jainen

>>We will loof forward<< I had to look that one up, kc. I find that "loof" is an old term for a paddle used to keep a vessel steering into the wind. It's a nice metaphor, and I was glad we could help Margaret do that.

>>How can you rent something for rental income and not have schedule E?<< The translator doesn't even own the property he is supposedly renting. The original post says "guy wants to rent a desk and assist clients 4 hours a week." Nothing about Schedule E real estate except the incidental use of a little bit of space for 10% of the work week. If this were a separate business activity it would still be on Schedule C.

>>The bottom line in either scenario will be the same.<< It will (as long as Schedule E isn't involved). But to deduct less rent requires an additional documentation step or two because the cash flow into the bank account won't match reported sales and the claimed expense won't be consistent with the actual checks. I like records that are simple and show what happened the way it happened.

>>the translator has just entered into an office-sharing arrangement with the IT guy<< I have still a different opinion. The space rental is not a separate business activity. It generates income from business assets but is incidental to the main business, so it is "other income" on line 6 of Schedule C. Do not take any of the expenses away from Schedule C.

>>the joint bank account is owned 100% by the 2 brothers<< No it isn't. They all agree that it is part of the estate to be distributed equally according to the will. The fact that there are some nominees on the title doesn't change that fact. Split up the house sale proceeds unevenly to compensate for the bank accounts if that is easier.

>>want to become partnerships or are looking at changing to another business entity<< You have a good background so you'll do fine. Unfortunately, choice-of-entity is way up there in the super-advanced category, almost needing a license to practice law. Make sure you get help if you are the least bit involved in that decision.

>>expanding my tax preparation business to include business returns<< That's a mighty big order. Try to break it into smaller chunks such as partnerships or S-corps, or focus on a particular industry like restaurants. The first thing is to review or learn basic accounting so you can handle Profit & Loss statements and Balance Sheets. Your local community college probably has the best deal for that. If you have access to H&R Block advanced courses, you won't find a better introduction to actually filling out the tax forms. It's hard to recommend seminar courses for beginning tax theory because a classroom just doesn't have enough time. For example, the current NATP national symposium has a session called "S-corporations from A to Z." It covers "converting a corporation to an S corporation after inception, including built-in gains tax... how to track shareholder basis, AAA accounts, and shareholder loan accounts... salaries and health benefits... tax accounting years and pass-through to shareholders, loss limitation, and the taxation of distributions... preparation of the 1120S as well as the corresponding 1040 returns for the shareholders with an emphasis on basis issues, reasonable salary, health insurance deductions, and other important topics." Plus -- you'll be finished in time for lunch! (They have another class that is just as long and only looks at the first item on that list. )

>>I see them making out like bandits<< Bandits are outlaws. The proper application of Section 121 is, well, proper. By "making out" do you mean that back-seat-of-my-Oldsmobile thing? Because that's the only improper aspect that seems to apply.

<<nonprofessionals are giving out bad advice<< The clients say that somebody told them that somebody ELSE told her about a different transaction. How could that come out as bad advice?

>>The ramifications of that would surely shadow his daily worklife<< I'm not sure what you mean by "negative basis," but he should not have to bear ANY economic loss for this land grab. That includes using his own equity to subsidize the university expansion. How would his co-workers find out anything about this? It's not like the university will force it into open court. What could be uglier than throwing an old blind man out of his home? It has nothing whatsoever to do with the people he works with. Let the lawyer do his job.

>>discuss how tweaking one aspect of this affects the others<< WHAT are you talking about? "TWEAKING"? He has them cold on an ADA violation that they simply can not afford to risk losing. Get a lawyer if you need to, but go back and make the university pay what they owe him. No 1099 -- this whole arrangement is for the convenience of the employer. They can easily bury another $100,000 in the eminent domain compensation, still cheaper than going to court. He can put that into an annuity or something so he doesn't have to erode his home equity just to buy lunch at the cafeteria on campus.

>>At last, a real answer.... Hillary << I thank you for your opinion of Mrs. Clinton's position, kc, but the fact is that legislation actually passed over the last six years proves that every GOP candidate is just as committed to EIC as any Democrat. The reason I suggest tightening eligibility is because the Republicans have loosened it. In tying benefits to W-2 wages, I mean to cut out Schedule C. Self-employment is almost never a viable option for people with minimal job skills. They need the support of a regular schedule, performance evaluations, training, and so on. I would have the tax benefit reflect such opportunities.

>>I can only see that 'simplifying' as increasing the amount of fraud<< It's kind of a cliche that people claim EIC using their girlfriend's kids, but I think most EIC fraud is just like any other tax fraud -- under-reporting income. I can't prove it, but it makes more sense to me looking at our vast economy of cash wages. I doubt there's anything you could do to EIC that would affect under-reporting one way or another. I can think of many enhancements to simplify and expand EIC in ways that would build confidence and respect for the program without doing anything scary. The first thing I would do is cut off all the wealthy families by going back to the old tiebreaker rule about highest AGI. Then I would move more of the credit into Advanced EIC, so workers get the benefit immediately in a form they can easily compare to not working, eligibility is somewhat monitored by employers, and there isn't the temptation of a large payout for a single signature.

