jainen

>>My APC has the red light (for unstable power) lit at all times....<< That usually means your house is not grounded. It isn't too hard to add a third wire to the circuit your electronics are on. Drive an 8' copper pole into the ground outside and run a heavy wire through the wall or floor to your plug. You can even use a nearby cold water pipe. This won't meet current building codes, but it's cheap and safe and effective and the connectors and know-how are at your local hardware store. (Tell them it's for a detached dog run or chicken house.)

>>comments, recommendations, and thoughts<< Okay, so far we've got: Politely request a different auditor (already tried, ticks 'em off) Request audit reconsideration (your own idea) Call Taxpayer Advocate (for when "an IRS system or procedure is not working as it should") Amend the returns (you might get lucky) File an Offer in Compromise (a long shot) Forget about it (too hard and expensive anyway) Anybody have anything else?

>>History first<< No Sir, put the history last. Or leave it out completely. Tom, the audits are closed. Tax court is closed. IRS Examination doesn't have enough subtlety to figure this out. All they are going to see is that your client repeatedly used false filing status and dependency claims to get EIC. You're dealing with Collections now, and those guys aren't into "polite" at all. Maybe you'll get lucky with amendments--it happens sometimes. But you'll probably do better with an Offer in Compromise based on doubt as to liability. That's always a long shot, but at least it would put all the years on a single page. With a sadly contrite story, the IRS might agree to drop the penalties and split the difference. My advice is to nail down the 2006 audit immediately. They will accept MFJ without a problem. Sign off agreeably and request a copy of the workpapers to help you word your offer.

>>there is no "sale or other disposition"<< Possibly. That's why I said I would need to see the documents. It depends on how the exchange was structured and at what point they were in the exchange when it fell through. My guess is they did receive contractual exchange credits for the old property, and it was the loss of these credits that might be considered a sudden theft or casualty. In that case they would still have gain from the disposition. It might even be a better tax position that way. The gain is taxed at 15%. The loss is an itemized deduction or an investment loss, but either way calculated on FMV instead of limited to original basis. I would also scrutinize every piece of advertising this company had, looking for any hint of a bond, insurance, or guarantee. All the major facilitators are bonded, and if these guys also claimed to be but couldn't make good on it that might be a sign of fraud.

>>Will they have to pay regular cap gain on the sale of their commercial property when the $ is recovered even though they were trying for the 1031 exchange that went sour?<< They will have to report capital gains on the disposition and they will not be able to salvage the exchange. There is nothing like "reasonable cause" allowed; they simply have to follow the 1031 requirements exactly or it doesn't qualify. Whether it is taxable or not depends on the rest of the return. I'm not sure if there is an investment loss. Probably there is, or perhaps a casualty loss, but I would want to study the transaction documents before I decided that. Presumably they have a claim against the bankruptcy estate, but the exchange contract does not give them any collateral or security so they may not be able to recover anything. They should consult with an attorney to see if a claim of fraud or some other special application is appropriate.

>>a random royalty that shows up just because one of his old books was just translated into Urdu<< It never goes on Schedule E, until he dies and his heirs get the royalties. And it doesn't matter if he is no longer in the authorship business, as long as he was in business at the time the book was produced. An interesting question is whether any FIRST book could generate SE income, since the IRS says you aren't in business (must capitalize expenses instead of deducting them) until you are established.

>>Does this income go on line 1 or 6 of Sch C?<< If writing books was his main business, the income is shown on line 1. If it was incidental to something else (for example, conducting wedding ceremonies) or if it was a small business that you don't want to do a separate Schedule C for, then you can use line 6. If writing the book was not part of a trade or business you could put it on Form 1040 line 21 other income, but the IRS may not like that.

>>simply because the old instructions... weren't compatible with e-file<< Oh, no. This goes WAY beyond that. Besides asking for the employer EIN, it requires either filing Form SS-8 or comparing to how other workers were treated--two main paths to formal determination. No, this is a major upgrade to the IC audits, using tax preparers to pre-screen each case. We will have to think carefully about how and when to use this form, because people are going to get hurt by it.

>>there is not an H for other<< This form should not be used casually. It could have important consequences for the client's employment. I see it as another step in the IRS shifting enforcement responsibilities onto tax preparers. But does anyone have any insight as to why the IRS is so concerned about the independent contractor problem? If a 1099 is issued the IRS will still get its tax, and has easy pickings for finding other undeclared income. The situation is even stranger because the employers are NOT bothered about the withholding--they have a completely different motive than the one the IRS is looking at. What do they care about 7.65% FICA, when wages haven't gone up in a decade? They are afraid of Workers Compensation Insurance.

>>Should ATX employees be given a special identifier?<< It would set a bad precedent. Before you knew it, we would ALL have to confess who we really are!

