jainen

>> try this out on the return<< Here is Schedule F: http://www.irs.gov/pub/irs-pdf/f1040sf.pdf. Line 6c does not call for any date or dates. Apparently you are having a problem with data entry in your particular brand of software. Call your tech support.

>>a reference to that rule in an IRS publication<< That particular rule ("ordering rule") is stated on page 64 of Pub 590 at http://www.irs.gov/p...s-pdf/p590.pdf. Read the whole of Chapter 2 because there are other rules such as "qualified distributions" that seem to apply to your situation. Also see the instructions to Form 5329 at http://www.irs.gov/p...s-pdf/i5329.pdf (Line 2 Code 12). Your second question is moot because IRS is not taxing you on the original contribution. They are assessing an additional tax because the broker says it was an early distribution.

>>previous question<< I guess I don't understand the question. Attach a statement with as many dates as you need. If your software can't produce the statement, call tech support.

>>the difference between simple math errors (which may encompass omitted income) and more complicated matters<< "Math error" is a technical IRS term for specifically designated kinds of problems that can usually be fixed by the preparer without much client involvement. It does NOT encompass omitted income.

>>I would have the POA to be able to assist with answering questions on a particular tax return, not necessarily under audit,<< Margaret, I do appreciate your concern with client comfort. But there are two kinds of letters. One is called math error, and all you need to handle that is the 3rd party designee. That's enough for any IRS questions concerning the PREPARATION of the return, which is presumably what you are hired to do. Everything else is a letter audit or worse. You never know what to expect on that level, and can't assume that you would be the best person to handle the problem. I mean, what if the defense has to be poor professional advice? That could conflict with your duty as a fiduciary--you do know that taking a P.O.A. imposes legal obligations? You really can't do anything until you confer with the client anyway; you sure can't assume that the client wants to disagree with the letter. There are no routine audits. So all-in-all I feel it is better to ask clients to bring IRS letters to you, and then figure out what y'all want to do about it.

>>In Publication 225, page 11 it says... << Yep, you're absolutely right, Dan! Pub 225 does say that on page 11. That's the section describing what to include in the statement you attach. As to the form itself, why, no, Line 6c does NOT ask for the date. Just check the box, and attach the statement. If you don't believe me, READ THE INSTRUCTIONS at http://www.irs.gov/pub/irs-pdf/i1040sf.pdf.

>>Good idea to get POA from all<< What is good about the idea? It is one thing to prepare a tax return. It is an entirely different matter to act as a fiduciary in representing a client before the IRS. If the client doesn't want or need it, why put yourself in that position? I believe it calls for a separate engagement letter and fee structure.

>>competent and dedicated preparers<< Sorry, you may not like what I'm saying, but there is nothing new here. A competent and dedicated preparer can PREPARE the return, and (if the 3rd party designee) respond to IRS notices concerning math errors and offsets. But a prior year CP 2000 for unreported income? No way. If you want to represent taxpayers before the IRS, you still have to be an E.A., CPA, or attorney. Or get the client on the other phone. Same as ever.

>>the customer says... << What does the letter from the state say?

>>leave it to the experts<< I may be misreading your original post, "real estate they held in a 1031 Like Kind Exchange." If it is property they acquired at least a year or two ago, the facilitator might want to "drop and swap" by making the division before the exchange. Courts have started to accept this in specific cases. But they are generally not to be cited as precedent, and come in the context of increased scrutiny by the IRS. And of course, always pay close attention to your conflict of interest concerning divorced couples and co-owners.

>>IRS was backlogged<< Get used to it. In my opinion, it is unrealistic for the American public to demand lower taxes for smaller government, while expecting the same level of service.

>>Can she take her half of this deferred gain and do another 1031 exchange<< Maybe, but remember that 1031 is one section of the code where substance-over-form doesn't apply. It must be done with the paperwork exactly right, so be sure to use an EXPERIENCED facilitator. With that in mind, 1031 can be extremely flexible. The biggest issue here is that you can't use 1031 to change title. A lot of people get tripped up by putting replacement property into a trust or LLC. The same problem blocks BOTH spouses going from joint to separate title too. It doesn't matter what good reasons or intentions they have. The facilitator will want them to identify and acquire all replacement properties in both names. From there (I guess) they can probably make a division pursuant to the court order, but it would surely be a lot cleaner to hold all the new properties jointly for a couple years with a real estate management company running things. I recommend you not offer advice on how to structure the exchange. Leave this one to the lawyers.

>>May be employer is holding off hours to compensate for the rent<< If so, you have a conflict of interest that should prevent you from doing tax work for the company at the same time as for the employee. Besides the rent that is apparently a taxable fringe benefit, the value of the personal use of company vehicles (i.e., commute) should also be on the W-2. How to handle this situation depends on which taxpayer is your client.

>>advise them to consult an attorney<< I also advise them to consult an insurance agent, as invariably one of the main reasons for forming a limited liability entity is to limit liability. As to why someone would start as a C intending to become an S, it often has to do with net income. One of the main disadvantages of a C corp is double taxation, but it is realistic to expect a few years of startup before there are any profits to tax anyway so S-status can wait.