This is a very good topic that I hope we will return to over and over. The potential is unlimited, when you consider not only document storage but telecommuting and everything. If H&R Block can outsource jobs to India, obviously our industry faces huge changes in how data is handled. My office uses Lacerte and tried to implement the Document Management System in February. Only the boss had enough motivation to make such a major workflow change in the middle of tax season! The rest of us made our pencil notes and then scanned it all in. Now I'm gradually getting used to the increased use of mouse (and keyboard as much as possible) and the dual monitors. Lacerte can scan W-2s and 1099s directly into the tax return. So far, checking for accuracy seems to take slightly longer than entering by hand, especially with W-2s that carry over from the previous year.

>>received a 1099 with his SSN which really belonged to the LLC<< I always have a disconnect about this situation. Where did the issuer get his SSN, unless he gave it to them as part of the work contract? Daisy's client (or party freeloader) must have represented himself as a business, and perhaps the job was only available that way. So the 1099's are most likely correct, and assigning them to another entity might be inappropriate. The issuer usually has a very good reason for not responding to the request. Anyway, if the 1099 is wrong then showing it as income offset by expense is also wrong, since that mischaracterizes both income and expense.

>>large business losses<< It is too late to forego the carryback for a net operating loss, if that is what you asking about. You might be able to shift some of the expenses to future. Look particularly at Section 179, other expensing, and depreciation method for new assets. Also look at prepaid expenses such as insurance and rent, whether income is allocated to the correct year, and any other timing issues. Don't forget to mention to your client that you are available year-round for tax planning that might help this kind of thing. Please add your personal thoughts to our ongoing discussion of whether AMT is fair.

>>the disability benefit he has paid for all his life<< He didn't pay for it "all his life." The eligibility period is only ten years, and the deal is that if you aren't working anyway, you can't claim to be unable to work. Are you saying that it is unfair that he didn't get to use his coverage because he never got disabled? The rules have been in place since long before he was born. He chose to drop out of Social Security coverage, and could just as easily have chosen to obtain a private policy. He could even have done so as a tax-free benefit through his corporation! He can still do that--what exactly is his problem?

>>In the past when I brought up situations like the one your client is encountering<< I have also mentioned that getting Social Security credits is one of the planning issues for self-employment. However, this particular case sounds bogus. Notice that he isn't concerned about retirement, but disability benefits. For someone who chooses to not work, this is pretty suspicious.

>>The use of the word 'FAIR' corrupts the whole debate<< So when the president talked about Saddam Hussein getting a fair trial, he should have said "mutually agreeable"?

>>the government if forcing him to sell<< Nobody is FORCING him to do anything. They are offering him an opportunity which has certain terms attached. He is perfectly free to decline the opportunity and the terms. Nevertheless, the current administration has overlooked some amazingly brazen improprieties among its favorites, so I doubt that a bit of extra tax deduction would raise any concerns therein. UPDATE: George Boutwell commented (in a different forum) that this tax break actually does exist. I admit it was news to me, but I have now read the code section for myself. It would be a conflict of interest to reveal it, however, so I encourage everyone to continue to research this interesting loophole.

>>these folks were already licensed, how could this have happened?<< This sounds like a reasonable argument, but it doesn't work. I happen to know because I tried it myself last week when the cop pulled me over for my creative interpretation of certain traffic laws.

>>is this bequest considered an asset of the taxpayer<< Thank you for a very satisfying question. No, I don't think he can count money that he might receive if the will is upheld sometime in the future. Of course, if he is the executor and deliberately delays the probate for his own personal reasons, I wouldn't stand behind that answer.

>>Congress last week passed a $464 billion spending bill.... Congress was at a standstill<< Nice try at spinning the news, redux. That was a FUNDING bill, not a budget. It was only based on continuing resolutions that kept the government working according to the previous year priorities. And that happens to be what the article you quote says, so I trust you don't disagree. Now tell me why the Republicans, claiming to be the party of fiscal responsibility, should be at a standstill when they controlled both houses of Congress and the White House. Why exactly did they ignore their Constitutional obligation to pass a budget?

This is a very strange thread, trying to argue that because the Democrats haven't yet reversed the tax increases that the Republicans scheduled for 2010, somehow that proves it's the Democrats who want higher taxes! And their first budget isn't even due until next October! (The Iraq money and other emergency measures were necessary because the Republicans didn't even bother making ANY budget for this year, not even funding the troops.) Well, aside from such domestic issues, the Democrats have already made enormous progress on the most pressing issues in the world. In the past five months the Bush administration has totally reversed their diplomatic position about negotiating with Korea, Syria, and Iran. As late as January our Secretary of State was sarcastically refusing such talks--"That's not diplomacy -- that's extortion." Since then they have opened discussions all around the globe, so what changed? The balance of power in the three branches of government, that's what.

>>In any event, there's no need for a cursive signature - original or scanned.<< Perhaps you mean there is no REQUIREMENT for a cursive signature. Neither is there a requirement to keep a copy of the complete return, or to print the depreciation schedule, or to arrange the pages neatly stapled in a nice folder, or many other elements of good service. But there are plenty of reasons, and some of those reasons reach the level of "need"