>>Global Warming Czar anywhere in Cali<< Santa Cruz is a small town on the central coast of California. Cali is one of the biggest cities in South America. It is famous for especially hot music, but I don't think they are hiring a Global Warming Czar.

>>let the sun do all the work<< It's not that easy. First of all, we have a very different relationship with the sun here in Surf City. That's why I mentioned the wiccan rituals. Even more important, the Climate Czar is not going to "let" anything happen. In Santa Cruz, global warming is not a political question. (In fact, we don't allow ANY political questions, so don't even bother asking.) What will be required is an exceedingly technical solution, which is why you need all that scientific background. Most important of all, like all bureaucrats everywhere the Climate Czar will certainly not have any relationship to anything that could be called "work."

>>to get a few ideas on what the rest of you kind folk are charging<< I'll give you some ideas. How much do you charge for a 1040? Obviously, it depends on how complicated it is, and how it fits into the rest of your practice. You can charge the same fees as for comparable 1040 forms. Or the same as for partnerships. Or you can go double or some other formula. If it's simple and he is a good client, you can do it free or for a minimum fee as a matter of good customer service. It's not fair to charge more just because it takes you longer while you are learning, but you might charge less because you don't have a competitive skill level for it. And you might charge less because it's not an important part of your client base, or else because you want to attract more of that sort of business. Or you might charge more to discourage that sort of business (or that particular client) if it's too much trouble. You might charge more if you have extra pay-per or other software costs. You might charge less if this first one opens the door to a lot of lucrative referrals. You can ask him what other quotes he's gotten (or get them yourself) and adjust your invoice accordingly. Or you can pick a figure out of the air and see how he reacts to it.

>>how will they know that I have combined 2 returns?<< That's what the explanation in Part II is for. One reason I do it this way is it's how the instructions for Form 1040-X Line B say to do it.

>>Just combine all the numbers on the two separate returns and put in column A on the 1040X?<< I prefer to select one of the clients as the primary, and put only those numbers in Column A. Then add the second return in Column B. Make all the other changes (filing status, dependents, spouse, etc.) as if amending from the way the first return was filed. Your software should do this for you. Start with one of the returns and lock it into Column A. Then add the spouse's W-2 and everything else, and the 1040X should be generated automatically.

>>Efiling is a simple as using this forum<< The forum has had a lot of comment about how convenient and useful e-filing is for the practitioner. I would like to point out that it is also of tremendous value to the taxpayer, and you are shortchanging your clients if you don't offer it. The biggest advantage is not the speed of processing or availability of bank products. It is not even the extra diagnostic checks or the acknowledgment of acceptance. It is the simple ACCURACY of not letting IRS seasonal employees retype the return you spent hours getting perfect.

>>The IRS soon will force all of us (paid preparers) to efile<< California has required e-file for years. The great majority of practitioners here consider that the advantages outweigh the problems. Postal service breaks down too, you know.

>>Who could afford to live in CA on an $80,000 income anyways?<< Don't be so starry-eyed. $80,000 is like the top 10% of household incomes here. I raised my three boys on less than half that. My rent on a 2-bdr house in town is $330. Sure, that's not the "typical" arrangement, but everyone here figures something out one way or another.

>>There's a job opening in Santa Cruz...<< As a matter of fact, I happen to live and work in Santa Cruz, California. It's a very weird community. The tax business is weird too, because (other than these highly-paid political hacks and some university bureaucrats) nobody has a real job. And the idea of family is stretched farther here than anywhere else. But if any of you are thinking of applying for Climate Czar, I'll be happy to write a letter of recommendation! jainen p.s. Don't bother unless you have at least a doctorate in both marine biology and engineering physics, preferably with several years experience conducting wiccan rituals.

>>Greenland is melting<< If the polar ice melts, wouldn't the spinning earth get unbalanced?

If the earth is getting warmer, does that mean someplace else in the universe is getting colder?

>>make sure we are not claiming someone ineligible<< That makes sense, but are you sure it's not just to keep us from double-dipping on the domestic production activities?

>>coniferous forests actually could be causing more smog than traffic<< That's right! I stopped going to Finland because their forests are way too smoggy. I prefer the open air around our local freeways.

>>getting cows to burp less can help reduce global warming<< Yeah, and the great Ronald Reagan said trees cause pollution.

>>The new 8857 is out<< Thanks for the heads-up, taxbilly. I hope we get a nice discussion going here. This one is going to take a LOT of study. I can see problems for the practitioner, especially one who prepared the original return that is now being challenged. For clients in a divorce, we will need to recommend legal counsel before providing some of the information now being demanded -- current income and expenses, allegations of forgery and domestic abuse, details about how financial decisions were managed during the marriage, and plenty more.