RitaB

7 hours ago, Lion EA said:

I want to get 1099s out of the way before I have a backlog... I'm glad I started about the 12th.

This is so me.  I remember last year hearing someone say that IRS would take a year to recover from a three week shut down.  While I think that was "speaking evangelistically," as a pastor of mine used to say, it's pretty accurate for me in January. 

OK, it's BS for me, too, but if I get behind, my life is way worse than it needs to be.

My codes are there (the link you gave us) for 2014 - 2019.  Is that about right?  I've used ATX (or Saber) for 100 years or so.

I was able to see 2013 install code by going to the Prior Year Download Center.  I do have all my codes in my files, but it's nice to print this summary.  Thanks, Abby!

13 hours ago, Pacun said:

Rita was correct by saying that since the twin brother were of the same age and the dependent was not younger than his wife, then... no EAC.

 

Yeah, but don't give me too much credit because apparently that Publication only works with twins. 

There's so much conflicting information out there, and that's just from IRS.  There was something the other day on FaceBook about CPE requirements the first year you're an EA.  We were all quoting things from IRS but arguing nonetheless.  I know we have to look at IRC, but so should they.  It's enough to make you take a wine per diem.

I think I'd print Publication 5334 and tell them,  "Sorry, no."  Just kidding.  Maybe.   

This is fascinating, and probably not at all what Congress had in mind by allowing a taxpayer to claim a younger sibling for EITC.  Which is the always the problem for these things.

The twin brother is not younger than the spouse, so no.

https://www.irs.gov/pub/irs-pdf/p5334.pdf

I believe the Shared Responsibility Payment is zero for 2019, not gone.  I am telling my clients there is a difference between setting the penalty at zero and the SRP being gone.  I can see it being a positive number again, and guess who will get blamed when they have to pay a penalty again?  "But you told me..." 

Yes, and I know you always listen to me and would have bought insurance if you had only known.  Right.  Nice try.  /s

I'm advising clients to research (call me) before they make decisions if the SRP is a factor in their decision making.

I don't carry it.

That was beautiful.

51 minutes ago, Catherine said:

Get a really good engagement letter, and get a BIG retainer, up-front - and make sure it CLEARS - before you do anything for this guy.  And tell him right off the bat that his chances are not zero, but not good.  Put that in writing in the engagement letter, have him sign and date it, and you both keep a copy.  

I handled an EIC/CTC audit for a grandmother a few years ago, and it went great.  She was really the grandmother, and the kids really lived with her while the parents were incarcerated.  She had been my client forever, and I had plenty of "proof" before I prepared the return.  We got some more items together, and IRS was satisfied.  I really hate refundable credits, but I felt very comfortable that she was entitled to the refund.  I certainly would not go out on that limb otherwise, correct.

1 hour ago, Christian said:

Are step children and step grandchildren allowed as such after you have been divorced from your wife for several years ? I have no clue. So much for having a kind heart for a family in need. Now his former wife has refused any of the birth certificates he probably needs. Whether he can obtain them from the State of Virginia I really don't know. Even so there remains the question of whether the Service will recognize these people as relatives since he is no longer married to their grandmother and has not been for several years. Anyone have any suggestions?

The step child is still his step child, and the step grandchildren are still his step grandchildren:

https://www.forbes.com/sites/peterjreilly/2014/06/23/step-kids-remain-step-kids-after-divorce/#82fc21271b04 

A birth certificate just proves somebody was born.  Your issue would be proving they lived with him for the proper amount of time.  If you take this on (I might if he could convince me they did, and produce plenty of dated documents with their names, and his address - like school records, medical invoices, Forms 1095 B, etc.)  here are two documents I'd read first:

https://www.irs.gov/pub/irs-pdf/p596.pdf

https://www.eitc.irs.gov/eitc/files/downloads/f886-h-eic.pdf

7 hours ago, Catherine said:

Oh, good, it's not just my office that still talks about "Line 21 income"!

3 hours ago, Lion EA said:

And, line 10 refunds, and what are we going to do next year when they redesign the forms and renumber?!

Dear Lord, just let them go back to the forms we know.  Amen.

Three stacks here in the office; two are new clients, and I'm about finished with them.  Four that I can think of who haven't dropped off, but I see on Facebook that two had nice vacations last week.  I'm about finished with them, too, if you know what I mean.  No, not firing them, just not going to care more than they do.  When they wander in, I will thank them kindly and say I'll be in touch in the next few weeks. 

1 hour ago, MacGyver said:

That's a really good point.  

I think it gets adjusted for those who are not 4361 over on Part II of the Schedule SE Adjustments Worksheet and then transferred accordingly.  It looks like Turbotax places "STMT" next to one of the SE lines, and adds a Statement after the form.  That might allow it to be placed on the Schedule C, but I think the real question would be is it allowed?  If we are to read Topic 417 to the letter, it says "employee," though it isn't written that way in Pub. 517.  Are tax topics binding?

