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DANRVAN

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Everything posted by DANRVAN

  1. You are making it way to complicated. You don't need to read past paragraph (a) titled "Deduction Allowed".
  2. Wages are not reduced on form 941, just the employer's deposit liability by the credit. That is true to prevent a double benefit.
  3. Incorrect. Suggest you review sect 172(a).
  4. Maybe some confusion in how I am reading your statement; but I think you are referring to the year of loss and carryforward computation. In the year of deduction the limitation is taxable income (with 80% rule) without regards to section 199A.
  5. We also have a lawyer on our finance committee that offers help with those types of issues.
  6. Oh, that changes my answer. per: https://www.irs.gov/charities-non-profits/churches-integrated-auxiliaries-and-conventions-or-associations-of-churches "Churches (including integrated auxiliaries and conventions or associations of churches) that meet the requirements of section 501(c)(3) of the Internal Revenue Code are automatically considered tax exempt and are not required to apply for and obtain recognition of exempt status from the IRS." So now what is the next step? If this was my local parish, I would furnish the above information to the investment group. If that did not work, I would ask the CFO of our Diocese for help in resolving the matter.
  7. Out of curiosity, auxiliary to what type of organization? It looks like they will need to apply for tax exemption.
  8. Have you tried the IRS TEO search? https://apps.irs.gov/app/eos/
  9. Now I am convinced it was made up as well, after I have beat it up trying to figure out how sec 6694 could apply!
  10. In OP situation there is zero liability or understatement on the 1120-S; even though the preparer of the return is subject to 6694 per Rev Proc 2009-11, (which also includes form 1065). As I explained in a post above, in order for 6694 to apply in this case, it would come from an understatement of the shareholder's income tax liability. For example if a sole shareholder claimed a $50,000 tax free distribution instead of a wage, the understatement of liability would end up on his form 1040. If in fact that is the case, the 6694 penalty would be avoided by using a 1099-NEC (right or wrong) to avoid the 6694 penalty as I also mentioned.
  11. Sound like the guy Terry mentioned in his OP specialized in those.
  12. That is the key. If filed by Dec 15, the return will be two months late from the extended due date. If filed after Dec 15, three months. If e-filed after Jan 15 four months, so the late penalty increases from 10% to 20% between now and then. Even though there might not be any penalty because there is zero tax due, that could change if there was unreported income, or denied credits or deductions. The return is now eight months past the normal filing date. They can wait a little longer for a refund if that what it takes; I am not sitting on unfiled returns for 30+ days for a number of reasons.
  13. That is true, but it is not going to result in a section 6694(b) penalty of $5,000.
  14. Okay, here is a possibility. Accountant prepares 1120-S and K-1 showing distributions and zero wages while there was no doubt shareholders were providing substantial services to the corp. Then accountant prepares 1040 (or in this case 20 of them) based on the K-1 he prepared which shows zero wages. Now there is an understatement at the 1040 level and IRS as the burden of proof to show: a. There is an understatement of liability which is due to a willful attempt in any manner to understate the tax liability by the preparer, or b. The preparer has recklessly or intentionally disregarded rules or regulations. In this situation, there should not be a substantial understatement on the 1040 (and lets leave off the 199A deduction) for the year in question by reporting on Schedule C instead of W-2 wages. And since there is not a significant understatement, there is not a potential sec 6694 penalty. Although the 1099-NEC amount could be reclassified as wages, the bottom 1040 liability should not be significantly different. Not saying that is the proper way to handle it.
  15. But does not result in an understatement on 1120-S by the preparer.
  16. The return is considered filed on the date it is postmarked, regardless of when it is actually processed. If the return is e-filed after January 15th, there is two additional months of late filing. Why would that be an issue?
  17. But that does not understate the tax return as signed by the preparer; 1120-S. Therefore section 6694(b) does not apply. Same thing, there is no understatement on the 1120-S. There cannot be an understatement penalty if there is no understatement, I would question the CPE provider. So he is saying 20 x $5,000, I say prove it. The only penalty I can see would be under section 6701 as to the resulting understatement on the clients form 1040 for reporting a distribution vs a wage. Maybe the IRS could take the position that preparer's role in preparation of the 1120-S was an act of aiding and abetting understatement of tax liability on the individual's 1040. However, the maximum section 6701 penalty is $1,000 for an individual tax return. So I question how the presenter came up with $100,00.
  18. I question that. The $5,000 penalty falls under sec. 6694(b) for understatement due to willful or reckless conduct on behalf of the preparer. First of all, the unreasonable wage issue does not result in an understatement of tax on the return. Secondly, I don't think the preparer really acts in a willful or reckless manner in these cases, he/she is just reporting on the actual facts and representations of the client. I am not trying to justify a non-reasonable wage case, but question the potential preparer penalties. And I agree 100% with you!
  19. The $5,000 penalty falls under sec. 6694(b) for understatement due to willful or reckless conduct on behalf of the preparer. Have you seen an actual "Reasonable Compensation" case where sec 6694(b) was imposed on the preparer? I have not. Yes, that would be the correct thing to do. There appears to be a common practice of reporting the distribution on 1099-NEC for the year in question, and then bringing client into compliance in following year. I think that would be a questionable practice.
  20. I believe it is best to advise the client to pay as soon as you determine the liability if they wish to minimize interest and penalties.
  21. And you don't want the smoking gun pointed at you when client gets extra months of late filing penalties due to waiting to efile on an unknown date in January. My advice is to file by mail ASAP, don't sit on it.
  22. The E&O carriers and AICPA are currently backing away with concerns the reporting might be seen as a legal matter, but I think that might change once the dust settles. For my existing clients I refer them to the Jan 2024 vs 2005 reporting requirements.
  23. It is actually a well written document with a table of contents, chapter summaries, checklist, flowcharts and examples. About 30 minutes to get a good grasp. Or corporation or entity registered with Sec. Of State (page 2) unless exceptions are met (page 4). One takeaway is the filing deadlines: "If your company already exists as of January 1, 2024, it must file its initial BOI report by January 1, 2025. If your company is created or registered to do business in the United States on or after January 1, 2024, and before January 1, 2025,..."
  24. I don't think this is correct You are correct, only LTC can be taken separately.
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