Ringers

I just tell my clients that I use a very good collection service. "Bubba" pays me the client's fee up front and then I give him a copy of the client's name, address, SS#, date f birth, home phone, spouse information, banking information, etc. for him to do thorough job on his "collections." He must be good, because he has never asked me for a refund of the fees he pays me.

I am doing a return for a widow whose husband died in 2013 and their full service broker sold about $150000 of jointly held stock in 2014. I have an e-mail out to him now, but I wonder from all of your collective experience do you find that full-service brokers who charge account management fees of $3000-$6000 will automatically provide a stepped-up basis for the widow's stocks by calculating the DOD value of 50% of the stock (100% in community property states) and then adjusting the cost appropriately. They should also treat the sales of 1/2 of the stock, even if held less than a year, as long term. In your experience, do they do this as an automatic service when they are aware of the spouse's death, or do they just keep the cost basis as of date of purchase?

Actually, any non zero number divided by zero is undefined; zero divided by zero in indeterminate. Why you ask? 17/0 or -13/0 have no possible answer, hence undefined. 0/0 could = 17 (because 17*0=0) or it could = -.34 (because -.34*0=0) or it could equal any number--hence it is indeterminate but not undefined. Math lesson over

Thank you. That is just what I was looking for! I love this board!!!

One of my clients moved into a retirement home and signed a Life Care Contract which guarantees her a discount on all of her health services and additional nursing services for the remainder of her life or until she voluntarily terminates the contract. She paid approximately $152000 and her estate will receive $136800 of this amount back upon her death or she will receive the $136800 if she chooses to discontinue the contract and move out. My question is, does the $15200 she will not get back qualify as deductible Medical insurance and, if so, does it qualify upon payment of the contract amount or upon termination (either through death or discontinuation of the contract)? Thanks in advance!

Under the old rules where shareholder health insurance could be paid by the S-Corp, shown on the shareholders W-2 as wages not subject to FICA, and then deducted on the shareholder's 1040 as SE Health Insurance, the rules for what constituted health insurance premiums did include LTC premiums. that is perhaps what the client is referring to.

Jack and Lee, By "paying the premiums" in #2 I meant paying the premiums of a group policy, NOT reimbursement for individual policy premiums or policies acquired on the exchange. In #3, the shareholder is allowed to take a distribution in addition to his W-2 wages, as long as he has basis. It does not matter what the distribution is used for--it could be for gambling, a vacation or even (gasp!) health insurance. The only reason I was showing a distribution to the shareholder was to simplify amending the 1120S and his W-2 IF the situation ever gets resolved between the IRS and DOL. The distribution in no way affects the W-2 or the taxable income from the K-1.

Here is my summary of the problem regarding the manner in which the health insurance premiums for shareholders (greater than 2%) of Subchapter S corporations for the year 2014 and the manner in which I will treat them on the Corporation and shareholder 1040 tax returns. Background: The IRS regs have not changed on the proper way to handle shareholder health insurance premiums—add them to W-2 wages NOT subject to employment taxes and have the shareholder deduct them as SE health insurance premiums on 1040 page 1 Line 29 In November, the Department of Labor stated that any reimbursement of health insurance premiums by any employer (including Sub S Corps) that has more than 1 employee subjects that employer to a $100 per day penalty per employee, or $36500 per employee per year beginning in 2014. Based on these two conflicting rulings, here is how I plan to proceed: For single person Sub S Corps I will handle the situation per the IRS regs as I have done in the past, including the premiums for the single shareholder/employee in wages NOT subject to FICA, etc. and deducting the premiums on 1040 line 29. For Sub S Corps that have at least one more employee in addition to the shareholder or more than one shareholder/employee that PAYS the premiums directly for All employees, I will treat the insurance premiums to employees as tax free fringe benefits and treat the Shareholder premiums following the IRS guidelines to obtain the shareholders tax-free treatment of the premiums. For Sub S Corps that have more than one employee that do NOT pay the premiums for employees other than the shareholders, I will show the premiums as distributions to the shareholders and not put them on the W-2 forms. Then I will deduct the premiums that were paid as if they were premiums paid directly by the shareholders themselves (out of their distributions) and deduct them as Schedule A medical expenses. I will tell the shareholders that if the position is ever made clear by the IRS and DOL, then I will issue amended W-2 forms, amended 1120S forms, and amended 1040 forms to exclude the premiums from taxation per the IRS regs. Any comments, criticisms, revisions, etc. would be GREATLY appreciated.

