Cyclone

Has anyone caught wind if the president intends to sign it and when?  I would like to think he wouldn't dare veto it.

I bet the truck dealerships will be busy this weekend now that business owners aren't limited to a $25,000 Section 179.

So just curious, are we allowed to hold off efiling a 2013 return until the IRS re-opens it in January.

I forgot about this shut down and just had a client sign a Form 8879 for a 2013 return.  I received an error when I tried to efile it and that triggered me to search this forum.

Do I need to have them come back in to sign the 1040 page 2 or can I just attach the Form 8879 with their signatures to the 1040 if I decide to mail in the return.

They are getting a refund but it will be garnished so the client's are not in a huge hurry.

This is a weird one I have not come across before.

I have a client who brought their parents over from Jordan in Feb 2013.  The parents are US Green Card Holders (permanent residents).

The only income the parents had for 2013 was from the husband's Social Security in Jordan.  Jordan did not withhold any Jordan taxes on the income.  The total social security income received (after converted to US dollars) amounts to about $27,500.

The parents do not have a house in Jordan and will be living in the US going forward.

I did some research and attached what I found.   It says that Foreign Social Security payments are generally taxable by the country making the payments (which would be Jordan).

The US does NOT have a tax treaty with Jordan.  

It appears that if I file a US 1040, the income is reported on Line 16a (Pensions) with a code FEP next to it.  This results in them owing about $ 800 since no Jordan taxes were withheld and therefore I do not believe they qualify for any Foreign tax credits to offset that.

I am thinking that a Jordan tax return needs to be filed to report the income and a US tax return is not required.  If a Jordan tax return is not filed then I am concerned Jordan could come after them wanting their revenue.  I would request the parents contact someone in Jordan to complete that return if one needs prepared.

Has anyone had any experience with Foreign social security?

Taxation of Foreign Pensions.pdf

I know the IRS is obviously fund deprived but I think it is unacceptable that when a taxpayer calls the main IRS line 1-800-829-1040 that they are told "We will not answer tax questions after April 15th.  Please try to find your answer on our website".

How can they expect people to file accurate returns when they can not get their questions answered, granted they may not have gotten the correct answer from the IRS staffer to begin with but at least they got to talk to someone.   There are obviously plenty of situations out of the ordinary that are not covered on the IRS website and still plenty of people that do not have access to computers.

Thank you for the help  Tom and KC!!!

The majority of the Corp returns I do are S-Corps and I am working on a 2013 C-Corp return which I am not as fluent with.

The C-Corporation owed income taxes for 2012 and paid them in 2013 from the business bank account.  No estimates were paid by the C-Corp for 2013..

The client had entered the C-Corp prior year income tax payments into Quickbooks as a deduction.   The Corp made over $250,000 so I have to complete the Sch L, M-1, and M-2.  

Since I do not believe the Federal and State tax payments for the previous year are deductible by the C-Corp should I enter it in as a non-deductible expense on the Sch M-1 so the balance sheet items will tie with Quickbooks?   Just to confirm, prior year C-Corp state tax payments are NOT deductible on the Federal C-Corp return like they are for individuals are they?

That is a very good point.  

My client is trying to track down the old tax returns so I can determine how much depreciation was actually taken on the properties and get the other numbers I need.

I really appreciate your reply.  Thank you.

I have a client that recently lost their spouse.  They had a property they owned jointly together.   The property was a house but not their main home.  They had acquired it back in 1997 using a 1031 exchange and had rented it out for a few years but then decided to make it their vacation home (2nd home).  Both the state where the property is located and the client's state of residence are common law states (Not community property states).

They have about a $50,000 capital gain that was deferred with the 1031 exchange.  The property has appreciated an additional $20,000 since the time of the 1031.

I have done some research and it sounds like the living spouse receives a stepped up basis in the property on the date of death of the other spouse but it is a "partial step up" of half of the FMV step up amount on the date of death since it was jointly owned.  If the property had just been in the deceased spouse's name then the living spouse would receive a 100% step up.

