jainen

>><<My personal preference is to acquire Continuing Professional Education credits by Continuing Professional Education. Not me. It's not cost effective. I study some nice books that would tack on high "grading fees" that don't add a dime's worth to what I'm learning. In my observation, most live seminars are very inefficient and generally inaccurate when they stray from their own printed syllabus. So just buy the book, and slam through all the free credits you can.

>>Just reinforces the worthlessness of our media.<< Well, gosh, Jack--YOU are the one who posted the Twinkie story instead of Bengazii on this forum!

>>it had been rolled over to an inherited IRA<< Who says? I suggest you see what the client actually signed before you talk to the IRS about who made what mistake. I would guess it more likely that the inexperienced heir made one mistake than that the professional fiduciary made a whole bunch. Maybe the heir thought he could roll it over, maybe he still thinks he did, but a rollover was never actually an option for a non-spouse. So it was indeed (in this scenario) a total taxable distribution, coded 4 (not 4G), which only means it isn't subject to 10% penalty. RMD was required for the year of death, but it was income in respect of the decedent, taxable to the recipient in whose name it was issued. RMD wasn't required for 2012. No wonder the IRS sent a CP2000. The only way out of this is to show IRS the documents, so you might as well get them in hand before you waste your time on hold.

>>the extent of actual tax noncompliance is unknown<< Why would they say a stupid thing like that? Everyone knows the extent of actual tax non-compliance! By the way, does this mean I can take a capital loss on my Green Stamp books? I just tried to redeem them and doggone if they ain't worthless!

>>Or does he now have an inventory business?<< Inventory? No, at least not in the sense of cost-of-goods-sold. It's 3-year MACRS property. Code sections 168(e)(3)(A)(iii) and 168(i)(14). You kind of need a fixed asset manager in your software package to handle a return like that.

>>File as though no penalty, and if one is assessed, there is grounds for abatement.<< Sorry, I did consider my mis-use of the word "penalty" but I took the low road. Actually the issue is an excise tax, not a penalty, so the relief is a waiver, not abatement. Form 5329 for 2012 MUST be filed as soon as possible (and the 2012 RMD distributed ASAP, even though 2013 can wait until December). I only meant "as if the penalty didn't apply" in the sense of the marginal entry on Line 52 offsetting the shortfall. If you wait for the additional tax to be assessed, you may have to go to Appeals because the abatement procedure won't be available.

>>Thanks<< Sure thing! Note that you file as if the penalty doesn't apply. They only have to pay if it's denied, and I think you have good reasonable cause in the error by the financial institution. I usually argue that the taxpayer is responsible for RMD, because the credit union can't know whether there are other accounts. But I can't see IRS enforcing that in the first year of an inheritance. After all, the Instructions for Form 5329 do say, "Your plan administrator should figure the amount that must be distributed each year." In fact the regulations say approval is automatic if the following (which I'm too addle-brained this morning to translate) is the case. (1) The payee described in section 4974(a) is an individual who is the sole beneficiary and whose required minimum distribution amount for a calendar year is determined under the life expectancy rule described in §1.401(a)(9)-3 A-3 in the case of an employee's or individual's death before the employee's or individual's required beginning date; and (2) The employee's or individual's entire benefit to which that beneficiary is entitled is distributed by the end of the fifth calendar year following the calendar year that contains the employee's or individual's date of death. Meanwhile, I think the credit union is still doing it wrong. This is not a return of excess contribution, described in the Instructions for Form 1099-R as taxable income in the prior year where it was already deducted. This is a corrective RMD taxable in the current year. Form 5329 can be filed stand-alone without amending because there is no change to taxable income in the prior year, just a (potential) penalty.

>>how to proceed is welcome<< See the last page of the Instructions for Form 5329 to request waiver of the penalty tax.

>>you wouldn't call them a criminal until they were convicted in a court of law?<< Of course I would call them a criminal because their action was a crime. (Sneaking across the border is a civil offense rather than a crime, but it's not a bad analogy--I have no objection to the term illegal immigration, referring to action.) I would not call the criminal an illegal client or an illegal neighbor or an illegal girlfriend (the people most likely to do that to me!) even if their status as client, neighbor, or friend was related to the attack. There is simply no such thing as an illegal immigrant, except in political rhetoric.

>>This is just more "political correctness" our society is using to "hide" the truth.<< I agree--a minority political faction is using emotionally-charged language to hide their true prejudices. I'm just a bit surprised to find it so strong in taxation, which everyone is subject to. The 14th Amendment says, "No State shall... deny to any person within its jurisdiction the equal protection of the laws." That means they are within the law if they are HERE, period. Even when they don't have a birth certificate or a visa or any other paperwork, being a person in the United States is never illegal under ANY circumstances. Their ACTIONS are a different question. So if you REALLY want to speak the "straight truth," talk about working illegally or whatever else you think is going on. Of course, then you'll have to talk about who is paying them or whatever else is going on.

