jainen

>>The fact that it hasn't been indexed for these many years is what makes it unfair. << By itself, Social Security is not taxable. Only in relation to other income does some (but never all) of it become taxable. Although the calculation of the amount subject to tax has not been indexed, the actual tax rate is the same as for ordinary income. That IS indexed annually, which seems fair and reasonable to me.

>>grant to Child A, Child B, and Child C a one-third interest each as tenants in common, reserving unto ourselves a Life Estate<< Your client's basis in the remainder interest is 1/3 of the donor's basis, taking into consideration the actuarial value of the life estate. In other words, the gift was not of 100%, but of some lesser amount depending on life expectancy and so on. Assuming the parents continued to live in the house as owners, there was a basis step-up (either full or 1/2 depending on title and state law) at the father's death. You will have to determine from the deed if the children inherited his share at that time or continued to hold only the remainder interest. Factors for calculating the actuarial value are given in IRS Pub 1457. This isn't a very clear explanation because I don't know how to do it.

>>it only has what it has confiscated form its rightful owners in the first place<< If that were true, we wouldn't have a nine trillion dollar debt. Actually, the U.S. government has many other sources of money. By making favorable concessions to foreign governments (notably the Chinese) it can sell bonds which are technically loans but don't really have any forseeable way to be repaid except by "selling" more bonds. A different approach is to get the foreign governments to "float" their currency against the dollar. The Chinese haven't fallen for that scam yet, but the Europeans love it because it kind of backfired there. In 2002 our government could get a 10% bonus on the dollar by buying stuff in Europe; our current administration somehow turned that into a 44% penalty. But it worked fine in the previous administration. Another good way is to print up a bunch of new hundred dollar bills. That used to be considered inflationary, but since they stopped publishing the money supply data last year nobody can hold it against them any more. I mean, it's not like the money has to be backed by gold or anything. The best way of all is simply to have the Federal Reserve announce that there is now more money, and merrily proceed accordingly. They've been doing that a lot lately.

>>citing whatever reasons he has, including simple ignorance<< I advise a bit more focused appeal. I do concur, however, that he is likely to succeed. The IRS treats this kind of penalty as an incentive, not a punishment. What they most want to see is a modest admission of past problems, with a robust explanation of how the taxpayer has resolved them and ensured future compliance. It is nice to point out that there was never any question of tax avoidance or late payment. Reasonable cause for late filing is best expressed in terms of outside circumstances over which the taxpayer had no control. It's kind of weak to say you are managing a pension fund (or whatever this is) but don't even understand basic tax issues like having to file something. Much better to blame it on the bookkeeper who suddenly got deported, um, I mean married leaving the records in a mess. Don't use 9-11 though--that one's worn out. Do some research first because there are some people who monitor ERISA and the IRS will waive penalties if you work it out with them instead.

>>You don't bring your friends to a buffet and pay only for one, do you?<< On the contrary, this fine company INVITES you to bring two friends to the Max buffet, at no extra charge!

>>I will be forced to buy the bigger one and throw away what I wouldn't be able to eat<< Or you could bring a friend and share the goodies. You would have a bigger selection to take care of whatever your appetite strayed to, and your split of the cost would be a lot less.

>>I have to be able to compete<< Nonsense. You CHOOSE to compete with that product. There are plenty of practitioners in your area who are quite successful without it.

>>Why wouldn't poker winnings be treated the same as other gambling winnings? Oh! I guess some politicians are poker players.<< The article makes clear that this is not a new law designed by politicians, but guidance from the the agency itself. And it gives the reason, too: "Some casinos and players have been confused over whether poker tournament sponsors who hold the money for participants in a poker tournament are required to report the winnings to the IRS and withhold tax on the winnings." Poker tournament winnings have the same tax treatment as other gambling, except that tournament players are perhaps more likely to claim to be professionals.

>>our men and women in the military are being protected from the sharks.... I seem to be a little cynical this morning.<< That's not what I call cynical. Cynical is saying the sharks are being protected from the military. Banks have a lot of problem recovering money from military whose refund is denied or redirected--collection activities are controlled, and it's generally bad PR. So they are going to stay out of that market.

>>is there any recourse to correct the error in tax prep or abate the penalties/interest?<< You can file an offer in compromise based on doubt as to liability. Will the client agree to pay 1/3 or 1/2 (plus your fee) to get all this behind him? You will need to document that an exception did in fact exist, other than just the 1099 said it did.

>>I am considering switching to ATX (from Lacerte) << You have not stated your reasons for considering such a change. Lacerte would seem to be a good choice for the practice you describe -- you need a very robust program that imports K-1s flawlessly. You need to be confident that multiple states are handled correctly, especially if you are not personally an expert in each one. You need extremely detailed diagnostics because time is a huge factor on those high-end returns, probably even more important than cost! I don't know if you rely on Lacerte's tax analysis feature, but it's possible that a single item there could pay for your whole subscription. You already spotted what may be the most important factor of all -- the data entry screens. This is after all only a matter of preference, but represents a very large learning curve. The only way to resolve that is to get the 2006 Max program and try it out for two months.

