Kea

You really should file the change of address. I had this situation when the last "rebates" were mailed out. Client had told me that he had always filed with the PO box. I changed it to the street address just when the IRS needed the real place to mail the check. We filed the change of address so he could get the check. It worked.

New client came in for me to do their 2006 and 2006 tax returns. She brought me the 2001-2005 returns. (2001-2004 were prepared in Sept 2005.) There is no depreciation or Section 179 taken for 2001-4. There are items listed as "other" on page 2 of 2003 Sch C that appear to be assets: Trailer $1721 Portable Office $2053 Storage Unit $1976 For 2005 Schedule C "other", they listed: bid plans / septic plans $2277 (this is OK?) Septic tank - construction $18,602 And (my favorite) took section 179 for Mobile home office $34,013. For the assets shown on the 2005 return, I can just file an amended return since the accounting method has not been used for 2 years - right? (06 has not yet been filed.) The 2003 changes would require a Form 3115 - right? What is the impact if the client decides not to make these changes? I'm sure they won't be eager to pay many thousands of $$. Although, she did ask me to review the old returns for mistakes. Thanks for your help.

Thanks Eli, I'll check with her tomorrow.

My client has $ amount showing in box 14 labeled "RET." This money is being taken out pre-income tax (is the same as the difference between box 1 and box 3). She does qualify for the retirement credit. I asked her to check with her employer if this was a 401(k) or 403( since it is not reported in box 12. The employer told her it is not either of those, but just "regular retirement." The employer is the county government. Box 13 does show an "X" in the retirement box. Is this eligible for the retirement credit? If unknown, what other questions should she (or I) ask the county to determine if it qualifies? I did see the post that said that 414 pensions do not qualify. Is there a list of plans that do and don't qualify? I tried looking through the IRS site, but could not find one. (I may not have been using the proper search terms or not looked at enough pages of results.) Thanks.

I am working on my first installment sale and I want to make sure I am doing this correctly. In May 2007, my client sold land for $113,000 total -- $25,000 down and $500 per month until paid in full (176 payments). They did not include interest. Thanks to your help on this board last November (when client informed me of sale), I know to use an imputed interest based on the AFR published by the IRS. In this case it is 4.79%. I have created an amortization spreadsheet and calculated the present value of the loan to be $63,128.76. Client purchased land in 2003 and has a total basis of $29,995. Client paid closing cost @ sale of $785. In reviewing Pub 537, I see where it discusses Section 1274 vs. 483. Since the sale is for less than $250,000, it is Section 483. It is "unstated interest" not OID. I am not sure however, what difference this makes. (I know a little about OID - took a class about 10 years ago and hoped to never see it again -- even though I like numbers and nitty-gritty math.) Based on my amortization spreadsheet and the 6 payments the buyer made in 2007, I calculate $1503 went to principal + the $25K down payment, and $1497 went to interest. I then report the $1497 on Schedule B (buyer name - installment sale) This is how I am completing Form 6252: Line 5 $88128.76 (PV 63,128.76 + down pmt 25,000) Line 6 $0 (client owned land outright) Line 8 $29,995 (basis) Line 9 $0 (no depreciation) Line 11 $785 (atty fee) Line 21 $26,503 (down pmt 25,000 + portion of pmts that are principal 1503) Line 26 flows to Schedule D. Is this correct for a Section 483 transaction? What would have changed if it were Section 1274 (or, do I not want to know?)? Thanks!

Deb, Sorry about that. The first part of my comment wasn't really appropriate. I hadn't noticed that you were in CA - and that you already knew that part. Revised answer - I don't know.

Deb, In general, married couples living in community property states do not come out better with MFS. This is because everything has to be split down the middle between each of them. At best it comes out the same, and can come out worse if they don't qualify for certain credits. (There can be exceptions where some income may be separate property.) I live in Texas (a community property state) and never even calculate MFS vs MFJ -- it's not worth it. I know you used to not be able to e-file MFS in community property states at all. It seems like the rule changed recently but you have to fill out some worksheet to do it. Like I said I seldom do any MFS. I hope that helps.

Thanks Terry, I knew he qualified so I didn't mention that part. I did check the rules and he is not required to have had a job prior to the move. Persons returning to work are eligible ("distance test is met if the new workplace is at least 50 miles from the former home." Quickfinders page 4-17). Chicago to Houston is over 1000 miles, and Austin to Houston is 150 miles. After graduation he started a job and is still there (and plans to remain there for the foreseeable future. It seems to me that he would use Austin to Houston since that had been his "permanent residence". But at the specific time he moved, it was from his temporary home in Chicago. Or, does driving a U-Haul truck for moving the stuff from Austin to Houston count as his one trip? Thanks.

Client and his wife had lived in Austin. Client went to school in Chicago for about 2 years to get MBA. Austin was still his primary residence and Chicago was temporary location for school. He did not work in Chicago, but did have a short-term job in Austin in 2006. In April 2007 he got divorced and moved some stuff to storage in Houston (he rented a U-Haul). After graduation in June (or May?) he moved to Houston without going back to Austin in between. He can count U-Haul rental and one month of storage. He did not move any "stuff" from Chicago to Houston. But for mileage expense - does he count Chicago to Houston or Austin to Houston? Thanks

I'm glad I could help. (I'm usually just asking questions.)

