Mr. Pencil

Please give a citation or reference link for that law.

I usually cite IRS pubs or instructions for plain language explanations, but never forget that they are not law or even policy. Pub 590 says a taxpayer can only rollover funds to or from a particular IRA once a year, but that other IRA accounts can have additional rollovers. In TC Memo 2014-21 the IRS argued that the LAW says one rollover per taxpayer, not per account. The Tax Court agreed. In other IRA news, President Obama is moving ahead with creating MyRA accounts as he said in his State of the Union address. Here is a fact sheet. http://www.whitehouse.gov/the-press-office/2014/01/28/fact-sheet-opportunity-all-securing-dignified-retirement-all-americans [The discussion in this forum is only about how the new plans work. Opinions on the speech and using executive orders should be taken to the Politics Forum.]

According to the Instructions for Form 1099-C (for the issuer), "You are not required to report a debt discharged in bankruptcy unless you know from information included in your books and records that the debt was incurred for business or investment purposes." Assuming the subject debts were indeed discharged in the BK (which of course we can't assume), they would probably have no tax effect anyway.

When the opposite is reverent, that's fine. It is good and healthy to make jokes about our own beliefs and what makes others strong. But it is cruel and unhealthy to laugh at others' pain and misfortune. This is an old joke with new poignancy. First, society is much less tolerant of such insensitivity. The joke makes a pun on the word idiot, but that word has changed meaning; across the country laws and even state constitutions have been rewritten to put it in perspective. At the same time, those two numbers have become incredibly inflammatory. A group shouting or chanting either of those numbers is committing a felony in every state of the union. They have caused incalculable suffering, so they also need to be understood with kindness. Please put an end to this thread.

I edited my previous post to address these issues. Use the worksheet in Pub 587, which is basically the same as Form 8829 but does not get filed.

Yes, with the requirement that each expense must be for the convenience of the employer, not the employee. These are not actually expenses of the home office as such, so they are not subject to the square foot ratio. However, they must of course be 100% business use or the home office fails to be exclusive. This also means they can be deducted in addition to the simplified method available this year. If you use the worksheet on page 27 of Pub 587 (which I recommend for audit-proofing), they get lumped on Line 11. None of this is explained very well in IRS instructions, but report depreciation and Section 179 on Form 4562 and carry it either to Line 4 of Form 2106, or directly to Line 21 of Schedule A. A qualified home office is treated as a business location for listed property.

I know you intended this in a light-hearted way, but it is actually very hurtful. I reported the post, objecting to the stigma of mental illness as well as the overt reference to drug gang violence. Pencil

This is a common question for Schedule E (which I assume is where he is reporting the disregarded LLC). The answer is that, unless he used accrual method to count the rent as taxable income, uncollected income is not the same as a bad debt. On the other hand, I don't think the S-corp has a cancellation of debt. It doesn't sound like the relationship was maintained in a business-like way. I would guess it was not a legally enforceable obligation, since it continued after there was no reasonable expectation of payment.

No, you might be remembering the temporary increase to $10,000 in 2010. But the original post was asking about more than $50,000 total expenses, so even the $5000 maximum could be reduced (although I think little or none was actually startup expenses as defined in Section 195). Another recent change is that the election to deduct/amortize is deemed made unless affirmatively elected OUT. The amortization period is 180 months, which is not exactly the same as 15 years.

That's an awkward way to put it, but I don't view it as harshly as earlier answers. You can affiliate with another office that is already set up with an EFIN (hopefully using the same software). Ask the efile help desk for clarification of your disclosure requirements for transferring the return.

Since he was not conducting a trade or business in 2012, nothing is deductible in 2012. The costs you describe all sound to me like depreciable assets starting when the business opened 2013. Closer analysis might identify some as consumable supplies or other operating-like costs, which could be treated as Section 195 startup expenses starting in 2013. I would also document at least general inquiry into whether the expenses could be considered made on behalf of the corporation. I would look for clear separation of cash flow and other assets, including intangibles like business systems and marketing. I would also look for a non-tax purpose in setting up a parallel company, especially if either of those companies is in a tax-mad state like California.