David, I too use the Tax Book Online version Web Library. this will be my second year, and I also like the layout of the book and its cites. I just wish it (or some other resource) had a definitive answer for the deductibility of health insurance premiums for >2% shareholders of S corps with more than 1 employee. My S-Corp clients are very angry that they have to risk a $36500 penalty from the Department of Labor to be able to show their HI premiums as wages and then deduct them on their own 1040 as SE Health Deduction. As of right now, if they follow the IRS guidelines, things are the same as last year, but if they follow the DOL guidelines, they set themselves up for the huge penalty. All I can do at this point is just share the information I currently have about the situation and let them make the final determination of their risk. (So far all have elected NOT to deduct the health premiums, since it is just too risky.)

I noticed in looking at the 2014 forms list that the 3115 form is listed for business returns but not available for 1040 returns. This could be a problem for schedule C filers and people owning rental property based on the "strict application" of the new expense or capitalize election rules. I guess we won't know until the forms are finalized whether or not they will include the 3115 with personal returns.

I have been using Pro Series for my 1040 clients since the Chipsoft days of 1988 and using ATX for my Business, Trust, etc. returns since the Saber days of 1993. With the debacle that was 2012, I jumped at the chance to get the large ProSeries discount for 5 years on the Power Tax Library and I now have been doing all of my returns on ProSeries since 2012 and loving it. I can't see myself ever going back to ATX eve though I had no problems with the 2012 program myself, just lived in fear that it would fail me during crunch time. ProSeries just feels more "pro" if you know what I mean. The only thing I don't like too much with ProSeries is their forum. It seems to be filled with some rather snarky people who seem to pride themselves on giving sarcastic answers to legitimate questions, unless you are a member of their "old boy's club." I wonder if there are enough of us ProSeries users on this forum to ask Eric to consider starting a ProSeries subforum much like what now exists for Drake and OneDesk. What do you think?

Sam, I have ATX from 1999 through 2012 (the last year I used it) installed on my Win7 Ultimate 64 bit computer. All of the years work perfectly. I could not install the old Saber programs from 1988 through 1998, however; they are still on an XP machine.

Thank yo all for your suggestions. I am not sure yet which route I will suggest she take regarding the penalties, but now I can give her more options. Ringers

Does anyone have any experience with abatement of Code Section 6699 (a)(1) Failure to File S-Corp return penalty? The daughter and son-in-law of a client of mine are the two shareholders of a small Beauty Salon with net profit averaging about $2000 per year. For some reason, they had their preparer file their Corporate returns for 2011 and 2012 about a year past the deadline for each return. Then penalty is $195 per stockholder per month for each month that the return was late. The 2011 penalty is $4680 and the 2012 penalty is $3510. 2013 has not been filed yet. The couple has two kids and other income of about $40000 per year with mortgage and RE tax of about $20000 per year, so these penalties will wipe them out. Is there any hope for an abatement or should I suggest they file for bankruptcy? Any suggestions would be appreciated.

Thank to all for your advice. I will post what eventually happens. Thanks again!!

At the end of March a fellow horseshoe player (hence my name and avatar) asked me if I wanted to take over the accounting and tax preparation for his printing firm from the accounting firm that has been doing his books and returns for the past 12 years. Here is what I found: 1. His printing firm is a Sub S ACCRUAL corporation with him, his brother, and his sister as sole stockholders. 2. He and his brother are sole stockholders in another Sub S ACCRUAL corporation which owns the building which is rented to the printing firm. 3. The rental of the property to the printing firm has been going on since about 2002 and both corporations have been accrual based Sub -S corps since then. This is where it gets dicey! A. The current accountant has only been depreciating the building for the last 3 years! B. The current accountant has accrued rents payable of $216000 on the printing corporations books, which has had them showing a loss each year. ($12000 rent paid and additional $36000 rents payable each year for last 6 years) C. The current accountant has NOT shown the Rents Receivable on the books or tax returns of the other Sub S accrual corporation, which has them showing slight losses each year also, only reporting the $12000 received. D. In 2012, the accountant added $106000 of previously unlisted, fully depreciated, machinery on the books and tax returns of the printing corporation. There are numerous other items, such as reporting loans from stockholders as bank loans, etc. which make the tax returns ticking time bombs. I know your first suggestions would be to run fast and far away from this situation, but I do not want to leave my friend with this potential big bill from the IRS. What would you do???????

Hi Cathy, The number you need is 37-6002057.

I had this happen to me in past years. The name on the 1040 must match exactly with the name as it appears on the t/p Social Security card. When the name is changed on the SS card, it will be updated with IRS and IRS will accept the e-file. In the interim, file it with the name as it currently appears on t/p's SS card.

Naveen, It is my understanding that if you file as an ERO then form 8879 or 8879-S is fine. If the corp is filing through an ISP and not an ERO, then the 8453 is required. This is what it states in Pro Series under Government Instructions for 8453. As a "tip" it suggests filing 8879 or 8879-S as an alternative. You can breathe easy!!