I've had the version that only lets you have 3 states. Maybe that's the difference.

Client is a 2nd year freshman and signed up for 2 classes. Then she got sick and dropped one of them. Even though she stayed in the 2nd class, she didn't actually complete it. Is she still eligible for lifetime learning credit? I don't think she can get Hope credit since she was no longer a 1/2 time student after dropping a class. (The 1098-T does check the 1/2 time box, though.) FYI -- Box 2 shows the amount for the 2nd class and a portion of the 1st (dropped) class. Box 1 is $0 even though the loan company paid the amount in 2007. It's my experience that the 1098-T is not always accurate. (It is a loan, not a grant.) Thanks!

Insert the disc and do the install again. It won't overwrite anything. Just pick the extra state you want. You would think there would be a better way.

My understanding is that it means it costs too much.

Existing client got divorced in early 2007. His wife was self-employed and claimed office-in-home. Client planned to sell house but could not find buyer. Decided to rent it instead. The basis for the rental house should be the basis at the end of 2006? Even if ex used as OIH in 2007, depreciation would be minimal. I could find out date she moved out and calculate depreciation she would be allowed. (I haven't talked to her this year. Don't know if I will. No kids, and based on their situation, I don't think it will cause conflict of interest if she were to come in. I won't call her.) Texas is a community property state. Does this affect the 1st few months. They were divorced by 12/31 so they will be each filing as single. I doubt they would be reporting any of the other's info. Thanks.

I agree with Gene. I have a client who fosters dogs for a rescue organization. While she has temporary custody of the dogs, she pays the vet bills and vaccines, etc. She got all the 501©(3) info from the rescue group and we deduct these costs. These are costs that would otherwise be paid by the rescue group if they were not being fostered. Sometimes she adopts the dogs herself. In these cases we do not deduct these costs.

I just got a forms packet from IRS. I haven't received one in over 10 years, and I've e-filed for almost that long - including last year. This booklet is about the size of a Pub. 17! I wonder of other people are getting these forms unnecessarily. What a waste of paper, time and resources. I've been an authorized e-file provider for 9 years. Why would I all of a sudden want to do my own return by hand and mail it in?

Yes, it passed last month.

Don't I have to show a sale of business property? Would I show it as sold for $0? Take a capital loss and charity deduction? Sounds like double dipping.

A client called today to say she wanted to donate land to a church. She owns 7 acres and has been renting out. She is considering: selling it to them at a discount selling outright and donating proceeds or donating a subsection of it. The shocking part is that she is asking me before taking action! My instinct is to advise her to sell the land and pay tax at the max 15% capital gain (all land so no depreciation) then donate the cash and take the Sch A deduction. At that point, she can decide exactly how much she wants to donate. Since it has been rented I don't think I can use the strategy for donating appreciated assets (and avoiding the capital gain tax). Are there other options that my pre-tax season brain is not thinking of? Thanks.

I bought a computer with Vista Home Premium a couple of months ago. I installed Saber / 1040 from 1998 - 2006 on it and they are now running. I'm not on a network so I can't speak to that issue. I did have to reinstall several times to get them to work. I had the most trouble with 1998, but I only had the demo version for that. I'm not sure if that was the problem or if it was designed for Windows 95 (or 98) and not for XP. I've been thinking about posting the procedure that worked for me, but I've procrastinated in writing it up.

Thanks KC. I don't see many bankruptcies, but I thought I remembered from a very long ago class that it depended on the chapter of bankruptcy. Under one it was taxable and under the other it wasn't. I know a recent law made it much harder to file bankruptcy. Since I am now aware of a client about to file bankruptcy (versus only seeing it at tax time), I really need to update my research. Thanks!

I would be interested in seeing what you find out. I hadn't even considered the possibility. I have a client whose husband died in November. Due to his large medical bills, she will soon be filing bankruptcy (yes, they had insurance). I don't know if she will be able to sell the house or if they will include it in the bankruptcy (not required in Texas, but she can't afford it on her $10/hour income). They've only had the house 3 years, so there is little equity. But if it isn't sold, and the principal is forgiven in the bankruptcy and that gets added to her income, she will never get the tax paid off. If this new law could help her, I would love to be able to give her that news. It might be the only good news she gets for awhile. She's only 30 and having to start her life over as a single woman. If I can help her minimize the debts related to her husband, it would be great. Thanks.

From these charts alone, we can't say that the "bottom half of all taxpayers got their taxes cut by 25%", only that their share of the total of taxes paid went down 25%. The share that is paid by the top 10% went up 5.8%. Is that "significantly"? That's hard to answer without more information. Also over this period the UPPER threshold for the bottom 50 percentile group went up almost 17%, while the LOWER threshold for the top 1% went up over 24%. (The lower threshold for the top 10% went up 18.5%.) While I agree that these statistics are interesting (I am a numbers junkie), they don't tell us anything about the tax rates paid by the various groups. I would also be interested in seeing charts of net income tax rates paid by quintile or decile for the same time period. How does it change if you add in SSI / Medicare?

Interesting possibility .... http://news.yahoo.com/s/ap/20071202/ap_on_go_ot/tax_hit_5