RitaB

Well, after I worried about it, I thought: Good. There's a weekly payroll I don't have to do. I can take off once in while and not have to be a hostage to his payroll. Was $135 a month for 6-8 employees, weekly payroll, that bad? I included payroll tax returns and figuring monthly deposits in the price. Good grief! I am happy to lose him, I have talked myself into feeling better. He can get used oats for all I care. Hope he's more regular now. Thanks, John!

I got one last fall for 2006 1040-X where client got K-1 after filing. (Didn't bother to tell me he was a shareholder in an S-Corp when he originally filed.) Are we now supposed to attach K-1's? I thought not, but this year I made sure I did attach the K-1 to the client's 2007 1040.

Yes, it is nice! I have twins from Soviet Union, fantastic girls, that bring me flowers every time they pick up their returns. Just because H & R was ripping them off, and I don't. Also, I was so surprised last week when a man came in with info to do his 2005 return and a box of candy! He is (really) disabled (head injury), had stock sales and thought he didn't have to report them. On the other hand, I got fired last week, too. Client found somebody "a little cheaper," he said. Is there any problem with the quality of work? "Oh, no," he says. What a downer! I worried about that forever. Also, last Friday at quitting time, client came in to get copy of her 29 page tax return. (Her husband had already lost their copy of 2007 return.) What do I owe you? Oh, nothing, don't worry about it, I say. She hands me $2...

Yeh, lots of calls. That's pretty funny about the two you had already done! The last one I had was from a girl doing her granny's return: "I heard that all I have to put on here is her social security. She also has retirement and interest." Me: "You should prepare it correctly, just as if she were filing a regular return." Girl: "But H & R Block told her several years ago that she didn't have to file." OK, why do people call for free advice and then argue with us?! I had a dream that all the Stimulus Payment returns I have done were ignored because I used 1040 instead of 1040-A. (I just do everything on 1040 for rollover purposes.) They're all mail in, so this really is just a bad dream, right?

Had a guy come in yesterday, with his copy of 2006 return that he had not yet filed because he was working on getting SSN's for his new wife's three kids. (He told me leave the lines for SSN's blank, I'll fill the numbers in when I get them.) The REBATE is his big concern now. What do I do? Will I miss it? (Never mind the $1400 refund amount on the return.) Reminds me of the phone tax refund. People had no clue what their basis in $100,000 of mutual fund sales was, but they had the whole article available for me on the $30 phone tax refund deal.

Yeh, me too! What is that about?! Also, when you leave a message on their machine that their return is ready to pick up, do they call you two days later to ask what they owe IRS, and what they owe you? Like we remember their particular situation, and like they can't possibly wait till they get to your office to find out this information. Then they show up a week later: "Now, what did you say I owe you?" Then: "You know what? I forgot my checkbook, do you take credit cards, blah, blah, blah..."

I am having trouble here, too. Glad you asked this question. Last year I just used Form 8582 on someone and didn't even open Form 6198. The program rolled over the info to this year's 8582. Now I'm worried that I should have attached 6198. All of taxpayer's loss was/is still suspended. I guess I need to amend 2006 to attach 6198?

Hi, Ray. I think, in a nutshell, the LT rate of 5% drops to 0% for tax years 2008 - 2010. So, the gain (or part of the gain) that would have been taxed at 5% (under 2007 law) will not be taxed. Of course, the mechanics and barbers will tell all our clients that there is no capital gains tax (at all!) for 2008. Our clients will run out and sell everything, short term, long term, you name it. They will not ask us first, then argue with us when they owe tax. Here is an article I kinda skimmed that you might find helpful: http://www.nysscpa.org/cpajournal/2006/120...entials/p40.htm On another (kinda similar) note, I cannot believe the number of people who have brought in their stimulus letter for me to explain to them. If I wanted to see it, they would never mention it to me.

Yeh, that dummy whammy part is over my head. Especially at this time of day. I'll pass on that one. Sonny paid all right! Funny, he just came in today to pick up 2007 return. Only owed $2852 and that with a gain on sale of dad's house. He was pretty happy this year.

Don't feel all alone. If I had a nickle for every time I've been on shaky ground... I hope you find that you've not done many with savings bond interest. That is probably the case. Hey, I've done taxes for 14 years and last year was the first time I've seen someone who cash a truckload of savings bonds they inherited. It's always been little amounts, here and there, no biggie, in the past. On the other hand, maybe I've lived a sheltered life! Here is one good article: http://www.leismaninsurance.com/2004%20Apr...%20article.html Excerpt: Avoid surprises Unlike most assets included in an estate that receive a step-up in basis — such as stock with a low income tax basis or a personal residence — IRD assets don’t receive a new basis at death. So they are subject to both income and estate tax. This double tax burden can surprise beneficiaries who were unaware that they owed income tax on these assets.

I understood what you meant, Michael. My issue is, if no tax was paid on the savings bonds (because the estate didn't owe any and it wasn't reported on the final return), the recipient of the inherited bonds should not be getting out of paying on the accrued interest. I took your post #12 on the other thread to mean that you would file Form 706 for a decedent whose estate is less than $2 million in order to help survivors (everyone, actually) escape tax on savings bond interest. I don't think that's proper use of the form with income in respect of decedents, like savings bond interest.

Yep, that's what I think, too! I was editing while you were posting. Thank you, Tom, for your input.