>>talk about the problem honestly with the proper terms<< What professional word-smiths, such as lawyers and journalists, have recognized is that "proper terms" should reflect fact rather than emotions when facts are meant. A person can not be illegal, even if they commit an illegal act. That is why "illegal immigrant" is an offensive term, because an immigrant is a person and there is no such thing as an illegal person under the 14th Amendment, whether they have the right paperwork or not. "Undocumented" is being used now as a neutral and accurate description when talking honestly.

>>If a divorce decree states that the non-custodial parent is entitled to claim the children on their tax return, do people still get the custodial parent to sign the 8332?<< According to the Regs for Section 152, concerning Form 8332, "A court order or decree or a separation agreement may not serve as a written declaration." However, you can still attach the decree if it has the right information and was signed before 2009 when this reg took effect. The problem is that a divorce decree almost never has the right information needed for the release. Since it has a different definition for "custodial," it doesn't specifically declare that the parent with whom the child spent the most nights will not claim the exemption for the specific year. And it usually is conditional, depending on child support or other factors. Anyway, why would a tax preparer want to take on the responsibility of interpreting a divorce decree? Also remember that the 8332 was never updated for the qualified child rules. It is only valid if the parents provide more than half the support, that is, the old rules now called qualified relative. Be careful when welfare, grandparents, or new boyfriend are involved.

>>they blend in and don't automatically think they are illegal don't you think?<< Maybe where you live. In my state "hispanics" are almost half the population, so the term is pretty meaningless. (I think all racial terms are meaningless, thinking of "anyone with a drop of Irish blood in them" in Gone With the Wind.) We certainly don't automatically think Mexicans are illegal. We understand that Spanish is one of several non-English languages native to natural-born citizens in this country. As for the term "illegal," it is indeed very inaccurate. It implies that a law has been broken, which generally has not been proven. You know that pesky legal principle we have, "innocent until proven guilty"? And generally nothing is ever proven, at least as a criminal matter. I.C.E. usually just acts on civil authority, often removing suspects from the criminal justice system before trial. So awkward as it seems, in my opinion "undocumented" is the more accurate description.

>>Read the trust document.<< I believe what Lion means is, take the actual, certified copy of the trust document with all amendments in your hand. Remove the staple and photocopy the entire thing in order. Give the original back to the client, and make an appointment to discuss the tax implications. When you are alone, read every page in your normal research mode, using a highliter, margin notes, moleskin notebook, whatever.

>>The Internal Revenue Service has finalized the regulations for the 10 percent excise tax on indoor tanning services<< See, now, the government IS making great progress on the most pressing issues in tax reform! This one sped through in only three years. Of course there will always be critics whining that the subject is very narrow. But let me point out the enormously important fiscal policy issue that has been resolved here--If something is free, you shouldn't be assessed 10% tax. It was tough debate, but in the end IRS stuck to their principles even in the face of special interest lobbyists. They did the right thing, and I for one am proud to be an American where taxation is administered with common sense and fairness!

>>A sharp marketing person<< Gene King (the guy the newspaper called) is the top marketing guru for HRB at the corporate HQ in Kansas City. Here he is with pictures on LinkedIn http://www.linkedin.com/in/geneaking and Twitter https://twitter.com/geneaking.

>>What's wrong with this article?" "H&R Block filed Gonzalez's taxes electronically April 9. Two weeks later, she received a letter from the Internal Revenue Service saying her tax return had been rejected." ACK!!

>>What happens to the remaining depreciation on "leaseholds" mostly for building repairs.<< Presumably "buidling repairs" have already been deducted! If they were actually leasehold improvements depreciation was allowed/allowable for the tenant. Normally when a lease terminates remaining depreciation can be taken as a loss, but since in the original post it is the same owner, I believe the loss must be suspended for the S-corp and subsequently reduce gain on the building sale itself. "Eventually will probably dissolve" doesn't sound like you can use the rules for complete liquidation.

>>what/who is a related party<< Thanks for posting this. With business entities I can never remember what is and isn't related. But all of us should memorize paragraph c4, defining "family member." Note who is NOT listed. In-laws, step-children, cousins, nieces.... lots of close relations! This applies to below-market rent, Section 1031, family loans, capital and passive activity losses, and many other matters on the 1040. But not everything. For example, much broader definitions for dependents and for transferring education plans. Also note that this is a TAX rule, not an accounting rule. GAAP generally ignores related party issues, requiring basis and other adjustments when books have to be reconciled to the tax return on Schedule M-1.

>>communications with an attorney enjoy attorney-client privileges<< Attorneys do NOT have any client priviledge concerning tax preparation, since a tax return is intended for a third party (the IRS). For tax planning advice , CPA's and EA's have exactly the same priviledge as attorneys in dealing with audits, appeals, collections, and other IRS administration (but not, of course, in criminal investigations)..

>><we can be civil< This thread is interesting in more than one way. To my mind, the income and deductions are not the most important matters because we really have very little evidence about them anyway. But we often discuss professional issues in this forum, and agreement is not something I particularly look for. Client relations, audit strategies, and tax authority are all good topics for the kind of "banter" we have been having.

