jainen

>>I do all of the bookkeeping as well as the taxes for my husband's business, one desk is used pretty exclusively for their checkbook and paperwork<< This can be a problem for a home office. No deduction is allowed unless it is the principal place of business for EACH business. If, for example, your husband has another fixed location where he does planning or other administrative work, your entire home office fails the exclusive use test.

>>if they are any more well off than before. The answer is no << That may be the political answer, but it's certainly not the mathematical answer. In 1968 the federal minimum wage was $1.60, which equals $10.56 in current dollars adjusted for inflation. Can you see that is 46% more than the actuall current rate of $7.25? That means increases in base wages have NOT caused higher costs of living. So yeah, people who received that increase are not any more well off--because the increase wasn't enough to keep up with other inflationary factors including stupid political positions..

>>more than a recipient’s annual wages from an entry-level job<< The implication is that welfare is excessive. More than an implication, actually, as they say "states should consider ways to shrink the gap between the value of welfare and work by reducing current benefit levels." A better solution is to increase the value of work. What do welfare recipients do with their money? The spend it in the local economy. Cut it back and consumer income drops. Increase wages and everyone from landlords to stockholders have higher income and pay more taxes.

Last week there was some discussion in the Politics Forum about whether the automatic spending cuts had any real economic impact. I'm raising the issue here strictly in terms of non-partisan tax effects. What do you think about the IRS saying the sequester requires them to reduce refunds? The IRS explains, "A corporation that can claim an additional first-year depreciation deduction under section 168(k) can choose instead to accelerate the use of its prior year minimum tax credits, treating the accelerated credits as refundable credits." In other words, by investing in new equipment they can use up otherwise-deferred credits, and even get a refund. Now, solely because of the sequester cuts, the refundable portion will be reduced 38%. http://www.irs.gov/Businesses/Effect-of-Sequestration-on-the-Alternative-Minimum-Tax-Credit-for-Corporations

>>personal pictures<< My favorite audit hinged on personal pictures. The client claimed 100% office in home for a big day care operation, but since it wasn't licensed the tax code really didn't support her deduction. And that was the first thing the auditor asked for! I looked at the children's photos on her desk, and knew this was a working mom who could never find enough child care herself. So I explained that the tax code only says "not in violation," and since the client hadn't actually been cited by local authorities... case closed!

>>It looks like IRS only Taxed 85% however INS took 100%.<< In spite of what I said before about 1040X during an audit ["IRS CP2000 Problem"], you might need one this time because you have new issues.of the deduction/credit for the repayment and lump sum treatment of the SS. (See Pubs 525 and 915 for details.) But CALL first! Be sure to have POA ready to fax (or client present). Also, have ALL the source documents, worksheets, and draft forms completed in hand before you call. That means redoing all federal returns back to 2009, a state amendment for 2011, and a written request for penalty abatement describing the reasonable cause. You should be able to resolve the matter with that single phone call and one followup fax or mailing (plus mailing the state amended return), As always, I highly recommend an engagement letter so there is no misunderstanding. You can not guarantee any specific results from the audit, and the client is responsible for all taxes, interest and penalty. However, I don't think you should charge a fee if you knew or should have known that the client received Social Security benefits.

>>What about all the gifts from clients that are sitting around the office? << Obviously you claim those as business income, so they belong in the office! But I certainly hope you don't leave your office door and window open, because cross-ventilation for the rest of the house would be non-exclusive personal use!

>>the woman was a photographer<< Really? I thought she used a mild expletive, then made him take a shower and put on a tie!

>>Chrome Laptop made by Samsung<< Oh, sorry! I didn't think about that. I barely even know about it. Chromebooks are kind of like Apple in that you can only run their own software or approved applications. That should be adequate for general use like doing Internet research, writing papers, editing photos, playing games, and communicating with friends who have computers or smartphones. If the kids are in high school they may have special interests that still call for a PC. For example, if they are assembling the church newsletter they will need whatever is in the office. Serious gaming is another area that Chromebook doesn't compete. And of course if you were thinking of outsourcing some of your own overflow work...

>>perks of being 60+<< All right, KC, you win. That's 20 things I can't disagree with you on! The only thing I CAN say is that my personal favorite isn't on the list--NO MORE PARENT-TEACHER CONFERENCES!

>>Can you run Microsoft Office in Chrome?<< Chrome is a web browser like Microsoft's Internet Explorer and Apple's Safari, not an operating system. Microsoft Office runs on the Windows desktop, although there is an online version called 365. The new Office 2013 has a lot of integration and synchronization with the Internet, so files can be stored online, transferred to other computers, connect with services including Skype, Hotmail, Flickr, etc. Chrome is free and runs on PCs, Macs, smartphones, and tablets. It has it's own online office suite called Google Docs, which is also free.

