Patrick Michael

New client sold a home using a land contract in 2010. Client still has a mortgage on the property and has been making the mortgage payments. Former preparer had been using Schedule E listing the payments from the buyer as rental income and then deducting the mortgage interest, property taxes and homeowners insurance payments (all payments made by the client, the seller) along with depreciation. Never dealt with a land contract before and my research leads me to believe this should have been handled as an installment sale on form 6252 with the interest received being reported on Schedule B and the interest paid on the mortgage deducted on Schedule A as investment interest expense. But I can not find anything on how to handle the real estate taxes and homeowners insurance. My feeling is, since the sellers are still the legal owners of the house and obligated to make the tax payments, they should be able to deduct them as real estate taxes on Schedule A and the homeowners insurance is a personal expense and not deductible. Am I missing anything? And should amended returns be filed back to 2010 even though the statute of limitations has past for 2010 and 2011? Are the returns considered to be a "false or fraudulent return" even if the tax payer had no idea they were wrong? Thanks.

As long as the educational institution is eligible to participate in a student aid program administered by the U.S. Department of Education I don't see why not From Pub 970 Maximum credit Up to $2,000 credit per return Limit on modified adjusted gross income (MAGI) $130,000 if married filling jointly; $65,000 if single, head of household, or qualifying widow(er) Refundable or nonrefundable Nonrefundable—credit limited to the amount of tax you must pay on your taxable income Number of years of postsecondary education Available for all years of postsecondary education and for courses to acquire or improve job skills Number of tax years credit available Available for an unlimited number of tax years Type of program required Student doesn't need to be pursuing a program leading to a degree or other recognized education credential Number of courses Available for one or more courses Felony drug conviction Felony drug convictions don't make the student ineligible Qualified expenses Tuition and fees required for enrollment or attendance (including amounts required to be paid to the institution for course-related books, supplies, and equipment) Payments for academic periods Payments made in 2015 for academic periods beginning in 2015 or beginning in the first 3 months of 2016

Can't file separately as he would loss the education credit which is more than the shared responsibility payment. He would not have had any shared responsibility payment if he could use his income only for the affordability calculation during the time period he was single. I was hoping for some type of alternative calculations in this case. I couldn't find any while researching it and was hoping someone here might have something. Oh well, guess it's time to give them the bad news.

Client was working part time while going to school, had no insurance from January to October. He was married in October and went on his new wife's health insurance as of 11/1 (wife had insurance for the whole year). Client would have been eligible for exemption based on affordability based on his income only, but when combined with his new wife's income he losses the exemption. Is there any exceptions to deal with this situation or are they stuck with paying the shared responsibility payment. Thanks.

This problem was why I finally jumped to Drake. At times it would take 10-15 minutes to get the program to open and numerous calls to support did no good. And I am not running it on a network.

Thanks Judy.

New to Drake this year and I was wondering if there is report that would show the clients who filed a Schedule C in 2014? Thanks.

They may want to check with the local Health Department also. Had a client who did the same thing and was shut down by the Health Department for several weeks until their basement kitchen passed inspection.

Client helped out a friend who owns a one man manufacturing business. Client put part A into part B, worked out his own home, set his own hours and was paid by the piece so I believe he should be classified as a subcontractor and not an employee of the friend. He was paid about $2,000 and the friend will be issuing a 1099. I'm thinking of putting the income on line 21 since he is not in the trade or business of assembling parts (has a regular full time job) and the activity is not regular and continuous. After some research I could not find anything definitive whether or not it should it be subject to SE Tax. What do you think? Thanks in advance for all replies.

Thanks for the replies. I was able to find the Prentice Hall 2013 edition for $.75 plus $3.99 shipping on Amazon. What a deal!!!

Good morning all, So far my practice has been limited to personal returns, schedule C's, and E's. I would like to expand and start preparing S Corp returns. Does anyone have any suggestions for a good book that explains the 1120-S or any suggestions on the best way to learn to prepare these returns? A Google search did not turn up much. Thanks

Are the capital gains treated as long term or short term?