No. The fact that under other circumstances it might have been waived is irrelevant. You just paid a reasonable fee for the adoption service, like anyone else.

The only answer I know for questions like that is that better records are, well... better. You don't want to go to audit without some alternative techniques. You might draw an old-fashioned pencil-pusher you want to impress with original docs. Or you might get some impatient kid that you want to overwhelm with little scraps of paper. Admittedly times are changing, but I would say the all-paperless office is still not standard business procedure. Suppose you had a contract dispute or needed warranty service or wanted to return something to a store--wouldn't an original be best? Or getting reimbursements from your boss or insurance company?

You still need to consider all factors. For one thing, home-office documentation is often pretty weak, or just not worth the trouble for a small space. And with the simplified method you can double-dip, taking as much as possible on Schedule C while still getting full Schedule A deductions for property tax and mortgage interest.

Are you a CPA? Because that starts looking a lot like accounting, and at least in my state even accountants are wary of looking like an audit engagement which requires peer review and tons of liability. What would the bank statement show you anyway? You don't know whether it is an accurate view of his income and expenses. If YOU interpret it that way, YOU are responsible for your interpretation. Make HIM provide the numbers directly--use the organizer! For Schedule C, E, or F use his P&L or a less formal income and expense ledger. If you don't believe those, resolve it within the interview or decline the engagement. Please post some links into what you have been seeing about this supposed need to review a taxpayer's bank statements.

No. As your own link says, "the ruling does not apply to registered domestic partnerships," Some people expect that to change, but it will probably have to wait for a court case. Or your own clients could be the court case! Personally, I don't believe it will change. California law has always maintained a very big distinction between marriage, which in the past was only for heterosexuals, and RDP which included both same-sex and some opposite-sex couples. Now the limitation has been reversed, so either couple can get married but only certain opposite-sex couples can choose RDP. In fact, one of the purposes of RDP is to avoid certain third-party legal issues of marriage, especially in terms of pensions and support payments from a prior marriage. That's a distinction which remains as definite as male and female, so I don't think your clients will ever have any legal basis for their position that California RDP was equivalent to marriage in 2011.

I would guess it's a data entry problem, but it might be hard to find. Maybe some checkbox sends it through the simplified method or something. Maybe it has to do with data already entered for the same fiduciary. I always expect weird stuff in the beginning, when I'm still learning the new program, it still has bugs, and so much depends on prior year rollover. It's probably quicker to just delete the 1099, check for latest update, restart the program, and re-enter. Certainly do that before calling tech support.

This is an excellent article with some new concepts. And the old concepts are important too, like limiting the scope of the engagement. Tax prep has become so very technical while retaining so many subjective choices, the information is used for so many purposes other than taxation, and communication has so many variables, that it seems impossible to avoid something being viewed askance by someone some time.

According to the April 2013 update at http://www.irs.gov/uac/Federal-State-e-file-for-Taxpayers, all states that have income tax e-file through the federal system. Only 34 allow state-only processing, but Maryland and Virginia are listed there. Four other states have direct e-file systems.

You have the most complicated clients! The rest of us have various taxation issues, but your clients seem to have the most complicated lifestyle issues. My recommendation is same as Pacun. Use the name on her passport.

What's a "phone cord"?

And yet, you continue to respond to MY posts! Hey, if you're just going to give her the heave-ho anyway, then heave away. There's plenty more where she came from--there always are.

I'm going to be sarcastic after all. But first, item #6 in Lion's post above--if you and/or the banker can get through that one, you're home free! Okay, now for the sarcasm. Since she sells cosmetics, she's probably fine with putting lipstick on a pig.

You said she has a sole proprietorship. According to that reg Lion cited, 301.7701-2, "a business entity is any entity recognized for federal tax purposes (including an entity with a single owner that may be disregarded as an entity separate from its owner under §301.7701-3)"

He had to give up his swinger lifestyle.