Mr. Pencil

Since the time in service was post-1980, 125% DB is not an allowable method for tax accounting. And I would guess that 15 years is not the correct MACRS recovery period for real property. Did you ask why he didn't go back to his previous preparer? I think he needs to amend the prior year return.

On the back of the Form 1099-Q are the Instructions for Recipient. They explain that non-taxable distributions are not reported on the tax return. But that doesn't mean you can ignore it. The tax preparer must determine what expenses were paid with the money, and coordinate it with education credits. Details in Pub 970. Taxable distributions are reported on Line 21, and may have a penalty on Form 5329..

In your state of CT children are eligible for kindergarten in the year they turn five. In Ohio, the cutoff is September birthdays.

When did they graduate? It must have been a REALLY good school if a December crack baby with birth defects from a low income single-parent family graduated at age 17.

I choose one for each client, and give them a choice between the other two.

Search this forum for "6662" and you will find several intelligent discussions of this penalty. It isn't actually "mandatory." It can be abated for reasonable cause, but that's not easy. Still, your best chance is right now. If you can't convince the auditor or supervisor, you can't directly appeal--you'd have to pay first and then file a claim for refund. And then go to Tax Court. Good luck with that! Even though you have greater than $5000, there might be an argument if it's less than 10% of total. But your problem is failure to keep adequate records so you have to fight a subjective standard. Your strong point is education level which comes up all the time in tax court (unfortunately rarely in taxpayer's favor). Or maybe just basic fairness since taxpayer rights for speedy resolution were so shamefully abused (use that one very delicately!)

Info only, no tax effect. If your software doesn't have some kind of null code, you can safely ignore the amount.

It might be more complicated than that. Because the tax tables incorporate the standard deduction, irregular pay can sometimes create underwithholding when nothing is withheld for several weeks. Also, sometimes a bonus will be paid sans withholding. It is very hard to plan for, other than deliberating taking a smaller paycheck each week. The bottom line is that his income level is about the worst in terms of our progressive tax brackets.

There are some things in this I don't understand (including New Jersey law on recourse debt). First, did you actually read the bankruptcy decree? Because if the debt was discharged then, why is the foreclosure now? And if it was a recourse loan then why isn't there a 1099-C for the balance? And I don't understand about the amount and relationship of the two loans, and it sounds like you don't either.

I'm interested in the answer. It sounds like the "minutiae" referred to yesterday [in the thread sid#'s]. Frankly, I don't see how it could be possible unless the number were assigned BEFORE filing. That's how it used to work, so maybe that's why IRS changed the procedure this year.

This is very common here in California, where more than half the population is Hispanic and half of the rest have made up their own names based on a dodgy marital status and/or a Middle Earth fantasy. In my experience, SSA is just as confused so calling them has no more chance of success than trial and error. The most likely possibilities for you are either of the hyphenated words. If you have done both, convert to paper file and get on with your life.

That's actually a lot of help, even though officially they only go to explain how the return was prepared (i.e., defend HRB). Protection Plus does not offer anything other than paperwork review. They will pay up to $2500, apparently including P&I, but only "if your tax preparer made a legitimate error on your return." On their website Protection Plus claims 70% of the market for "Audit Assistance," so they must be defining that term pretty narrowly.

There IS still one other thing--the amount on that W-2. If it's less than the EIC max of $45,000 I would probably refuse to do the return. The whole engagement is tainted by the family's apparent history of trading SSN's and tax fraud. I would say it exactly in those direct terms, and explain that I am personally required to sign under penalty of perjury that I have investigated inconsistencies, such as whether they moved in 2012 or 2013. If the taxpayer did not immediately agree, I would not waste any more time with him. Because in the end he won't accept the return anyway. By the way, did you ask why he didn't go back to his previous preparer? That's always my FIRST question for a new client.

