Patrick Michael

My wife gets and an "Insurance Opt-Out" payment twice an year for not using her employer's health insurance. Employer saves about $9,000 a year and my wife is happy to get the extra money. A win-win.

Is this really a problem? Has anyone heard of someone submitting a POA without the taxpayers knowledge? Most representatives are professionals (CPA, EA or attorney) so are they really going to risk losing their license by submitting a false POA. They would better serve taxpayers by coming up with a better way to verify refundable credits before issuing the refunds without placing additional burdens on tax professionals.

Make sure you check ALL your carry-overs (including state). I had a couple of clients with charitable donation carry forwards that did not convert and NY LTC insurance carry forwards that I had to manually input. Make sure you take the time to learn how to write macros. They are a huge time saver for repeated entries. If you search on macros in the software discussion page in the Drake forum you will find many useful macros.

NY is looking at creating a new employer payroll tax to replace income tax on wages. The business would be able to deduct the tax (as they do other payroll taxes) but I doubt many employers would (or could afford to) just eat the difference between added tax liability and the tax benefit they would receive by deducting the additional expense. The only way I can see this working is if the employer reduced wages to make up for the added net expense. NY is not very business friendly as it it is and I can see this as the final straw for many businesses. They would have to shut down or reduce their staffing levels, specially businesses that rely on minimum wage employees, as these businesses would not be able to reduce wages to make up the difference. As an example of how this would disproportionately effect low wage earners is the local McDonald's. NY is ramping up the minimum wage to $15 an hour and as a result, by the end of 2019, all the local McDonald's will have installed ordering kiosks and automate many of the cooking tasks in order to reduce payroll. And local pizza franchiser closed all five of his locations recently citing the minimum wage increases as one of the reasons he could no longer afford to stay in business.

IR-2018-172, Aug. 23, 2018 WASHINGTON — Today the U.S. Department of the Treasury and the Internal Revenue Service issued proposed regulations providing rules on the availability of charitable contribution deductions when the taxpayer receives or expects to receive a corresponding state or local tax credit. The proposed regulations issued today are designed to clarify the relationship between state and local tax credits and the federal tax rules for charitable contribution deductions. The proposed regulations are available in the Federal Register. Under the proposed regulations, a taxpayer who makes payments or transfers property to an entity eligible to receive tax deductible contributions must reduce their charitable deduction by the amount of any state or local tax credit the taxpayer receives or expects to receive. For example, if a state grants a 70 percent state tax credit and the taxpayer pays $1,000 to an eligible entity, the taxpayer receives a $700 state tax credit. The taxpayer must reduce the $1,000 contribution by the $700 state tax credit, leaving an allowable contribution deduction of $300 on the taxpayer’s federal income tax return. The proposed regulations also apply to payments made by trusts or decedents’ estates in determining the amount of their contribution deduction. The proposed regulations provide exceptions for dollar-for-dollar state tax deductions and for tax credits of no more than 15 percent of the payment amount or of the fair market value of the property transferred. A taxpayer who makes a $1,000 contribution to an eligible entity is not required to reduce the $1,000 deduction on the taxpayer’s federal income tax return if the state or local tax credit received or expected to be received is no more than $150. Treasury and IRS welcome public comments on these proposed regulations. For details on submitting comments, see the proposed regulations. Updates on the implementation of the TCJA can be found on the Tax Reform page of IRS.gov. People in high tax states will not be happy about this. When I first heard about this attempt to get around SALT I figured the IRS would do something like this. I'm sure there will be a new round law suits challenging the new regulations. I live in NY and wish the politicians would but as much effort into finding ways to reduce taxes as they do trying to create a loop hole to get around SALT.

I'm sure many of us will be getting calls from clients asking for projections to see if they're having enough withheld after they see this (already saw the article posted on social media). Just wondering on how you are planning on handling these requests. Will you be charging for the projection and if so, how much?

A classic telemarketer prank! https://www.youtube.com/watch?annotation_id=annotation_420523&feature=iv&src_vid=mkdoogjic4I&v=-7OgWcwgB50

I disagree that "Basically, only miles driven while a customer is in the car is the deductible portion." I believe the mileage from the time they drop off their last fare to where they pick up their next fare would be deductible as long as they were "working" (signed onto the app and not going home between fares). I have a couple of Uber drivers and they also told me that the mileage reported by Uber does not include the mileage when driving from one fare to pick up another so I have them using one the phone tracking apps to make sure they capture all their miles..

Thanks everyone.