>>link takes you to a login page<< Sorry. You must have been online when I posted, so I didn't have time to check for and fix the smilies and broken links. Note that it wasn't tax court. I don't know why he paid to go to District Court, but they slammed him on everything. His disabled adult daughter lived with him, so he tried to deduct room rental expenses, elderly & disabled credit, EIC, CTC, as well as energy credits and SE business expenses. I guess he filed MFS late, and it covered several years. Talk about red flags--this guy looks like a matador! Along the way IRS lost some records but the court said record-keeping is the taxpayer's responsibility. Great read!

Tax Court case Pamela L. Brooks v. Commissioner, (2013) TC Memo 2013-141 Taxpayer claimed grandson as qualifying child, but lost tiebreaker because child's mother also claimed him. Mother apparently amended her return to delete the exemption (IRS disputes that 1040X was actually filed). Court ruled, "On this record, we cannot conclude that [parent] has released her claim to the dependency exemption deduction. ____________ Respondent concedes that N.J. was a qualifying child of petitioner during 2006. Respondent contends, however, that petitioner was not entitled to a dependency exemption deduction for N.J. because his mother, Monique Bias, claimed N.J. as a qualifying child for 2006 and as his parent, she is entitled to the dependency exemption deduction for N.J. under the tiebreaker rule of section 152©(4)(A). Monique Bias claimed a dependency exemption deduction for N.J. on her Form 1040 for 2006. She did so even though she told petitioner that petitioner could claim the dependency exemption deduction for N.J. for 2006. Petitioner did not know that Monique Bias had claimed the dependency exemption deduction for N.J. until the IRS audit of petitioner's returns. Petitioner contends that, despite the fact that Monique Bias claimed a dependency exemption deduction for N.J. on her 2006 return, petitioner still is entitled to a dependency exemption deduction for N.J. To support her contention, petitioner introduced a copy of a purported 2006 Form 1040X, Amended U.S. Individual Income Tax Return, for Monique Bias. The Form 1040X bears the signature of Monique Bias and is dated September 18, 2008. On the Form 1040X Monique Bias decreases by one the number of dependency exemption deductions she claimed. In the explanation of changes, she explains that she is requesting the change because petitioner provided more than half of N.J.'s support during 2006. The Form 1040X petitioner produced is not credible evidence that Monique Bias released her claim to the dependency exemption deduction for N.J. The Form 1040X was not prepared until the IRS had begun auditing petitioner's 2006 return. Although Monique Bias signed the Form 1040X, she had not filed the Form 1040X with the IRS as of the time of trial. Although both petitioner and Monique Bias testified that they had agreed that petitioner would claim the dependency exemption deduction for N.J., Monique Bias still claimed the dependency exemption deduction on her Form 1040. On this record, we cannot conclude that Monique Bias has released her claim to the dependency exemption deduction for N.J. for 2006. Accordingly, as N.J.'s mother, Monique Bias is entitled to the dependency exemption deduction for N.J. pursuant to the tiebreaker rule of Section 152©(4)(A). We therefore sustain respondent's determination disallowing petitioner's claimed dependency exemption deduction for N.J. for 2006.

Rodriguez v. U.S., DC TX, 111 AFTR 2d 2013-793 Taxpayer was denied claim to itemize deductions for years for which his wife filed separate return claiming standard deduction. Apparently wife filed first. -------- For tax years 2003 and 2005, Plaintiff sought to itemize his deductions. For each of those two tax years, Plaintiff's wife filed a separate tax return on which she elected the Standard Deduction. Where a taxpayer's spouse has elected the Standard Deduction, a taxpayer is not allowed to itemize deductions unless: ((A)) the spouse makes a change of election with respect to itemized deductions, for the taxable year covered in such separate return, consistent with the change of treatment sought by the taxpayer, and ((B )) the taxpayer and his spouse consent in writing to the assessment (within such period as may be agreed on with the Secretary) of any deficiency, to the extent attributable to such change of election, even though at the time of the filing of such consent the assessment of such deficiency would otherwise be prevented by the operation of any law or rule of law. 26 U.S.C. § 63(e)(3). In this case, Plaintiff states that his wife's election of the Standard Deduction for tax years 2003 and 2005 was a mistake. Plaintiff has provided no evidence, however, that his spouse changed her election for the Standard Deduction for either tax year 2003 or 2005, or that she consented in writing to the assessment of any resulting delinquency. As a result, Plaintiff is not entitled to itemize deductions for tax years 2003 and 2005.

>>If the auditor needs more.........<< The auditor doesn't need any more. According to you, "The letter he got says if he disagrees he should have a conference with a local appeals officer.." That sounds to me like the case is already closed. Your employer letter could backfire because it only says the education is not needed for the current job. It does not address the key question, whether an MBA would qualify him for a different job. Your tuition statement could backfire because it shows the scholarship was not used for tuition. According to the NYU website, "International students are not eligible for scholarships." I guess somebody else gave him a scholarship, probably identified in the 19 pages, which was used for non-academic living expenses. Interest and dividends, as you have already noted, CAN be taxable to a student on an F visa. More research is needed. Good luck with your phone call this morning. I would expect the auditor to take the easy way out, inviting you to send in your documentation. That will NOT re-open the audit. It might be considered a request for appeal, but more likely it will just be a tactic to get you off the phone and burn up some time for the client to exercise his rights. That's usually how it works.