Patrick Michael

Finally received the docs. One paragraph states that a "Irrevocable Trust is created by this instrument" and that "during their lifetime trustee shall pay to grantors all the net income from the trust.". Next paragraph states that upon death of surviving grantor the trust will terminate and the children will receive the principal and any undistributed income. But then the next paragraph states that grantor "shall have limited power to to appoint the remainder of the trust to any other person or charitable organization...exercising such power by the surviving Grantors Last Will and Testament". So it looks like this is a "intentionally defective" irrevocable trust as mentioned by Sara and the 1041 needs to be filed, with the K-1 to the mother. The 1099 INT is issued with the trusts EIN. And to add to the confusion, the trustee received a letter from the IRS yesterday looking for 1041's back to 2017, when the trust was created. So my next question for this very knowledgeable group is why is the IRS looking for returns if there was no income reported? I'm fairly confident there was no income since the only asset in the trust up to the father's death in 2020, is non-rental real estate. Thanks for all the replies and educating me on this subject.

I'm waiting on the actual trust documents. Trustee supplied me with this info. Forgot to mention that the lawyer who wrote up the trust told the mother that no 1041 was necessary and the mother should just include the interest on her 1040.

Don't do many trust returns and had a question from a client. Client's Mom and Dad creating an irrevocable trust, naming my client as trustee. They put their home into the trust, but retained exclusive right to occupy the property and the right to all property tax exemptions, and are responsible for paying all expenses for upkeep of the property. Mom and Dad also manage any other assets placed in the trust. Mom and Dad are the beneficiaries of any income and their children get the principal and undistributed income upon Mom and Dad's death. Dad passed away in September this year and the proceeds of a life insurance policy was paid to the trust. The trust received a 1099 from the insurance company for interest (over $600). From what I have read I believe this is a grantor trust. A 1041 should be filed which contains only the trust’s name, address, and tax identification number along with a statement letting the IRS know that the items of income or deductions are instead reportable by the “deemed owner.” Am I on the right track or is there something else I'm missing? As always, thanks for any and all help.

Attended a tax update seminar last week and they said the new $600 stimulus payments are included in reconciliation on the 2020 return. So if a client did not receive the payment it will be included in the refund. I asked what happens if they get the $600 after they have filed and he did not have any answer. Makes sense now if payments are cut of on January 15th. And got mine in the bank account this morning!

Happy Thanksgiving to everyone. I am very thankful for all the great people on this forum.

It's a done deal! After some back and forth we settled on 35% for three years. Thanks to everyone and have a Happy Thanksgiving.

It's mainly 1040 clients with a couple 1120's, one 1065, and one 990EZ. Her fees are comparable to what I charge and most of her clients have been with her for many years. The payment would be a % of the fees from her customers that stay with me each year. For example, if revenue from her clients was $30K the first year and $20K the next, the % would be on $30K and $20K. She is also offering to present this to her clients as a "merger" between our firms for the first year with me taking over next year, thinking that more clients would be likely to stay if she was still involved in the first year, albeit in a very limited manner. Thanks for the replies. I will keep you posted.

I am considering buying a book of business from a retiring tax preparer. They are asking for 40% of the gross revenue from their clients for four years. I think this is a little steep, but never having purchased a book of business before, I'm not sure if it is reasonable. There will no purchase of assets, just the client list and they will be available to help out with any questions for the first two years. Any advice would be appreciated. Thanks.

Thanks Margaret. I do know most of my clients and would be sending them an email before uploading the files. I guess am a little paranoid even though in 20+ years I have never had the IRS or NY ask for the authorization.

I am looking at using Verifyle to have clients sign the E-File authorization forms. According to Verifyle's compliance page IRS regulations require an "identity verification check" and suggest texting a code to the client that they have to confirm. I was wondering what method other users of Verifyle use to verify the identity of the signers? Thanks.