Client has a special needs child and has to travel from NY to Minnesota every year to see a specialist. She submits her travel bills to a charity which then reimburses he for the travel expenses. All is good until the charity issues her a 1099 Misc with the reimbursement amount in box 7. The charity insists they have to issue the 1099 and will not issue a corrected 1099. She does not have enough medical expenses to clear the 7.5% hurdle for schedule A. I don't believe this should be taxable and not sure how to handle this. Leave it off and wait for the CP2000 notice, put it on line 21 with an offset to zero it out, or a schedule c with an offsetting expense to zero it out? Any thoughts?

According to Kiplinger: "A new report by the N.Y. Dept. of Taxation and Finance outlines a series of tax-related proposals. They include giving New Yorkers the option to donate to a state-operated charitable fund in exchange for a credit to be used against their N.Y. individual income tax liability" If this goes through how is it going to deductible on Schedule A? Wouldn't the credit against the income tax liability be a benefit received, negating the ability to deduct?

Maybe I'm missing something, but how is switching from an income tax to payroll tax going to help the workers? Sure, businesses can deduct the payroll tax (until the congress changes the law to exempt the deduction) but the businesses will still end up paying out more then the deduction is worth. I assume the businesses are not going to just eat this increased expense and will lower wages to make up for it. I can see businesses that use minimum wage (or near minimum wage) employees laying people off since they will not be able to lower wages to make up for payroll tax. I live in NY and wish Cuomo would work on lowering taxes by controlling spending instead of spending money on a law suit that is doomed to fail.

Thanks to all. I learn so much from all of you.

Attended a CPE class night and one of the speakers was from NY Tax Department. Good news for those of us in NY; you have to enter only the first three characters of the driver's license document number this year! First i heard of it.

Preparing my first return with a sale of a residential rental unit and trying to understand how the gain is taxed. The house was purchased in 2009 and has been depreciated, straight line, over 27.5 years. There is a a $106,877 gain and $31,772 in depreciation, none of which is considered "additional depreciation". This is were I'm getting confused. Some of what I have read says that the total amount of the gain that is the result of depreciation is taxed at 25% and others said the entire gain is considered a LT capital gain (which I do not believe is true). When I look at the Schedule D Tax Worksheet it looks like the gain from the depreciation is taxed at ordinary income rates with a maximum rate of 25%. Is this correct? Thanks

Thanks for all the input.

New client owns a hair salon and rents three chairs to other stylists. The stylists who rent the chairs run their credit card transactions through the clients machine and he then writes checks to the stylists for their share, less the fees. The 1099-K will show the total amount run through the machine so he will have to show that as income and then back out the amount given to the stylist. I'm thinking he should send 1099's to the stylists as other income. Any thoughts?

Thanks.

Need a sanity check with all the changes recently. Client called today to ask about the energy tax credit for replacement windows. Her installer told her that the windows, which were installed in 2017, were eligible for a residential energy tax credit. I thought that credit ended in 2016 and from what I can find the 2017 credit only applies to: qualified solar electric systems; qualified solar water heaters; qualified fuel cell property; qualified small wind energy property; and qualified geothermal heat pumps. Client insists this is not correct. Has anyone heard if the credit was extended to 2017 for replacement windows? Thanks.

Same amount on both, one in the mother's SSN and the other in the daughters SSN.

Why does it seem I always get this odd ball situations that I have never dealt with before late in the season! Mother co-signed for her daughter on a car loan. Daughter defaulted and loan was forgiven. Both mother and daughter received a 1099-C. My research led me to Treasury Regulation Sec. 1.6050P-1(7) that says that for purposes of filing, "a guarantor is not a debtor." Mother has tried to get the creditor to correct the 1099-C but they refuse. Is this another case where I should include the income on line 21 and then back it out on line 21 with an explanation that the 1099-C was issued in error to avoid a CP2000 notice? Thanks.

Thanks

This a the first time I have had a client receive a 1099-LTC and was wondering if anyone has experience with these. Box 1 has an amount and "Reimbursed amount" is checked in box 3. From what I was able find if box 3 is checked "Reimbursed amount" and only box 1 has an amount then none of the benefits paid are taxable (this is a qualified contract). I thought it should be reported on form 8853, part c, but after following the flow chart in the instructions it does not appear that the form needs to be filled out since it was not a per diem. Does this need to reported elsewhere? Has anyone not reported it and had a CP 2000 sent? Thanks.

I concur, to a degree. During tax season I try to stick with what I know, as I do not have the time to do extensive research. But after tax season, I enjoy the challenge of doing the research and learning new things. I have declined returns after researching the subject and deciding that the situation was too complex for me. Most clients appreciate my honesty when I tell them I don't have the expertise to deal with situation and come back the next year for their "normal" return. I have had a few that were mad they had to go elsewhere and pay the higher fees that most "specialists" charge. As a one man show, I really appreciate having forums like this where tax pros with more experience and knowledge are willing to share that knowledge and experience with those of us who want to learn and grow.

Thanks Judy. That's the direction I was going but tend to overthink these things.