>>I'd like to have an exercise bike as a desk chair<< How about an exercise bike as the whole desk? http://fitdesk.net

>>I want the touch and I want to work in the same os with my pc, laptop, phone.<< That is why Windows 8 is wonderful. In the past, new versions were criticized for being buggy, unstable, vulnerable to hacking, not backwards compatible. This time the main complaint is that it doesn't LOOK the same. We have to learn a new interface. But we have to learn that anyway, to take advantage of mobility (which turns out to be VERY productive). Personally I switched to Chrome because it's real clean cross-platform, but if you stay all Microsoft you'll have the safest online programs available in the new Internet Explorer and Skydrive. The upgrade is only $35, and you get tons of free newsreaders and all sorts of other apps that work flawlessly. Not to mention synching with any other computer or device you use. What's not to like?

>>You can have an exercise bike or washer/dryer or anything else at one end<< No you can't. There is no de minimus exception. That high standard was set long ago by a ruling that disallowed the deduction because there was a non-business closet in the room, even though the closet space was not claimed. The ruling said the room was not used exclusively for business, because it also provided access to the closet. On the other hand, you may agree with Taxed that you can do anything you want as long as you don't get caught.

>>From a practical perspective, how many times have IRS visited your HO to see if the exercise bike is parked there?<< By practical, do you mean anything goes if you can get away with it?

>>help an exchange determine whether a taxpayer is eligible for the premium tax credit<< All right--that's too much even for my communist brain. Why does my insurance company have to know what I claim on my tax return? Only thing I can think of is to figure out the max I can afford in co-pays. Now, if it was t'other way around it would make sense. The IRS could look at my medical records to see if my deductions were really necessary.

I nominate this for Best Post of the Week! No fussing about how it's not enough deduction or bragging about what a great job the preparer already does. Just level-headed thinking about all the ways she might find to take advantage of a new safe harbor!

>>refer her to a tax attorney since her question is related to transfering deeds<< Good advice if the issue is estate planning. But for selling a house, in my experience most real estate attorneys don't have a reliable understanding of tax implications. One alternative is to gift half the title now, and rent the property out for no more than three years. Under Section 121, ownership and occupancy do not have to be the same two years. There's a good chance sales prices will be higher by then anyway.

>>This post should really be moved to the politics forum<< OMG! Everybody here AGREES--not only with each other, but even with the IRS! That's gotta be a first in this forum! Please LOCK the thread while we are ahead. We're starting to deteriorate into a disagreement about how it's being reported, which is a whole different issue.

>>That doesn't make it right to put an entry on the wrong line.<< Yes, and I had a similar objection, also on mortgage interest, in another thread [home office standard deduction]. So it's not necessarily a problem with VITA volunteers. And really it's not even a problem of bad preparers. We all make mistakes all the time. In my opinion that is acceptable. What I don't like is a weak or missing review process. That goes to how the organization is structured, not the quality of the workers.

>>one day applied for back overtime and got paid for it<< The same would happen in private industry, especially if the workers are protected by collective bargaining. Fair labor laws, you know--you get paid for working. Don't you want government agencies to stay within budget?

>>it is an audit! << Now that 1099s are electronically filed, it makes sense for the IRS to use computer letters for the initial phase of the audit, rather than waste government resources like they used to in what is usually a simple matter. The taxpayer still has ALL rights, including the right to meet in person with an office or field auditor, the right to representation and to provide evidence and witnesses, protection from repeated examination, relief from penalty and even interest when allowed by law, and of course appeals and judicial review with the burden of proof shifted to the IRS. Compare the CP2000 to the math error procedure (deceptively named because it can go far beyond arithmetic), in which there is none of that because the tax has already been assessed before the taxpayer is notified. When I say a CP2000 is usually a simple matter, I mean the IRS is probably right because the proposed change is based solely on the mismatch. They are not questioning subjective things like intent or whether deductions are legitimate, just that income was actually received. Still, the 1099 might be wrong or already reported in a different place or whatever, so the taxpayer has the full range of responses available as in any other audit. If you don't like the vocabulary, Jack, call it whatever you want.

>>CP2000 letters are NOT audits<< You may not think so, but the IRS does. Perhaps you are confusing a letter audit with a math error letter. A math error can not result in a Notice of Deficiency (unless it is transferred to the examination unit), so a taxpayer does not have a right to take a math error letter to Appeals or Tax Court. But a CP2000 is very much an audit (IRS prefers the euphemism "examination"). It should always be considered dangerous.

>>The difference is... << Of course, the main difference is that this new Revenue Procedure isn't actually in the instructions yet because it only applies to returns filed next year. The mortgage rule your office missed has been in the instructions since Adam and Eve first needed to buy a house. And yes, I do audits. Just not with a canned response.

>>blasting my co-worker for not reading directions for Sch A line 10<< The difference is that I looked up the current rules BEFORE filing, rather than waiting for ten clients to get audited.