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    Horseshoes, Bowling, Blackjack, Cribbage, Teaching College Math, and....(yeah) accounting and taxes.
    Former ATX user for business since the Saber days of 1995 through 2012 and Pro Series since the Chipsoft days of 1988 for individual taxes. Now for 2013 I am using the Pro Series Power Tax Library for all returns. I love it!!!

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  1. A client of mine got a 4 page letter from the Illinois Department of Revenue yesterday that they were reducing his Illinois overpayment from $1888 to $1886.60 due to errors in the return. Looking at their explanation, it showed that they charged the client $1.40 for the late payment (by 5 days) of his 2nd quarter estimated tax payment. Really! Since his overpayment was applied to his 2022 estimated taxes, we now have to reduce the amount applied from $1888 to $1887 (rounded off). Was all of the postage and form corrections worth the $1? I know my state is in debt, but things such as the above are part of the cause rather than part of the solution. (smh) I have been preparing taxes since 1972, and this takes the prize for the smallest adjustment letter ever received!
  2. Thank you. Is the nonresidents tax due reduced by his share of the PTE and does the resident partner get a credit on his NJ return for his share of the PTE?
  3. I have a NJ partnership one partner a NJ resident and the other partner a NJ non-resident. The partnership owns a rental property which it sold n 2021. When I prepare the partnership return, the PTE 100 shows a tax due of $13130, or $6565 per partner on their PTE-K1 and the NJK-1 shows the non-resident partner's share of the NJ tax to be $7368. How are these amounts related and what payment do I send in with the partnership return? The prior 12 years of the partnership taxes were easy and I just sent in a small non-resident tax, but this year with the PTE it is a little confusing. Any NJ preparer's help would be greatly appreciated!
  4. Hi Yardley, Please see my PM to you after I saw your post on the ProSeries board. Ringers
  5. Thank you Abby!!!! The article you cited is EXACTLY what i spent an hour searching for on Google but to no avail. Ringers
  6. An 80 year old client died and designated his Trust as his traditional IRA beneficiary. The beneficiaries of the Trust are his two children in their 50's and his two grandchildren. How can the trust distribute the IRA to the 4 beneficiaries so that each of them can decide the rate at which they want to withdraw from the inherited IRA? Can the Trust distribute the entire IRA amount to each Trust beneficiary in the current year and issue a 1099-R similar to that issued by the original IRA holder to each beneficiary with a 4D code, or does the Trust have to maintain the IRA funds and distribute that portion each year that each beneficiary wants to include as income, or does the Trust just distribute the entire IRA in the first year and each beneficiary includes the entire amount as income?
  7. A client just dropped off his gambling statement (did not receive any W2-g's) that show the following amounts for Sports Betting: Amount of winnings $1432418.00 Amount wagered $1474520.00 I know he has more losses than wins and, if required to report the total winnings can only deduct the amount of losses up to his winnings on Schedule A, but the big problem is the State of Illinois. If he reports his winnings on 1040 line 21, it will all be taxed by IL which does not allow itemized deductions. $71620 of IL tax!! Is this report by the Sports Book just line the coin in-out report for slot winners and not reportable as winnings on his tax return unless W2-g is received for single wins of over $5000? Or is there something else I am missing here?
  8. Here is a very informative reference I have used for ISO redemptions. Tere is probably a similar site for NQSO's also. https://www.thebalance.com/incentive-stock-options-3192970
  9. With regard to this 1120-S, here is where things stand. The S-corp was always S for 22 year existence. Books were always on on TAX basis. Cash basis. There has never been exempt income. Net earnings for 2018 were $189000. 2018 Schedule L shows $50000 cash as only asset, no liabilities, $1000 stock and $49000 retained earnings. AAA account at $180000 even after $150000 distribution. Bank reconciliation shows 12/31/18 balance in all checkbooks as $1400 TOTAL. Schedules M-1, M-2 are all plugged figures. How would you prepare the 2019 tax return for this S-corp so that the 2019 Schedule L and stockholder basis statement made sense? What would you do with opening balances for 2019 on the 2019 Schedule L? Former accountant has no prior year data on his computer, no workpapers, and diminished mental capacity. Client does not have a clue as to what has happened, since he relied explicitly on the accountant for all fillings. Client has 4 years of returns only. All are plugged in a similar fashion to 2018.
  10. The 1120-S for 2019 has not been filed yet. I have looked at the 1120-S for 2016, 2017, and 2018 and they show about $170 K each in profit with no shareholder wages (Dental practice). The former accountant is in very poor health and I have taken over the returns. I do not want to prepare the 2019 return without reasonable comp, and thus continue the erroneous ways of the former accountant, but I want to keep the penalties down for late filing and payment of the 941, 940, etc. Also, as a side note, may want to file for a PPP. I know that sounds "convenient" but my primary goal is to get him into compliance even though in doing so it opens up a PPP opportunity.
