jainen

>>Are we expected to know all of that or expect that our client tells us << Yes--both! Our clients expect us to know that, and we expect our clients to tell us!

>>no FICA was taken from my paycheck<< Interesting question. Payroll taxes are paid by the EMPLOYER. If they didn't withhold from you, that's not your problem. It might not be true--there are a few scenarios under which it may have been handled correctly without your knowledge, but realistically the company probably cheated to avoid payroll taxes on the non-cash compensation. At this point, what you do depends on whether you want to make a fuss with your new employers, which in turn depends on how important Social Security credits are for you. Start by verifying your Social Security record for the year in question.

>>the government doesn't have it<< The government has excellent instructions that cover just about every variation imaginable! CLICK HERE for a short introduction and links to the related pubs and forms. Of course, the government can't give you all the key information you need, such as how title is held, the adjusted basis, whether it's a non-recourse loan, a qualified mortgage, a foreclosure, the specific reason for cancellation of debt, if bankruptcy is involved, etc. But the instructions will tell you what information you need to get from the taxpayer, and how to treat it. Also, just because an attorney says they will get a 1099-C doesn't mean the lender will agree, or that the numbers will be as expected.

>>Every member of Congress should be required to do their own personal income tax return... we would have tax simplification overnight<< I doubt that very much. We would have exactly what we'are going to get anyway--a new program in the federal bureaucracy to give a huge subsidy to favorite corporations (as determined by campaign contributions) for providing a very plain service to a select segment of voters. There will be more money spent on determining which voters qualify than is spent on the tax prep itself, although even the tax prep will cost at least three times what Enrolled Agents have been charging. The only simplification involved is that taxpayers will lose exemptions and deductions, which will pay for bigger tax breaks and subsidies for the favorite corporations.

>>When IRS questioned the discrepency between the 1099 and what we reported << Deb has a good explanation for what might have caused the discrepancy, and I suggested nothing else. But whatever the client's books show as the reason, you can protect him from being audited, comply with Section 10.34 of Circular 230, and (if the IRS does not happen to agree) avoid an accuracy penalty by simply using the normal disclosure procedure the IRS calls for. Presumably those are all important reasons why your client is paying such high fees.

>> the 1099 he was sent is more than $10,000 what he was paid<< File an accurate return based on taxpayer's contemporaneous records. Attach Form 8275 or other disclosure for the inconsistent treatment of the 1099.

>>I need to look at the actual IRS code<< "Need" is probably too strong a word here, because if you don't already know how the tax code works you won't be able to understand it anyway. If you are asking about residential rentals, the IRS has an excellent manual at CLICK HERE. Although it doesn't give citations, it covers IRS regulations and interpretations (which have the force of law) as well as the tax code itself. For anything more technical, I recommend you engage a tax professional. Many tax rules apply only to certain taxpayers, involve arcane definitions, or rely on court rulings that only affect part of the country.

>>does that mean client is out of luck with catching up on the missed depreciation since 2003?<< Yes and no. No--he can't deduct unclaimed depreciation on a late return. Yes--he must reduce basis anyway, as if he had properly claimed it.

>>disabled because of auto accident<< For purposes of early distribution, disability is determined by what will happen in the future, not what caused it. I would guess the plan administrator would not change the code unless you provide proof of a Social Security determination.

>> I did not see how this was serving any real purpose.<< They didn't send it to ME. As you all know, I love to go on and on about stuff that doesn't have any real purpose!

I've had clients resist when I tell them they need contemporaneous written acknowledgement for volunteer out-of-pocket expense over $250. In 136 TC No. 25, the Tax Court reaffirms the requirement.

>>Where in Pub 54 << "How to figure the 12-month period" is explained on page 12. You can choose any period you want, so why use January 1st if it doesn't give the maximum exclusion?

>> fines and penalties are "never" deductible<< That only refers to traffic tickets and other government fines. Bank charges are simply fees spelled out in the private contractual relationship. Bank charges of all sorts are deductible in the ordinary way. If not otherwise provided for in the code, they are business expenses on a business account and investment expenses on a personal account.

>>2008 is still a good year for filing for a refund, right?<< Yes, and he can also still file for the other years too. No refunds of course, but maybe no balance due either. Just be sure he understands that a 90-day letter means 90 days, period.

>>the number of days in the foreign country during tax year 2010<< That number is not relevant to the calculation. Based on the starting date you entered, ATX is doing it the way described in Pub 54.

>>auto withdrawal requests denied by the IRS<< More likely they were denied by the banks. Common problems include a non-spouse co-signer on the account, credit union account (not the actual bank), wrong numbers (from deposit slip instead of check). Oh, and insufficient funds.

>>they have no idea what they entered<< The tax system is so unfair to small businesses. How are they supposed to keep track of every piddling $48,000?

>>Have you ever wondered<< Many years ago I began to study this matter. Although your explanation seems to make sense, I think it best to continue my own research. One thing I have found is that the size on the label does not necessarily answer the question.

>>the same as this contractor's sign<< It is NOT the same. They don't say, "You can save a macnickel if you promise to leave it on your dashboard for three months."

>>Under this theory, McDonnell Hamburger should give out 1099's for senior discounts.<< I love your entire answer, OldJack! Why, I might make a cynic out of you yet! Of course that won't stop me from mocking you anyway. McDonnell doesn't incur any expense related to that discount. A better analogy is Bugger King. They give out those golden cardboard crowns, an obvious advertising expense.

>>I determine all of the 'convenience of the employer', what is or is not reimbursed, etc.<< That's not the issue. Does the corporation pay anything related to the property or not? You can't avoid 280A by calling it a "reimbursement" unless you use an accountable plan. >>Bay area companies can actually pay the employees less to work from home, not more, since the employers are not renting expensive office space in SF<< How's that again? The employers get bigger profits because they force their own employees to subsidize them? Well, okay, if that is true then the corporation is not renting so the employee can take their deductions at 15 or 25 cents on the dollar, subject to 2% AGI. Under an accountable plan, they could exclude 100% without limit.

>>I see no point in doing that<< That doesn't mean there is no point. Perhaps the contractor has a good reason to show maximum gross income on his books. Or perhaps this particular transaction is smoother with such an understanding. A 1099 would support the advertising expense deduction, but it would be much cleaner to simply charge full price and then pay for the advertising space. If the homeowner were my client, I would say he just granted an easement incurring a minor basis adjustment, not taxable income.

>>Quite a mess, huh?<< Nope. At least, not if she can show that she is the heir. I'm surprised the lender is having a problem correcting title on a seasoned loan, so maybe they are doing her a favor by not invoking a due-on-transfer clause. Has she recorded new title down at the courthouse--maybe SHE is the one balking because she doesn't want her creditors to find that asset? In any case, have the estate issue a 1099 as a nominee, or simply take the deduction and respond honestly with excellent documentation to the IRS letter, if any.

>>I have no problem with a home office for an employee in general.<< Maybe you don't, but Section 280A(c )(6) of the tax code sure does. If the corporation reimburses your client or pays higher wages or extra in any way because the employee uses his home office, he can't deduct anything, period. And the income is still taxable, unless it's an accountable plan! So why not?

>>they cannot document where all the deposits in their checking account originated<< And you took them back anyway? I assume you aren't giving these tax cheats any special discounts on your prep fees. Did they at least learn not to deposit the cash they aren't going to declare?