DANRVAN

But does not result in an understatement on 1120-S by the preparer.

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?

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.

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!

Good policy!

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.

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.

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.

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.

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,..."

I don't think this is correct You are correct, only LTC can be taken separately.

I agree with Bulldog. Appears 1023-EZ is effective.

For 2022 he should have been able to deduct the following if each item not eligible for employer plan: LTC both him and wife; wife's medicare; and wifes supplemental.

What is the source of your post Lee? EDIT: now I see it on you subject line!

Then med insurance premiums up to that amount including LTC and medicare (but see below) are deductible. See section 162(l). If under a sec 105 plan, then not taxable. However, the medicare reimbursement would be considered a subsidized health plan; therefore the remaining 25% would not be deductible as SEHI, but that does not effect supplemental or LTC. I am not aware of anything in the code that would prevent a new retiree from starting up a part time business and make just enough to cover his and hers health insurance premiums.

Are you referring to 2022 or 2023? So he was both an employee and self-employed until Dec 2022?

That is correct, assuming he was the original sole owner of the stock and did not aquire through purchase, inheritance or gift. That is correct. Since the C-corp is a separate taxable entity, retained earnings do not change basis and are subject to double taxation. His basis equals his investment; internal transactions do not change it with a C corp.

Just curious how you have now determined it had not been depreciated either in full or part? Also, how are you going to determine if the improvements (either in full or in part) have not been written off as expenses over the years? In order to include the improvements in the 481(a) adjustment, you will need the date placed in service to determine the amount of depreciation allowed or allowable.

Section 645 is one of the shortest sections of the code. Anyone working with estates should be aware of it.

If you did not switch to a calendar 2 years after DOD (assuming a 706 was not required) you would be out of compliance to continue with a "fiscal" year. Also, you should know that a 645 election is irrevocable; you can not terminate it until the election period ends.

A 645 election. You mean to a calendar year? You must not be familiar with an election under section 645 which allows the trust to file as an estate, however there is a time limit. In most situations, the election period ends two years after date of death. So for 2022 two returns (and related K-1's) are required regardless.

So are you saying brother A will receive an additional amount for the unpaid taxes of his brothers; and then take the responsibility to pay the county? If that is the case, it becomes a wash for him. No additional income or deduction.

Meant to say " greater of the amount he paid for the 2/3 or the basis of the transferors"

In theory his is taking the brothers basis as adjusted immediately before the sale. $66,000. But in practice he is taking their disallowed loss and adding it to his actually cost basis from the July transaction. Either way the result is the same, $66,000 basis for 2/3 interest. The result would be the same if we look at it as partial sale / partial gift since he paid less that fmv to brothers. In that case his basis would be the greater of the amount he paid for the 2/3 of the basis of the transferors (brothers), or again $66,000. However I don't think we can call it a partial gift since the transaction lacks the element of gratuity. Are you saying he has paid some of his brothers' share of the taxes and is expecting reimbursement from escrow? If so, has he previously deducted the amount paid for his brother's share?

Yes, the return must be filed and payment made by March 1. They are multiple IRS sources to confirm. In those cases, I politely terminate the call. Then call back and talk to someone else with more knowledge. When I make the initial call, I have a copy of the POA ready to fax the rep on a separate phone line.