Here is an example:

Original purchase price of rental property in 1986:                   $90,000

Improvements:                                                                           $10,000

Value of new property acquired in 1031 exchange in 1997:   $150,000

Value of property on date of death of 1 spouse in 2014:        $170,000

Sale price in 2014:                                                                  $170,000

Realtor commissions:                                                              $  15,000

Depreciation taken during years as a rental:                           $ 35,000

Here is how I calculated the taxable gain:

Cost basis of jointly owned property (prior to death):               $   65,000  ($90,000 + $10,000 - $35,000)

Cost basis of Surviving spouse (after others death):                $117,500  ($65,000 + $170,000) divided by 2

Add Realtor commissions paid to sell property:                        $  15,000

Adjusted basis of Surviving spouse:                                         $132,500  ($117,500 + $15,000)

Realized gain:                                                                           $  37,500  ($170,000 - $132,500)

To determine taxable amount:

Depreciation recaptured at 25% rate:                                         $35,000

Difference (taxed as Long term capital gain):                              $ 2,500  ($37,500 - $35,000)

Does anyone see any flaws with my logic?  I am not positive how the depreciation recapture is handled with a 1031 exchange.  I also am not sure if it matters how the property was owned (Joint Tenants in common, Joint tenants with Right of Survivorship,) with regard to the partial stepped up basis.  

I really appreciate your time to review my long post.

I have always filed extensions for everyone that I had in my office that will not get filed by the deadline.

I have several clients that are traveling or for other reasons can't get into sign by the deadline.

I have their returns done and they are getting refunds.

Just curious do you guys file extensions for people even if they are getting refunds?

I plan to but they are at the bottom of the extension pile.

I sure hope the ATX and IRS servers stay up till the end but don't want to plan to have to efile anything on the 15th from experience.

I had one where the client's cat had puked up a hairball on the documents. Several that smelled of Pot....I am located close to the University of Iowa (rated the #1 party school in the nation)

I had a construction client that said they had several more receipts but they had them on their truck's dashboard and they blew out the window.

I think I will deduct latex gloves and Febreeze as a "Necesssary" expense for handling some of these documents. Thankfully I have an office admin that opens the envelopes and assembles the paperwork for me.

Any single item over $5,000 needs to have an appraisal. Your client had multiple receipts from multiple days? I don't try to manipulate my clients information or curtail their deductions if they are legitimate. However, I would ask them to review their donation slips and to make a more serious effort to reconstruct exactly what was included in each donation visit and give them thrift shop price guidelines to help them dial in to a more accurate (and honest) list of their donations. In this case, they are way too casual in plopping down a $6,500 figure and expecting you to not push back. They know better.

My Dad always said, "Pigs get fat. Hogs get slaughtered." I think they both go to the butcher shop, but I got his point.

Thank you for your reply. The receipts actually total $6,553 and they have 3 kids and wear nice stuff and have lots of toys so I don't doubt they paid over $9,000 or so for them new and the items are probably only a couple years old.

ATX is automatically taking it to page 2 of the 8283 (Section B since it is over $5,000).

I think I am going to advise they just use $4,999....I agree don't want anyone getting slaughtered. She owns a business and I doubt she wants to risk the goodwill deductions causing the IRS to look at other things.

I have a client that moved and in the process cleaned out a lot of stuff.

They are saying the amount they gave to Goodwill amounts to about $6,500. They have the Goodwill receipts with values listed, no pictures of the items donated or anything.

On Form 8283 it says that anything over $5,000 requires an appraisal which should be mailed to the IRS with Form 8453. Does anyone know if it applies to Goodwill items?

I am leaning towards telling the client we can only deduct $4,999.

Thoughts?

Oh, and whatever the form is you file with the return that lists all the foreign accounts if your account balance is over something like 50K. Can't remember the number right now.

Thank you for all your replies. I knew there was the FBAR and Form 8938 filing requirements if the foreign assets exceed certain amounts.

I was not aware of some of the provisions of the Foreign Account Tax Compliance Act (FATCA) that took effect in 2010.

I guess I will be reporting my client's foreign dividends.

I have a client that is a US resident (Physician) and his only earned income is from the United States and he lived here all year. He previously was from another country and still has family there.

He has investments held in his home country and says his account over there paid dividends of about $1,500 (when converted to US dollars) in 2013. He is not filing a tax return in the other country and is asking me if he needs to report the dividends from the other country on his US tax return. He will not be receiving a 1099 of any sort from the investment firm in the other country.