Oh, I thought you had already determined that he had a legitimate HA exclusion and were asking how to report it.  No, tax topics are not binding.  Yes, absolutely, if you're not sure he's entitled to an exclusion for HA, by all means determine that first.  In addition to the points Margaret made, the payer had to designate the HA prior to paying it.

7 hours ago, MacGyver said:

Rita,

I know this is a really old post, but I just wanted to say, thank you.  This has been a horrible thing to try to research as all the keywords you need, "Schedule C," "Housing Allowance," etc. are in all articles you don't need.  How I missed the word "employee" on that page, I don't know.

The situation I was researching is an ordained, Board Certified Pastoral Counselor, running a practice as a sole proprietor and reporting on a Schedule C.  A Form 4361 has been approved by the IRS, so none of the income from that Schedule C passes to the Schedule SE.  The challenge was how to take the Housing Allowance.  To my way of thinking, it would perhaps report on Line 27 of the Schedule C so it would reduce the AGI, but I just couldn't seem to find a way to trigger the forms needed in the software without entering the allowance from a W-2.  I was hopeful the Schedule C practice should be able to designate the allowance.  Your post is the first thing I've seen to give a good reason why I can't seem to make it work.

If any of you have any additional insight, please share.

Thanks again. 

Thank you as well, MacGyver, I've not had a Sch C clergy with housing allowance, but I would say entering the legitimate HA on Sch C would not be correct because that would reduce income for SE purposes.  I know your client does not pay SE tax, but others do, so Sch C would not be the place.  In thinking how to reduce income for income tax purposes only, my first thought is to enter the HA on what used to be Form 1040, Line 21.  (I think it's on a Schedule for 2018 but still Line 21.)  Others in this thread have dealt with this, and they'll know more than I do about this one. 

Yes, the Form 1040 changes.    I loved the ATX federal comparison of 2018 to 2017 since I found the 2018 form changes to be about the worst thing ever, and it was far easier for me to flip over to the comparison and explain things when I went over returns with clients.   I printed the Form 1040 comparison for every return, and I thought it was a lifesaver.   Nothing like seeing a figure in the middle of a full sheet of paper with print on half of it and wondering where the heck did that come from??  And what numbers got added together to get that number on the right?  Also, a handful of my folks didn't have enough withholding (thankfully not many), and it helped show them they really got a tax cut; it's the liability that counts.  Really hate the 2018 form changes so much I can't even tell you.

13 hours ago, BLACK BART said:

Ha-ha!  Girl, I just hate to argue with you about tax because you're always just so...so... (what's the word?) conscientiously right!  And I have to give you credit 'cause those thinned-out Tennessee filers surely can't be as easily replaced as Lion's high-rollers from New York.  So anyhow, keep that integrity intact; meanwhile I'm gonna see if I can scratch out a few dollars from cabin-flippers near Dogpatch.  If it doesn't work out, stop by sometime on visitin' day.

Best regards, BB

It skeered me when I saw I got quoted again, Buddy.  I thought I had started a big ole war in our family here.  Nope, I'm not always right, but I've got three kids watching me, and I try not to confuse them.  Best regards to you, too, my friend, and thank you.  You are so much fun.  Your kinds words and sense of humor mean a lot to me.  Just tell your cabin-flippers their danged SS checks are gonna be slim, and Rita warned em.  I ain't even mad when people shoot themselves in the foot.  They'll be posting those memes on The Facebooks asking, "How come Congress expects me to live off $12,000?!"  Cause you been swearing you do, bless your heart...   

On ‎9‎/‎12‎/‎2019 at 12:07 PM, cbslee said:

Actually my decision making process in a gray area like this is based on:

1.  Discussing the issues/risks with my client.

2.  Evaluating my client's level of risk taking or risk aversion.

3.  Asking myself whether this is a "red flag" potential audit triggering issue.

 

...I will admit to being too lax in several areas.  This year as I am easing into semi-retirement I have been tightening up on my client's compliance in those areas.

 

We appear to use very different methods to decide upon positions on returns.  I complete every return like it's my own.  You probably do as well.  Agree to disagree. 

3 hours ago, Richcpaman said:

Is this a question about "Audit Risk"  The answer to that one is easy.   There isn't a lot of it anymore.

But I still sign the return based on what I know and what I believe to be what is right...

Rich 

Completely agree with these statements. 

