jainen

>>this one, while not 'citeable' is informative on how to argue the issue<< There is indeed something to be learned from this, and I thank you for bringing it to our attention. For one thing, it demonstrates the system incorporates a lot of prejudice against an innocent spouse claim, so without a subjective plea there is little hope of winning on the technical merits of the case. The first thing this taxpayer did was get IRS to stipulate to virtually all the facts, so the court could not trip her up on that. For example, one of the main problems was that her records were completely inadequate, but the court was not able to hold that against her. She might have made a stronger presentation on the six areas of analysis, but it was pretty obvious that all that was going to go against her anyway and her best argument was simply that it was not fair.

>>Since when, especially from a federal perspective, are gays who are "married" allowed to file MFJ?<< I said in California, not federal. And it is required, not "allowed." And the effective date was January 1, 2007.

>>when they split, it's always a mess I know what you mean. Here in CA hardly anybody gets married anymore unless they were already married before, in which case they vow til death do us part you ain't gettin' any of my stuff, which of course is what busted up their other marriage in the first place but this time they put it in writing. So we invented palimony to enforce community property laws even if they never even got married, and now we have this thing about gays who aren't allowed to get married (although many did anyway) and are now stuck with filing MFJ anyway. And that doesn't even get started on the over-65's hetero's who are MFJ but can't tell their ex because it would cost to much too admit they are in love. Oy vey.

>>how to argue the issue<< More like how to beg and plead the issue. The court held the divorcee responsible for her share of the ex's income, even though she never received it and didn't even know how much it was. It also said the law does not give her full credit for what was withheld from her own paychecks, but that was "inequitable" so it condescended to give her a break even though (as it took care to point out) she should have been smarter about the whole thing, it's still not clear that she is in compliance for other years, and she really doesn't need the money anyway.

>>QUOTE(Code §72(t)<< Now, now, Old Jack. I'm surprised at you. Would you give up so easily simply because the client is totally wrong and the tax code is perfectly clear? That seems pretty flimsy to me.

>>Should we all have to edit our posts just because someone previous edited theirs?<< I edited my post on August 2 without drawing further attention to it. Although some members supported the original language in various degrees, I thought it was a distraction to understanding the topic. Anybody else can edit their own posts on this board, according to their own interests. In some cases the original language was quoted by others, but I had no control over that.

>>JH did not cause the early penalty, the taxpayer did<< That's okay. I don't have to restate my reasoning on that point. I could take either position, depending on if I were arguing for or against the client. But what about my contention that the point is irrelevant? Jackson-Hewitt guarantees they will pay the penalties, with no fine print about why there are penalties or who caused them. That is their own promise, undoubtedly well-vetted by their attorneys. It is very different from the H&R Block guarantee which only applies when "penalty and interest charges are assessed due to H&R Block's error." I think the only valid argument there is whether the 10% is in fact a penalty or an additional tax. I believe that it functions as a penalty and is generally considered so by tax professionals and, as I showed, by tax courts.

>>either take it as a misc deduction not subject to 2% or take a credit for it next year<< What do you think about this situation, which I saw on another tax board? The taxpayer was required to pay back $5000 in settlement to a buyer of real estate for problems that apparently showed up after the sale. They all wanted to put it on Form 4797 or Schedule D. Of course, nobody bothered to cite any authority for that. Nobody suggested that this claim of right rule might apply, but I think it is the ONLY option.

>>that was owed by the taxpayer had JH not made a mistake<< I have several points to make about that. First, it is irrelevant. The guarantee does not apply when they DON'T make a mistake. For example, it isn't "satisfaction guaranteed." It only becomes a question when they DO make a mistake, like this. Secondly, the guarantee is not limited to certain kinds of penalties or certain reasons for a penalty. It is simply, IF they make an error. Nothing about "our error leads to the penalty." And this particular penalty is indisputably related to the item that JH got wrong. Besides, this penalty WAS in fact caused by the JH error. They reported that the income was not an early distribution (or at least that an exception applied). If that had been correct so they did not make an error, there would be no penalty. It is only because that was wrong--because they DID make an error--that the 10% penalty was imposed. (For jklcpa, the original post is not about YOUR policy, which is a good one. It is about Jackson-Hewitt, your competitor, who apparently advertises more than they are really willing to deliver.)

>>Jainen reading my postings (no replies though)<< I'm slowly learning that whenever I stray from general tax issues to how the board operates or people post, it just gets people upset.

>>I've always called it an excise tax<< Well, of course that's what Jackson-Hewitt is going to argue. You don't work for them, by any chance? And I suppose in a narrow, legalistic sense you could claim that's what Code Section 72(t) says. But the way our system works, is that the law is interpreted by the courts. It is certainly not hard to find numerous court rulings that interpret it as a penalty. For example, TC Memo 2004-111, "10% early distribution penalty was upheld against married taxpayers who received distribution from qualified retirement plan." Besides, the guarantee is not couched in narrow legalistic terms. If you want to be legalistic, you have to resolve any ambiguities in favor of the party who did not write the document.

>>He's going back tomorrow<< In my opinion, he has a claim for the entire 10%. It's not a tax, but a penalty the IRS assessed after JH mischaracterized the income that was plainly identified on the 1099-R.