I am about to lose my 1040NR virginity and want to make sure I'm correctly understanding what I have researched. Canadian citizen and resident sold a partial share of a vacation home located in the United States. It was not a time share, they actually owned a condo with two other couples. The condo was never rented out. They will have a long term gain of about $12K from the sale. From my research it looks like, since this was the sale of U.S. real property, it is taxed as a long term capital gain "connected with the conduct of a U.S. trade or business." As such they do not need to fill out Schedule NEC and there is no additional tax on the gain that flows from that schedule. They do not have any other U.S. sourced income so the gain will not be taxed as they are in the zero tax bracket for LT capital gains. They have not yet applied for an ITIN so they have to file a form W-7 along with the 1040NR. I have the 8288-A showing the amount withheld that they will be sending in with the return. It seems pretty straight forward. Is there anything I am overlooking? Thanks.

That took care of it! Thanks.

I'm trying to prepare a CA 540NR but when I go to view the return the only one in the list is the 540. I went to the "NR" screen and entered the date he moved into CA and the state he moved from but it did not help. All the W-2's are entered and have the correct states listed. Any ideas on what I am missing? I called tech support and they said they are going to have to get back to because they are having computer issues.

I e filed a 2012 and 213 return last week and had the Acks back the next day.

Here's the link. It is in the Tax Business Owners group in LinkedIn. https://www.linkedin.com/grp/post/1868452-6017063664580845569 Thanks for the responses.

There was a thread in another tax blog discussing tax software and several posts said there were problems with Drake's depreciation calculations. They did not elaborate on what the problems were. They did say Drake was aware of the issue and chose not to address it and they had to manually override the entry. I was looking into switching from ATX to Drake for 2015 and was wondering if anyone has experienced problems with depreciation and if so, what is the issue? Thanks.

Thanks Judy. I will have to get back with the client and see how he has been accounting for them. He is insisting that the $50 K should be a loss since the franchisor shut the business down and he has to pay the state. Either way I do not believe this gives raise to a capital loss.

You are correct jmdaviscpa. I clarified with the client that the $50K was for tickets sold. So I still think that the $50K does not give rise to loss as he would have already deducted the cost of the tickets on the P and L.

I would like to bounce this off the tax pros on the board. Client owned a franchised convenience store which he bought from an individual 20 years ago. The purchase price was for inventory and goodwill which has been written off. The franchisor owned all the real estate, fixtures and other assets (other than inventory). The franchisor cancelled the contract in October of 2013, came in, threw my client out of the store and locked the doors. They seized the inventory and store bank accounts (apparently authorized in the franchise agreement). The inventory value and bank accounts were netted against liabilities (which franchisor assumed) and "fines" called for in the agreement. At the end of the day my client is personally liable for about $50,000 owed to the state lottery commission. My client said the $50,000 was for scratch offs inventory. I don't believe there is any gain/loss here since the dollar value of the tickets were included in the inventory amount used to offset the other liabilities that were assumed by the franchisor. Am I on the right track her? Please let me know if more information is needed. Thanks.

I filed this form reporting a preparer who was taking my law enforcement clients by promising bigger refunds. He was deducting haircuts, meals, and non-existent deductions (ammo never purchased, non-existent magazine subscriptions, etc.) and they always exceeded the 2% floor. He told them not to worry because it was legit and he had a ruling from tax court that police officers were entitled to a "standard deduction" for employee expenses and no receipts were necessary for expenses under $250. One officer was smart enough to ask for a copy of the decision and the preparer refused to give it to him saying he had to pay a lot of legal expenses to litigate the matter and he was not going to give it away for free. Three years later he is still in business and doing the same thing.

Not much to the Sch C's and they were very organized.

Had ten dropped this morning and most wanted to know why they had to go on extension (or pay double the fee to expedite). A new client came to pick up and was upset that my bill was $300 (1040, Sch A, 2 Sch C's, Sch E), when the last preparer only charged $125. I asked why they didn't go back to their old preparer and they said because they got a letter from the IRS and had to pay back taxes, interest and penalties because she "messed' up. And they could not understand why they owed this year when they always got money back before. Well, maybe it was because she "messed" up in the other years and understated your income and the $300 bill is for doing your taxes right! The15th can't come early enough this year. Rant over... feel a little better.

While in the return go to Forms/Planning and Analysis/Married vs. Separate. You have to make sure you have inputs coded correctly as to J/F/S. There are also some manual adjustments you have to make.