I think there are very few gray areas; I actually study until areas are not gray to me.  I think that's part of my job.  I believe the activities of the clients in the examples in this thread show active participation in a trade or business and are subject to SE tax.  They are rehabbing houses, just like my older son rehabs cars.  It seems that clear cut to me.   The article Max posted is excellent, and I might be a little too strict sometimes.  I will just add that if you truly believe you have a tossup, and you're letting your client decide how to report a flip, you need to make sure he knows how Social Security benefits are figured. 

I tend to oversimplify taxes and overcomplicate everything else.  If you buy an asset thinking you'll sell it when it appreciates without you working on it, you're an investor (Sch D).  If you buy a house to fix up and you think your work (including the work you do to hire the other people who work) will lead to income, you're a dealer (Sch C).  Yeah, I lose a few clients being like this, too.  Not many, but I'm fine with it.  The last one qualified for EITC whether I used Sch C or Sch D,  but I hope she had an investment gain that knocked her right out of it the next time she fixed up a house, and the guy who amended my return lost sleep over it.  What to do, what to do...  Yeah, I know, he didn't, but still...

23 hours ago, ILLMAS said:

TP was sole-proprietor for many years, in 2016 TP incorporated but forgot to change the FEIN on the merchant account and received an IRS notice that he didn't report $XX for 2017 and he paid the tax.  In 2018, TP recieved the 1099-K which again reflects TP SS#, but the sales are from the corporation, at this point in time, you recommend to the TP to contact the merchant service and have them amend the 1099-K, or report the income on Sch C and create an expense "Will be reported on corporate tax return" for the same amount to zero out?

Thanks

I would do the work around you suggested, entering the amount on Schedule C and then deducting it with an explanation on p. 2.  Yes, of course, your client can ask the issuer to amend the 1099-K, and that would have been a really great thing to do seven months ago.  I would do what is expedient for me, and call it a day, as my friend Abby says. 

Some would say just don't address it on the personal return, let the client get the letter, have a light stroke, (or get mad at you - they do that) and then charge client to explain to IRS what happened.  I really can't charge enough to like fixing these things, and the "fix" is going to be saying exactly what you're saying now.  Additionally, three weeks after you respond to the letter, the client is going to trot back in there with the letter that says, "We got [one of these six things] from you, and we need two months to let it lay around but we'll get back to you.  That's your fault, too.  /s

On ‎8‎/‎23‎/‎2019 at 9:43 AM, Evan S. Golar said:

50% Waiver to non-1099R distribution

A client who is required to take an RMD from an inherited IRA doesn't take it for 2018. Reason is irrelevant - but simply there was a screwup with the custodian.
An extension was filed for 2018 to allow more time to receive the 2018 RMD prior to filing the return to request the 50% waiver.
What happens if by October 15th the RMD isn't received? Is the 50% waiver request invalid because the return should have been filed by Oct. 15th, or does it carry through so long as the
RMD is taken prior to filing the return?

Evan, in June 2019, I had a client to FINALLY take withdrawals to cover RMDs for 2017 and 2018.  (They blamed the custodian, but come on, I told you two years running you had to take RMDs, the custodian probably gave you paperwork you didn't read, etc.)

I completed Part IX of 2018 Form 5329 and attached a statement to it when he made the withdrawals in June 2019 (the due dates for both RMDs were in 2018:  4/01/18 and 12/31/18), and he mailed the Form 5329 by itself.  I don't know the answer to your question, but I'd go on about my business and complete the 2018 Form 1040 and deal with the waiver request when the RMD withdrawal occurs.

If you’ll look at Form 4506-T, I believe Line 8 indicates you can get Wage and Income Transcripts as far back as ten years. 

On ‎7‎/‎31‎/‎2019 at 8:54 AM, Roberts said:

I hate it when high income people show up at my office wanting to pay me to work. As a small business owner it's sort of a nightmare scenario to be paid.

I just had a neighbor that my former partner let go after preparing the 2009 return come to me because his kid needed 2017 filed for higher education purposes:  I know I'm a mess, the EA who's been doing my return is mean, will you please help me? 

Yes, as a matter of fact, it's July, and I like to eat, wear clothes, and live indoors.  Let's see if we can regroup.  LOL.  It went very well.   A lot of times it works out. 

On ‎7‎/‎19‎/‎2019 at 9:23 AM, Christian said:

Much to my astonishment I received a large estimated tax penalty myself. I have not received one in more than ten years...

In the spring I had three clients call me shocked at receiving the penalty for not making estimated payments.  After I hound them for years to make payments, and nothing happens when they don't, as soon as I ease off, this is a priority for IRS.   "Oh well, I'll make the estimated payments; I didn't know."  Uh, yes.  Yes, you did know.   

Sorry, that's not helpful; I just wanted to say it. 

I was thinking last week, "If only they'd go back to the old Form 1040."  Fingers crossed.  I apologized to a client just a few minutes ago for the 2018 forms.