>>they are of the trusting sort<< Sorry, I don't buy it. Maybe the preparer didn't sign it, but the taxpayers sure did. I agree with Pacun here. "They go to these type of preparers because they know they will get bigger refunds. They come to you ONLY when the IRS gets them." Trusting sort, indeed! They knew perfectly well they weren't paying into the IRA or incurring those employee expenses. The only trust they had was believing the preparer when he promised they could get away with these kind of deductions in these amounts. Nevertheless, I believe you should accept them as clients and serve them professionally. That would include requesting penalty abatement based on bad preparer advice--sometimes the IRS will allow it if you can show they have changed preparers and taken other SPECIFIC action to ensure future compliance. You can also suggest they file a small claims suit, but don't don't get involved in that yourself.

>>the term you want is life estate<< Let's not assume too much. When it comes to the implications of how title is held and transferred, it's best to stick with known facts. Life lease is a perfectly good term, although the meaning varies in states near Canada (like NY). The mother has something like a tenancy for life, and the kids have something like a remainder interest. For purposes of capital gain or loss, remainder interests are valued as a percentage of the property's FMV. The percentage is found in actuarial tables as described in Pub 1457. The sales are capital transactions. Basis is determined in the ordinary way, whether acquired by gift or purchase.

>>accountable plan expense account covering reimbursements for employee's business use<< It's not clear from original post that there even is an employee relationship, as opposed to an owner or investor. In any case, an employee can not be reimbursed for actual monthly payments except as a taxable fringe benefit. Even depreciation would not be allowed unless she is in the business of renting personal property with a profit motive. I suggest she call an emergency Board meeting to clarify in writing the existing accountable plan, and submit her mileage records (excluding commute if the car was kept at her home) by the end of the year. Seriously, she needs to do her tax planning in advance.

>>Where is that .004 coming from?<< Basic arithmetic. When you multiply two numbers, the product will have as many total decimal places as there are in both numbers. We Ancient Ones remember this as one of the cross checks for math with paper & pencil. Some calculators will round that up or down to the significant figure. With money the "sig fig" is usually two, because the lowest denomination is a cent (hundredth). However, there are many times, even with taxes, when you have to keep track of greater detail. One of the early computer frauds involved a banker who captured all those partial cents and transferred them to his own account. It totaled millions of dollars!

>>only two locations in the entire state<< For what it's worth, your travel costs are deductible. More important is that this new threshhold will cause marginal preparers to drop out. If you choose to stay in the game, you'll gain a quick competitive advantage. And that wasn't bad advice--if you want to take a chance, odds are pretty good the IRS won't bother with you this year. After the big city crush, Prometrics will probably find a cheaper way to pick up the country stragglers next year.

>>the checks were never cleared<< Get the checks re-issued. Have the client deposit them and write a personal check to apply for 2006. At the same time, now that taxpayer is current set up a payment plan and stop the garnishment. This is a good off-season engagement--pretty easy for you, impossible for the client.

>>the SOL has tolled<< You need a legal dictionary to understand this usage of "toll." It means to delay, suspend or hold off the effect of a statute. For example, the three year statute of limitations is tolled during periods of medical incapacity, so a person qualifying under that rule could have more than three years to claim a refund.

>>The program requires that an "NOL statement" be completed in order to e-file<< The same statement is required for paper returns. Acording to page 9 of Pub 536 at http://www.irs.gov/pub/irs-pdf/p536.pdf, for deducting a carryforward, "You must attach a statement that shows all the important facts about the NOL. Your statement should include a computation showing how you figured the NOL deduction. If you deduct more than one NOL in the same year, your statement must cover each of them."

>>a sample letter<< I don't think a canned letter will serve you well. From what you say, the taxpayer did not actually have reasonable cause for failing to file. The IRS is pretty tolerant on the matter, but surely you can do better than "forgot to mail the return." Start with the taxpayer's excellent history of complying with all tax requirements (if and only if true). You can include the disruption of business processes when the court trustee got involved (if and only if the dates match). But don't lean too much on that point or it will sound like whining. Don't neglect to state the commitment to future compliance, supported with specific action such as hiring a bookkeeper or tax professional. Any standard business format would be appropriate. The IRS prefers short block paragraphs, and never exceed ONE page of explanation. Then you can attach as much as you want--schedules, affidavits, or whatever. Just make sure it is complete, with contact information and a clear statement of your request as well as the facts and citations that support your position.

>>I just gave one of my flakes a 30-page return to MAIL<< Well, I waited until this morning to reprint a whole family, and already phoned them to say I would bring it over. I think I must be the flake! Luckily I read this thread just now, and sent the e-files off, and called them back, and ate some ice cream. I feel better now.

>>When you brag about having Top Secret clearance<< ?? Anyone who brags about that would not retain top secret clearance for long. And a tax professional would not retain clients by claiming to be the subject of an FBI investigation, whatever the purpose or outcome. For some reason, it's just not something clients want to hear. I made a little flyer called, "What is an E.A.?" It explains (okay, brags) about how hard I studied to get admitted to practice before the I.R.S, and what a tremendous benefit that is for my clients!