TaxesNE1

I haven't seen anyone here celebrating the fact that the administration is doing such good work that we actually ran a surplus for the month of January, 2013.

It's time for a lesson in how mandatory sequestration actually works. "In the United States federal budget, the sequester or sequestration refers to budget cuts to particular categories of federal spending that began on March 1, 2013. The area most affected is called discretionary spending, which includes defense and non-defense elements. Discretionary spending represented approximately 36% of federal outlays in 2012. The sequester also affects certain mandatory programs, including Medicare. The sequester will reduce 2013 discretionary spending below 2012 levels, while cuts to Medicare will reduce future cost increases. Total federal spending including all categories will continue to increase, but less than previously planned.[1]The cuts were enacted by the Budget Control Act of 2011 and initially set to begin on January 1 but that date was postponed by two months by theAmerican Taxpayer Relief Act of 2012. The spending reductions are approximately $85.4 billion during fiscal year 2013,[2] with similar cuts for years 2014 through 2021."

The deficit has been cut in half. You folks need to turn off Fox and watch some real journalists for a change.

I was contacted by a lawyer who said he was being audited and wanted me to take over. The previous representative was himself a tax lawyer. The tax lawyer liked going to the bar much more than meeting with the IRS to review the client's documents, so, he just pointed to the conference table piled with documents and let the auditor get to work while he went "out to lunch." The resulting audit report showed a potential liability in excess of $50,000. It seems the tax lawyer had not prepared the original return. That was done by a CPA who was sent to prison for aiding and abetting tax evasion. So, we have two "professionals" involved here. I decided to audit the books. After checking on a few tax entries, I could see that most of the tax information had been made up. I put the whole mess on a general ledger and balanced to the penny. I prepared an amended return and requested an audit reconsideration. I walked in to the IRS office only to find a U.S. Attorney waiting for me. When he learned that I was neither the client nor the preparer of the original return, he went back to his office and left me to go over the amended return with the auditor. The client was due a refund of over $10,000. Why? The jailbird CPA had deducted an entire ranch as an entertainment facility (which are never deductible). But upon obtaining records from the ranch and its use, I was able to treat it as a second office. The IRS had no problem with it. The lawyer-client did not go to jail. It would have been a tough prosecution anyway, since the original return had been filed in person and not through the mails (take note: most prosecutions relate to mail fraud). The point is, you may often find perfectly legal ways to take deductions where others did not. It used to be a well-known admonition that a smart tax man never "files" a return for a client. You could fill an encyclopedia with all the reasons for not falling in to that trap.

You have two separate kinds of income here. The partner's share of income before he died goes on a K-1. From the moment of his death, however, his estate would own all the income due him under the partnership agreement. From your description, it sounds as though the surviving partners made decisions concerning the division of income AFTER the partner died. This opens up a whole can of worms. I could try and take you through this maze of complexity but would advise you instead to turn this over to an estate tax attorney. You must also consider whether and, if so, how community property rules would apply and also whether the size of the estate requires additional work be done.

The ATX "refund policy" was never intended to address the situation we all see this year. They are looking at a potential product liability lawsuit for producing and selling a defective product. The only timing issue, of course, would be the statute of limitations in your particular state.

One word is conspicuous on this topic for its absence: windows. Does the windows version and edition one uses make any appreciable difference in ATX performance? The ATX tech told me that they're liking Windows 7 but not Windows 8. I'm also finding certain accounting software producers who don't like Windows 8. Windows 7--Home Premium? Windows 7--Professional? Windows 7--Ultimate? Suggestions for better performance?

The son would be treated as a common-law trustee. All income and expense should be reported on the mother's return. The client should be advised to set up a formal trust and have the trust become the owner of the rental property through a legal transfer of title. Since the property going in to the trust is owned by the beneficiary (mom) it would be a grantor-type trust. Depending on the size of the mother's estate, this trust idea may prove invaluable in terms of preserving Mom's assets as she gets older and grows more dependent upon government benefits. They need to consult an elder law/trust/estate planning attorney.