Hi, Michael - Actually, income in respect of a decedent (like the savings bond interest we've been talking about) is completely different than capital assets like homes and marketable securities. IRD does not receive a step up basis at DOD like captial assets. See Publication 559. Also, if you just google "income in respect of a decedent" I think you'll find a lot of articles that explain it better than IRS (imagine that! haha). Believe me, last year I read up like crazy on this. Note the tip at the top of p. 9 of Pub 559 as well: "If you have to include income in respect of a decedent in your gross income, and an estate tax return was filed, you may be able to claim a deduction for the estate tax paid on that income." (Emphasis mine.) So, I don't believe your clients are supposed to be relieved of that tax if estate tax was not paid. Also, as someone else alluded to, if the income would be taxable on the decedent's final 1040, or Form 1041, I don't think IRS just wants you to pick another form so it won't be taxable. I don't know, I don't always understand IRS... ;-)

You are correct. And that is the point - if it's reported on Form 706 (for estates under $2 million), nobody pays the tax, and I don't believe that is a correct use for the form. Another poster (see #10 and #12 above) indicated that his company would have filed (the not required) 706 in order to report the savings bond interest and effectively remove the tax liability for the interest reported (but not taxed) on the 706. I do not believe that is correct, and I posted a link under the "Michaelmars" thread which supports my opinion. I don't doubt that it's being done effectively, I just think maybe something's going under the IRS radar. Not to be critical, but I would have to do a lot more study to be convinced that this routine filing of 706 to avoid the tax on savings bond interest is proper.

I know that sick feeling! Well, like I said, I may be wrong, but if you go the that site which links you to the tax code, it seems to me that you can't just report the interest on 706 and it be exempt cause your estate was under $2 million, and avoid the tax on some part of the interest on the bonds. That is how I read this, anyway. If I'm mistaken, I hope somebody that knows more than I do will tell us. Nether my hair dresser nor mechanic is speaking to me, I'm so grouchy this time of year! Haha! BTW, have you seen Form 706? Quite a form. Yikes!

I did a little more reading, and I believe this "step up" is only going to take place if the estate actually pays tax on the accrued interest. I could be wrong, I often am, but I will definitely check into this some more in a few weeks: http://www.ucrgift.org/giftlaw/glawpro_sub...SS=11&SS2=3 Excerpt: Example 4.11.3A David Decedent owned a U.S. Series EE savings bond at the time of his death. The face value of the bond was $1,000 and the original purchase price was $500. David left the savings bond to his daughter Suzy. As an asset owned at time of death, the $1,000 savings bond is properly includable in David's gross estate for estate tax purposes. Moreover, Suzy will have $500 of interest income when she redeems the $1,000 savings bond. The $500 of taxable income represents the untaxed interest income that accumulated during David's life. Finally, because this is an IRD asset, there is no step up in basis for Suzy. However, she might receive a partial income tax deduction to offset some of the taxable interest income if David's estate paid estate tax on the value of the savings bonds. See Sec. 691©.

Thank you for this post! The phrase "taxed to the estate" is really jumping out at me. My guy's dad's estate was maybe worth $350,000, so it never occured to me to even consider filing a form designed for estates over $2 million. It does not make sense to me that just putting it on the 706, and it not being taxed at all, exempts sonny boy from paying the tax. At any rate, the 706 (or the request for extension) had to be done by 9 months after DOD. Dad died in 2004, sonny cashed bonds in 2004, FL accountant did both returns. I just met the son in March 2007, (when he brought in those nastygrams!), so I guess I didn't totally drop the ball, afterall; it was not an option for me to prepare a Form 706 anyway. Time to hit the sack. Hope you have a productive and profitable day tomorrow!

I did a little reading to see if I could have handled my situation better, and found that Form 706 (or an extension request) must be filed within 9 months of DOD. So this option really was not available for me. The Dad died in 2004, and I first met the son when he contacted me for help in March of 2007. I don't know if this is any help to you or not, but it made me feel better.

No problem. We'll see what the barber recommends. Haha!

Did you catch the part where I was not the original preparer? All of this happened in FL, and I mistakenly reported to you all that the son had the interest income in 2005; it was actually 2004. (You know how time flies whether you're having fun or not.) He came to me for help in March 2007. Would you still handle it with the 706? Would that option be available? Also, you would have to take some of the interest on the son's return, I believe, unless he cashed the bonds on the DOD, which he did not. I appreciate the opportunity to learn something here, even though my original post was titled "NT..." Thank you for your help.

Yeh, they could have put the accrued interest thru DOD on dad's final, but they didn't. (There was no 706. It's not required for everyone.) Same amount of tax whether son or father reported it. I did think of that, and should have elaborated on that as well, I suppose. I forgot for a moment that us accountants really love to find errors with what other accountants do.

Yep, that's what I realize now! I was a lot less helpful in my explanation this time. It took about 15 seconds this time! Geez! It's kinda like explaining to some clients why they can't itemize - after a while you just take their papers, complete the Sch A with $3000 on the bottom line, and move on!

The house was in FL and an appraisel was done on the DOD. Yes, he reported the rental income, and depreciated the house using FMV on the DOD, and yes, there was a gain on Form 4797. Sorry I didn't elaborate on all that. If he had a loss, he would have been eager to report THAT, which was my point. He wanted to have it his way, like at Burger King.

Thanks, KC, it never even crossed my mind that there might be a question there. It is so good to have lots of people who think differently, isn't it?