Hope everyone is doing well. I'm thinking about next year's tax season and am expecting it to be much different the past due to Covid. I am preparing to go virtual with very few people actually coming to the office. I'm looking for a platform where clients can easily upload the documents to me by scanning or snapping a picture (converting the picture to a PDF), and that I can use to send documents, and clients can sign them electronically. Many of my clients are older and not very tech savvy so it would have to be user friendly. It would be great if it also integrated with Drake. I have looked at TaxCaddy and it seemed like it would do what I want for gathering info, but it does not integrate with Drake. You also have to sit through their sales pitch to get the pricing, so I have no idea on the cost. On the assembly, delivery, signing side SafeSend Returns seems to fit the bill but is very pricy for my small firm. The per return price wasn't too bad but there is a $1,500 set and training fee. Does anyone have any experience or suggestions on any platforms I could use? Thanks.

I spoke with the clients and it appears Sara is correct. They couldn't find their originals and the previous preparer's wife did not know how to print out another copy, so she just pulled copies out of the file cabinet to give them.

It would not surprise me if their 2018 return was on the flip side of someone else's return. I am going to let them know what happened so they can be alert for any identity theft issues.

Now I have seen everything. New client dropped off their paperwork (the previous preparer passed away). So I'm entering the numbers for 2018 into the comparison screen from a double sided copy and when I get to the second page, the numbers are not making sense. It takes me a minute to realize the flip side is actually someone else's return! I check the other pages and sure enough, the other person's entire return is on the flip side of my new client's return. His girlfriend also dropped off her paper work and on the flip side of her return is another person's (different from the first person) investment account statement! So what should I do? Just give back the client the return as is, or make a new copy of just his return and shred the copy with the other person's information? Do I have any obligation (or should I) notify the other person of what happened? Thanks.

Sounds about right. NY does not recognize bonus depreciation. So the $25K is adding the bonus depreciation taken on the federal side back in and then subtracts out the depreciation that is allowable in NY.

Never had to amend a 1041, but there is a first time for everything. Previous preparer neglected to take the additional exemption on a special needs trust on a 2018 return. Client paid $1,000 when they filed. How do you report the $1,000 previously paid? Does it go on Line 25 Payments: 2018 estimated tax payments? Thanks.

Thanks Judy. I get so few of these I can never remember of it's the starting or ending year.

I tried to Google this but can't find the answer and this always confuses me. Client's mother passed away in November 2018. Nothing happened with the estate until 2019. Client filed his 2019 taxes in May and last week he received a 2019 K-1 with a fiscal year ending date 07/16/20. Should I amend his 2019 return to include the K-1 or does it belong on his TY 2020 return? Thanks.

Client has a 10 year old son who is legally blind and has other developmental disabilities caused by a rare genetic disorder. His grandmother's will established a "Special Needs Trust" last year when she passed away and there was substantial income this year . Parents started the application process for SSI several years ago but gave up, because of the household income, the amount he would receive was not worth the time and hoops they would have to jump through. My research shows that a qualified disability trust must be established for the sole benefit of a person under age 65 (which it does) who meets the Social Security Administration's definition of "disabled" (no question he meets the definition) and that the beneficiary of the trust is almost always going to be receiving either Supplemental Security Income (SSI) or Social Security Disability Insurance (SSDI). I cannot find anything that says he must be receiving SSI or what situations he would be eligible for Qualified Disability Trust designation while not receiving SSI. I'm leaning towards saying this is a Qualified Disability Trust and taking the extra exemption amount. Anybody ever deal with this or any thoughts? Thanks.

My clients received the 1099 only.

What exactly are your concerns? I had a couple of them and treated them like any other Schedule C. Deducted mileage for deliveries (one used a app to track mileage and the other a pen and paper log) and a % of their cell phone because they used it in the store to scan items and for the GPS while delivering.

I agree with Tom. Takes a little extra time setting up formulas the first year but after that is makes it much quicker.

I have been using IDrive for the last two years. It's about $50 a year for 5 TB. It is set up for automatic renewal but sent several emails before renewing so you had the opportunity to opt out before the renewal.

I have one client who enjoys gambling and every year I get a scratch off ticket along with check. Actually won $50 on a $2 ticket this year.

We might be able to go that route The non-profit paid for all his living expenses while away. Parents are trying to see if they can come up with enough evidence that they provided over half his support but it will close based on the amount of time he was away. I think we can claim it was a temporary absence since he intended to return home. But we would rather not go down that route in case of an audit.