I know he needs to do the FBAR filing by June 30th.

I have searched and can not find a definite answer on if the dividends from the other county need to be reported on his US tax return. If so, is there any special notes I should put on the Schedule B to report it?

I appreciate any guidance.

File the child return and carry forward the capital loss for future use on child returns. Also track 1099-Div for basis even though brokerages and fund companies are supposed to track that now.

Good points....thanks

File the kids return and NO kiddie tax is involved.

Thanks for the reply....sorry I misspoke, there shouldn't be kiddie tax but I think the kiddie tax rules may require a tax return to be filed for the child.

I agree with Michael that ideally the net capital loss would not trigger kiddie tax but I wonder if the IRS systems will send letters out to clients if they don't file a return especially for the "non-covered" securities that they don't get the basis information for.

I will probably advise my client that since there is a net loss they won't be subject to kiddie tax and probably don't need to file a return if they don't want to and we will deal with it if the parent or child gets a letter from the IRS.

If I have another one come up with a "non-covered" security I will plan to file a return for the child however.

I have a client who has an UTMA (Uniform Transfer to Minor Account) account for their 11 year old child.

In 2013 they moved some funds around within the account (changed investment allocations) but did NOT take money out of the account.

A 1099-B was generated in the child's social security number with Proceeds from the sale showing about $10,000. The Basis of the shares exceeds that so it actually had a capital loss of about $200. It is a "covered" transaction so the basis has been reported to the IRS. The child also has interest and dividends that amount to about $50. No wages.

My confusion is with the kiddie tax. I am thinking this applies since the proceeds were over $2,000. Since there was a loss on the transaction it would actually benefit the parent's to report this on their return and I know that was not the IRS's intent with this tax.

If it was a capital gain over $2,000 then I know the kiddie tax would apply but since it is a loss I am unsure how or if to report it. The client would prefer not to have to file any returns for it if they are not required. Would you file a return if it was a "non-covered" security and no basis information is reported to the IRS?

I am not a fan of these accounts (unless the parents are high income) and am encouraging clients to do a 529 for college savings instead.

Is anyone as frustrated with the clients that need their taxes completed for FAFSA (financial aid for college). FAFSA forms need to be filed ASAP but the darn brokerage companies had until Feb 18th to get out the 1099s. I have some clients that wanted me to complete their returns without their investment statements and amend later.

I certainly hope at some point the brokerage houses are back to the January 31st deadline (and not need to issue corrected 1099s after the fact).

I have not done it yet (learned from last year to wait until the all clear).

The other ATX forum has users saying they can not get into ATX and others can not efile after doing the update.

ATX 2013 has been working great for me so far so I am hesitant to do anything to mess it up.

I am running Win 7 Pro on a network.

I charge a "Rush Fee" for anything that comes in after April 5th and have a big sign up at the front desk saying that anything received after that point will most likely have an extension filed and if they really need it done we will move it to the top of the pile and charge a "Rush Fee". People that owe usually save more than that fee by being able to set up a payment by the deadline. If I am having to burn the midnight oil up to the deadline I feel it is only fair I get compensated extra for it. I do it again on October 5th.

We were using Intuit since we are in the Pro-Advisor program, and the first year was no monthly charge. After that, they began charging 9.95 per month, even in months when we had no activity. We are now using Square.

Just to clarify, Intuit will waive the $9.95 monthly fee after the first year as long as you remain a Pro-Advisor. The rep told me their system automatically is set up to start charging it every year until the Pro-Advisor lets them know they renewed.

When I noticed the charge I called and they refunded the charge and stopped it but told me I will need to call in again next year to get the fee removed.

I have the swipe card (and GoPayments) and it is a real time saver to automatically get the payment entered into QB and the credit card % is lower than what Square charges.

If anyone is interested in my recommendations AFTER I finish the next phase of my testing, please send me a message and I will gladly share with you.

There will be a few members here I will not respond to.

I will not be posting them publicly.

Jack,

Just curious if you know when you will have your findings completed? Do you have another phase of ATX testing to do?

Like many others I am still deciding whether I want to renew with ATX and your opinion will be a big part of that decision. Thanks to you and all the Beta testers.

I would love your findings emailed to me at: [email protected]

I would love your report too.

[email protected]

Thanks!!