Very true. And that's why I cited the actual tax code itself, which DOES in fact mean it is the way it is. You also believe, "it does not say 100% it cannot happen as HOH," but I already quoted the actual language that DOES say so. Well, I don't know what your game is, but since you have finally stated that they lived together all year, I will fulfill my promise by telling you how to audit-proof this return. First, unless your client is married use filing status of Single. Do not claim any of the four tax benefits that require a qualifying child, including Head of Household, EIC, CTC, and Form 2441. Second, recognize that "random guy" has already declared under penalty of perjury that the mother did NOT join your client during 2012. Obviously that was done with the mother's agreement; you say "they" only claimed one child. So she is being inconsistent. Months after leaving her old boyfriend, she helped him file a fraudulent return with her own SSN! You have minimal proof of residence, so boost it with at least a couple of items dated in 2012. Third, Complete the worksheet on page 16 of Pub 501 for EACH dependent. Make a good faith effort to include support or gifts from the father, welfare, and any other resource for the family. For housing costs, the worksheet allows only 1/4 of fair rental value regardless of actual costs such as mortgage or utilities. That's what it takes. Of course, I'm only teasing you. Just like last year this is an EIC fraud return, which of course only works if they can file HoH. So like I said before, do whatever you want, friend!

I don't know why the IRS changed the procedure this year, but if it is minutiae then why not simply do it the way we're supposed to? I've seen a lot of complaints on this forum about ATX delays and errors and non-compliance. The attitude of service reps seems to be, "it's good enough." And I guess that's true for ATX.

I think ATX users should call the company and complain very loudly, as this does not comply with the Instructions for Form 8879. We are required to enter the SID number AFTER filing.

Did that include Pub 4681? The rules are complicated only in the sense of having so many possibilities. Once you figure out whether it was business property or a recourse loan or below FMV and a few other things, it's pretty easy to deal with. Typically the lender doesn't need both a 1099-A and 1099-C, so you may not have any cancellation of debt. That could mean either it was a non-recourse loan, the value of the property exceeded the debt, or the balance of the debt is still owing.

Do whatever you want, friend. In my opinion you are at that bridge now, because there is no difference between getting tax returns done and determining tax liability. Your latest post confirms in my mind that you do not know and have no way of knowing that the mother and children lived with your client for 365 days in 2013 or that your client provided more than half of their support. I strongly recommend you do not sign the return--but do whatever you want, friend.

You might think so, based on Pub 590. But the Tax Court said, "Petitioners' interpretation is incorrect and not in line with this Court's previous opinions regarding section 408(d)(3)(B ), the plain language of section 408(d)(3)(B ), or the legislative history of section 408." That's pretty tight. By the way, the taxpayer was an attorney specializing in taxation so I don't expect anyone else can ever win this.

You can reinvest within the same account. Or you can do a trustee-to-trustee transfer. But you can not use the 60-day replacement procedure more than once a year.

You expect your position to be challenged, but you are not worried even though you are not able to support it? And you get upset when an expert gives you the advice you asked for. It sounds to me like you are still confusing dependent exemption with filing status. I think you misunderstood what you read, or it may have been something from before the law changed. Or it may have been wrong, even if it was somewhere on the IRS website. [Yesterday I reported something that the IRS itself challenged in court even though it was from their own publication .] Please tell us how the mother filed in 2012, and when she separated from the father. Then we will tell you how to audit-proof this return. Because based on what you have told us so far, I think the professional at Jackson Hewitt is correct.

That brings up another thing that has bothered me from the original post. This kind of question is basic for the taxpayer, too. Usually it gets cleared up the first year, So is this the first year? What happened in 2012? Specifically, when did the parents separate?

Jack and I have referred you to Pub 501 and the Instructions for Form 1040. See IRC Section 2-2(b ) if you need a legal citation. Not a word has changed since 2005. It sounds like your firm has some unhappy history with separated parents, so ask around the office. And don't shoot the messenger. Rules for Head of Household are on page 13 of the Instructions. They say "do not include... Any person who is your dependent only because he or she lived with you for all of 2013." This is exactly your client's situation--since his girlfriend and the children are not actually related to him, he can only claim them as dependents under the rule for "any other person... who lived with you all year."

I'll save you the trouble. The rule you are remembering is on page 17 of the Instructions for Form 1040 (and in Pub 501). It clarifies that the children are not qualifying children of any taxpayer because (in your case) the mother is not required to file a tax return. That allows the unrelated boyfriend to claim them as qualifying relatives for dependent exemptions, but it still does not allow Head of Household. By the way, I don't think you should be discussing this with the father, unless your client has signed a disclosure form. Meanwhile, don't promise your client a quick refund if the father files first.

It is true in the sense that the first return filed will be processed, and any later return showing the children's SSNs will be rejected and have to paper file. Both taxpayers will get IRS letters inviting them to support their claims. Presumably your client will prevail on the issue of dependency, but is not eligible to file Head of Household with non-related dependents.