>>They also told him they wouldn't pay for the interest unless he had purchased the "gold plan"<< Tell him to take this statement from the J-H website to the office manager, and say they have three minutes to pay him the $113 out of petty cash or he will file a complaint with the local District Attorney Consumer Affairs. "Q: Do you stand behind your work? A: When you pay for tax preparation at Jackson Hewitt, you are automatically covered under our Basic Guarantee which entitles you to reimbursement of penalties and interest charged by a taxing authority if a Jackson Hewitt tax preparer makes an error preparing your tax return. For an additional fee, you can purchase the Gold Guarantee® for extra, worry-free coverage. If you purchase the Gold Guarantee and a taxing authority notifies you of an error on your tax return, contact Jackson Hewitt, present your Gold Guarantee Certificate, and we’ll work with you to resolve the issue, which may include reimbursement for any additional tax liability or reduction in your refund amount up to $5,000. Ask your tax preparer for current pricing of the Gold Guarantee and a copy of the Jackson Hewitt Commitment to Quality brochure which explains our guarantees, their terms and conditions."

>>Why are you folks so tough on her?<< Thanks for the support, Clay. Although the answer was technically correct in terms of the tax code, my original post used abusive language. You are now seeing only my edited post.

>>I would consider sending him a bottle<< Really? I thought I beat you up pretty rough on that one. It got so bad even I admitted regrets and backed off. Still, congratulations and if your skill continues to play out a bottle would be more than welcome. Would you mind sending a jeroboam, please?

>>Calif does follow the Fed guide lines for what will and won't create an NOL<< California generally conforms to IRS Section 172 in calculating an NOL, but there are exceptions. Most important for you, filing in Texas, is that a California non-resident segregates income for this purpose, and so could have a California NOL based on California losses that are offset by non-California income on the federal return. There are also lots of differences in the way the carryforward is determined. Without knowing anything about your specific case, I would guess it more likely that your software requires certain entries, hopefully as simple as a checkbox. The federal probably determines it automatically while the state has only basic calculations and weak diagnostics. That's pretty common. Name your software and maybe someone can give you a hint, or study your help files and call tech support.

>>I have a client ... << Pacun, is the original post from you as well? Because I don't understand how you could have a client if you know he is filing fraudulent returns. Even without personal knowledge, so and so would certainly have to inquire how so much can come from so little. It is common for software to be less complete for state returns as for federal. You may have to make manual adjustments for the Schedule A items that should not generate an NOL.

>>I meant "jiggle"... I meant "wiggle"... LOL<< I thought it was funny. Maybe not as funny as a child dying in school bus rollover, but at least it was a funny word used in a funny way.

>>what is the significance of student bringing $9K with him<< Theoretically you can transfer or deposit less than $10,000 without government interference. But in a country that just legalized the most sweeping program for the surveillance of its own citizens in the history of the world, backed up with a complete loss of the rights to even consult an attorney before being imprisoned in isolation indefinitely, I wouldn't trust that customs officer at the airport.

>>I have no reason to know which country they are from<< I'm sure your clients could give you several reasons for understanding the difference between India and Pakistan. >>I hope that minimizes your concerns<< Not at all. The issues of bringing large sums from western Asia are still the same. Actually, from anywhere in the world. Being "on good terms with India" is irrelevant, because we are not talking about diplomacy or trade agreements in this forum. Ask the bank in India, or here, to set up the transfer with full accountability. If he is going to a major school the admissions office can undoubtedly bring it straight into the student's account. Other than the bank's normal reports to Treasury, there shouldn't be any tax matters involved with the transfer.

>>Hate to spring for a new monitor if that is not the problem<< Ask around if anyone you know has an old monitor gathering dust that you can borrow as a test for a couple of weeks.

At the Republican debate last weekend, one of the candidates was discussing how to simplify the tax code, "which now requires $140 billion of American families’ income to prepare their tax returns." Does anybody know where he got that number, and if it is correct? Because if it is, I need to increase my prices. That's an average of three or four thousand dollars!

>>4 legs per lizard<< Not necessarily. Lizards are close relatives of snakes, and they don't all have legs. The Glass Snake, for example, is a common legless lizard (it has movable eyelids so we know it isn't a true snake). It's just the sort of oddity that reptile house managers like to display to generate interest.

>>It doesn't sound like he is trying to hide anything.<< That's exactly what it sounds like. Even you observe "all the markings of sounding suspicious." Certainly "there are, in fact, many honest, hard-working people from the Middle East." But every single one of them is acutely aware that the American government tracks people and money that enter this country from there. I mean, for the last half decade we have been fighting a WAR on and over Pakistan's borders for that very thing! So when someone asks if it's okay to stash a large sum of Pakistani money in somebody else's account, which happens to be called money-laundering, and is particularly interested in IRS "consequences," which happens to be part of the Treasury Department, it's just not something I feel comfortable about.

>>they weren't sure if they could do that<< You think they are going to move tens of thousands of dollars from the mideast (maybe Pakistan, "I don't remember") into the U.S. for a young male under an alternate name without attracting a LOT of attention from Treasury and Homeland Security? Stay away from this one.