  11. The client wants me to prepare a 2019 W-2 to change a portion of the 1120-S distributions into "reasonable compensation" after we had a conversation about her past returns. I am OK with amending all the 941's, 940, and state unemployment returns. I know I have to withhold FICA and Medicare, but is it mandatory to withhold Federal and State income tax withholding? We have agreed on a gross payroll amount of $100000.00. I am trying to cut down on the penalties and interest the client will pay on the late W-2/
  12. Thanks to EVERYONE who has responded. I agree with Catherine completely about balance sheets--if the Balance Sheet doesn't balance, then you can't trust anything else in the return. I finished inputting the 2018 corporate and personal returns for 6 different entities in the two clients that have come to me from my acquaintance, and I found numerous serious errors in ALL of them. One balance sheet for an S corp was off by over $200000, with $0 cash entered. Another had $58000 in Retained Earnings but $145000 in the AAA account. Incomplete postings of the K-1 to the personal returns associated with them. HSA accounts posted on the 8889 but not carried to the Schedule 1. The scariest items of all were 2 schedule C's, one for a music business with $2800 income and $114000 in expense and another for a pottery business with no income and $28000 of expense, both schedule C's on the same 1040. Furthermore, this same "hobby"loss total has been going on for 2016 and 2017 also with the same amounts of loss. I am warming up to tell that client that they can expect their Fed tax to go up by about $28000 for the year, but the good news is they don't have to keep their business records any longer. I also feel compelled to tell them that their 2016 through 2018 person return taxes were understated by about the same $28000 for EACH year not counting penalties. I don't even think they could get HRB to file those Schedule C's. SMH!!!!
  13. WOW!!! Three of this board's heaviest hitters responding to my questions. As was often said on Wayne's World, "I'm not worthy!!!" All of the information and suggestions were excellent. First of all, with regard to negative AAA, my understanding now is that it CAN be negative, but can not be made negative or reduced below 0 by distributions, which would then be treated as capital gains to the shareholder--is that correct? All clients have copies of their returns which they have provided but 4562 forms just have depreciation from prior year assets or are simply not included. New assets are sometimes listed on the return as "new acquisitions" rather than increasing fixed assets. Even when the fixed assets rise from 2017 to 2018 on Sch L, they are not listed on the 4562 forms. The clients have bank reconciliations that they do and some receipts for recent fixed assets, but little else. The original accountant had both 1120-S corps set up with no compensation paid to shareholders but with other C corps. used to pay shareholders and other employees and then "lease" them back to S corp for an inflated price. Individuals own the vehicles used by the S corp (both Dental practices) and are being depreciated on the individual 1040 returns at 95% and 100% business use with no mileage figures give. Both shareholders say that the vehicles are used mostly for commuting and just occasionally for lab work. One client has at least part of the dental practice on QB and I am getting that as well as whatever information they can get me in terms of fixed assets. One of the dental clients, however, asked me "what is a balance sheet." Abby, the $110000 loan is a loan TO the shareholder which he has no idea how it got there! I Have given all of the taxpayers a detailed spreadsheet citing all of the missing items for each entity and asking for their help in reconstructing all of the inaccurate or incorrect items. Between two clients, we are talking about 2 1120-S, 2 1120-C employee leasing corporations, 1 1065 LLC owning one of the office buildings, and the 2 1040 returns (one with 2 schedule C's), all prepared by the same accountant whose wife, thus far, has not been able to find ANY written records. I am not trying to belittle the prior accountant. We have known each other a long time socially and both went to the same school in IN (the one with the leprechaun mascot). He is a CPA with a JD as an international tax attorney, but as I said it has been a struggle for him to prepare these clients' returns for the past 3 or 4 years due to declining health. The clients' responses to my queries have been "I trusted him to prepare my returns for the last 20 years." Unfortunately, they did not keep the records they supplied him and neither did he. I truly appreciate your combined help in this situation. Respectfully, Ringers
  14. Assuming that the books of the 1120-S corporation are being kept on a TAX (rather than accounting) basis, and the corporation has ALWAYS been an S corp, are the following statements true: 1. If the corp has shown an overall profit since the date of incorporation and there are no "timing" differences between the books and the return, then the AAA account will equal Retained Earnings and Retained Earnings will have a positive balance. 2. If the corporation has shown an overall loss since the date of incorporation, the AAA account will be $0 and the Retained Earnings account will be negative (representing the accumulated loss from inception). 3. When profits bring the Retained Earnings account above $0 again, the the AAA account will again equal the Retained Earnings. Again, these three questions assume that the Corporation has always been an S corporation, that the books are done on a tax rather than accounting basis, and there are no timing differences, such I as depreciation methods, in play at any time. I "inherited" five large accounts from an accountant friend who is having memory issues, has lost all computer copies and has no backups of all prior year returns, has no paper files or trial balances or fixed asset and depreciation statements. I know his tax return balance sheets are plugged, but for all of the S corps (with all the above assumptions holding true for all of them) the retained earnings account is in general $300000 over the AAA account. I think I will have to do a "reset" of the ending 2018 tax return balance sheet to get a new "opening" balance sheet for tax year 2019. He also has loans to officers in excess of $100000 about which the officers have no idea. He is bordering on dementia and his wife swears there are no documents anywhere in the house. For depreciation going forward I was thinking of taking the balance sheet Fixed Assets minus Accum. Deperciation and depreciating that amount over a nominal period of 7 years Straight Line, since the corporation officers do not have asset lists either because "John always took care of those things." I know Jack would say "Run Forest Run" but someone has to help these clients get out of this mess. Most of them have been with him for 20 years or more. Any suggestions? Thanks in advance!!!!
  15. I saw an article from Kiplinger written by a CPA who filed his 2019 return in February. Based on his 2018 family income, he would have received a stimulus payment of $2900. Based on his 2019 income he would not be eligible for any stimulus. By filing early, he lost his stimulus payment of $2900 which, he claims, would not have been subject to repayment. How will IRS be able to justify penalizing someone for filing early!! If the current method stands, I do not expect any client in the future to allow me to efile their returns before April 15th of any tax year unless they are getting a refund!
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