location. Another issue with partnership is that the partnership agreement must explicitly require the partner to incur a home office expense. Then you must divide the office expenses between the two businesses, and limit the partner's deduction to the percentage of income generated by the paperwork rather than whatever they are selling. Or you could just shine it on, if you don't like the rules.