>>the fact that one of the two joint taxpayers is already outside of their reach<< That may be one of the issues within the Offer in Compromise, but you can't simply assume it to be true. Representing the decedent's estate can be a tricky thing and I wouldn't start the engagement by concealing your relationship from the IRS. kcjenkins, you say not to explain the death "at the start" so how are they even supposed to sign the offer? Isn't the death (with loss of income) one of the most important elements of the offer?

>>how to handle this if he receives a 1099 shown as royalties<< His royalties received in connection with a trade or business are reported on Schedule C, just like his other earnings. If he dies, his heirs can use Schedule E to report later royalties derived from the copyrights.

>>Should I expect it to be rejected then and consequently have to paper file it?<< Hard to say what might happen. You are the first person to ever try.

>>musician that makes big money in a recording contract<< Well, depending on the contract and other factors he is either an employee, a member of a partnership, or self-employed. I suppose in a rare case he could be running the income through a corporation. Don't use Schedule E -- royalties from his own creative works are business income. There is a special exception for expenses if he is a performer working as an employee, and artists are exempt from uniform capitalization rules, but otherwise most of the usual stuff applies. Don't forget that he may need to file in multiple states if he goes on tour.

>>if anyone knew why you couldn't transmit new returns after the 15th<< I think the federal government works on a fiscal year ending October 15th, so after that it is a prior year tax return. Oh no--it's the BANKS' fiscal year, and without RAL's the whole e-file house of cards totally collapses. Either that, or their Norton anti-virus protection expires and it takes a month or two to get the renewal authorized. Or it might relate to their cutoff for flagging returns for audit. Anyway, that's just the way the world is. Birds fly south for the winter; bears and e-file go into hibernation.

>>no way to get it to him in time to timely file<< Don't worry about it. Since he doesn't have a tax liability, there is no penalty for late filing.

>>"See attachment" on the Schedule D<< "gains nicely summarized" doesn't sound like it meets the requirements for "See attachment." You must itemize every single transaction in the same format as Schedule D.

>>90% plus of the client list they bought is planning to stay<< Not to put too fine a point on it, but this survey has very little to do with their client list. The sample is well below 1% of ATX users, and even within the study itself 19 out of 20 respondents aren't buying the product. Of course, any time you see statistics you have to put them in context. First of all, self-selected respondents are always a non-representative sample. And in this case, the study was of AICPA members, who are certainly not ATX's main target. Members who use it are all in small or local offices; maybe tax work is not a major part of their practice so they are satisfied with software that is universally rejected by regional operations that obviously have different needs. I think one of the most interesting numbers is in Exhibit 5. More than 10% of these ATX users buy it primarily for business returns. Only two other programs sport such a distinction--and one of them is the other CCH product! That's something to think about looking forward. Is ATX a great backup choice for the occasional entity in a 1040 shop, or is CCH competing against itself? Well, what about that 90% customer loyalty? In this group, ATX does have a bit of an edge but most other users are similarly satisfied with their current software. Those who aren't, do not think ATX is any better according to Exhibit 3B. And that's another fact CCH must be brooding over.

>>the argument that an LLC can own a S-corp<< Harrumph, yes, well, that is of course one of the key flaws in the statement that an LLC is a disregarded entity. But even though an LLC can't own an S-corp, an S-corp CAN own an LLC, and (I admit I'm talking beyond my expertise here) can make certain arrangements and elections to treat it all as one big happy family.

>>he did create a new entity for new location<< It depends on what this means. Many lawyers recommend putting each property in a separate LLC for liability protection. Since an LLC is a disregarded entity for tax purposes, it is easy to structure the ownership so the new activity is included in the existing business. In that case the expansion could be deductible instead of treated as start-up costs. After all these years, I'm still always surprised when a client asks such a fundamental question AFTER spending the money.

>>a pharmacist lecturing to a senior club about drug interactions, a second-generation American doing translation work for new immigrants<< It doesn't matter what you call it. The pharmacist's lecture is clearly an integral part of his profession which he practices in a regular and ongoing manner. His compensation must be reported on Schedule C, not Line 21. The translator is probably engaged in a business unless the work is only occasional and irregular.

>>I never noticed it until I was finished with the return .<< Maybe you slipped an extra space in there, like you did in this sentence.

>>He is going to be one unhappy camper<< I don't understand this attitude which has become so widespread the last ten years. Stocks do NOT have a tax advantage when held in a retirement account. All the risk, but none of the special rates. In the old days, retirement funds were managed much more conservatively with security of principle and steady growth the priorities. But our economy has gone crazy and everyone gambles their retirement on stocks. It has been a disaster for some, and I believe we will see more problems. Even the biggest retirement funds went risky and now can't find "liquidity" for their investments. Gads. So tell your client he was one of the lucky ones who got his money out before the storm hits. Why should he be unhappy at making so much? And let's be careful of the word "camper." A lot of people are in fact losing their homes.

>>no matter how innocent you are<< Come on, this isn't about being unfair. E-file has been around for 20 years, and it works smoothly if you do it the right way. I don't have any sympathy for ERO's who waste IRS resources by not bothering to prepare or file correctly.