BHoffman

I’m doing OK with all of this after the shock of my dad’s passing resolved, but I’m making decisions from now on based on the effect on quality of life.  Period.  Starting with firing any and all PITA clients.  

Last summer my dog died, my aunt died, my childhood friend died, my mentor shot and killed herself.  These things all happened within a 10 day period.  Then, my dad died unexpectedly in his sleep in January.  I'm completely rethinking life's priorities.  

Does anyone file form 8275 to disclose that the 1099C is not on the tax return and the reason why it isn't (Treas. Reg.)?

The 1099C was for $12 k.  She is going to contact her son to find out if he also received one.  

From what I gather, the bank can go after the co signer for payment if the borrower defaults, but only the borrower gets a 1099C.

My client co-signed a student loan with her adult son with Chase bank and has now received a 1099-C.  I've been researching and found Treasury Reg Sec 1.6050P-1(d)(7).  I believe it says Chase should not have issued her the 1099C.  I gave her a copy of the 1099C (she had not opened the envelope!), but if all else fails, how do I report this and then exclude it from her income?  I was thinking of form 982 with no exclusion box and including the following note:

"PURSUANT TO TREASURY REGULATION SEC. 1.6050P-1(7) THE 1099-C ISSUED MISTAKENLY TO HER BY CHASE BANK IS EXCLUDED AS SHE WAS A COSIGNER ON THIS STUDENT LOAN.  THE BORROWER IS HER SON."

Or, is she on the hook?  Her adult son is probably insolvent.  Any advice?

Great info!  Thanks, Judy

Client is a MMLLC taxed as a partnership (MMLLCP).  One member is an individual, the other member is a MMLLC (MMLLCM).  The MMLLC partner is going to buy out the individual.  After the buy out, do I report the results of operations of MMLLCP on MMLLCM's form 1065?  How?  

Tom,  do you think the expanded CTC will offset the lower write off for those taxes for your middle income clients?  

A lot of my middle income clients are eligible for the CTC, and a bunch of them will be taking the standard deduction instead of having to itemize since their mortgage interest isn’t that much.  I’m curious about how much my Sch A fees are going to drop.  

The DPAD is repealed and replaced by the 20% deduction available to pass throughs.  Almost all of my business clients will be eligible for it.  It’s going to be nice to forego the whole DPAD calculation.   No more like kind exchange calculations for vehicles and equipment, just real property.   If only they had addressed look back interest, my other bane, this would have approached bliss for me.  I think they did raise the revenue requirement for reporting on the accrual basis from ave $10m to ave $25m.  

So far, so good but it’s too early to tell.  I think the real proof isn’t going to be evident until after we are finished with the tax season when this all takes effect.  

I'm probably a dinosaur, but up until this year I mailed out pre-tax stuff - engagement letter, privacy letter, organizer, etc.

This year, I sent that stuff as an attachment for clients who have email.  There are only a very few who don't.

Big difference, and no paper cuts! 

I try to avoid appointments and prefer either scanned or mailed docs.  Sitting there listening to all the non tax stuff while they cough and wheeze with the flu, using my bathroom and leaving a mess, bringing the kids who climb my curtains and interrupt every 5 seconds....it’s a gross waste of time. And I have to change out of my comfy jammies and wear shoes.  :*

Quickbooks for most W2s and Drake CWU for 1099s and W2s not on QB.  I prepare about 100 W2 forms and around 30 1099s.

FDNY - If you and the client have already determined his reasonable salary at a hefty $260k per year, and his hours haven't changed, then why would he need to increase his salary just because his investment in his company is doing well?  Unless he is the only one providing goods/services for sale to his customers I'd say that no one is going question his salary.  He's already paid taxes on the cash used for his distributions. The whole premise of the S Corp is to pay FICA only on income that is earned, and avoid the double taxation on dividends.  

I think we get tangled up with the reasonable salary for S Corp shareholders because there is no set calculation. The tax court cases were all about heinously low salaries and huge distributions. The court recharacterized that portion of the distributions to closely meet the SS wage limit in every case.  I think it's a relatively safe bet that the SS wage limit would, in most cases, satisfy the reasonable salary requirement. 

Tax court cases involving reasonable salary for S Corp officers generally settle on the max Social Security wage cut off.  See the above Forbes article for the specific cases. 

Here is the IRS fact sheet FS 2008 25 cited in the article:  See "What's reasonable compensation?"   I am curious about this  

https://www.irs.gov/pub/irs-news/fs-08-25.pdf

Cbslee,  I wholeheartedly agree that the client should take adequate payroll.

Sorry to have veered off topic by bringing up the question of whether SCorp salary can be an issue if the shareholder takes no salary, and also takes no distributions.

19 minutes ago, cbslee said:

That doesn't make sense to me since the the taxability of income from an S Corp is based on S Corp profits not on whether income is distributed.

You should take a good look at all the components of reasonable compensation for this client .

https://www.forbes.com/sites/anthonynitti/2014/02/04/tax-geek-tuesday-reasonable-compensation-in-the-s-corporation-arena/6/#5cf75f1641a2. See the last paragraph of the article.  This is a contentious issue, but if the shareholder received no distributions then perhaps there is nothing to re characterize. 

Did the SCorp shareholder take any distributions?  A discussion during a CPE class seemed to imply that no distributions means there is nothing for IRS to reclassify as missed reasonable salary. 

https://www.irs.gov/individuals/w-2-verification-code

More info in the above link.  I'm hoping if/when it becomes mandatory, payroll software like QB will be able to include the code.

Update:  I got the ownership info for this new client from the AZ Corp Commission website.  NOW they are telling me that they intend to change the AZ LLC to a multi member, so it will a 1065 after all. I'm so glad I gave them a high estimate of fees with a retainer up front.

I have an AZ LLC with its single member being a DE LLC.  The single member of the DE LLC is a DE Corporation.  The AZ LLC is a construction contractor.  The DE LLC does nothing except hold the interest in the AZ LLC.  The DE Corp does nothing except hold the interest in the DE LLC.

Since the AZ LLC is a single member disregarded entity, what form is used?  I'm thinking the operations are reported on the DE Corp 1120 and there are no tax returns filed at all for the LLCs but that seems strange....any advice?

Sue and Sally will show zero ending ownership percentages on their K1s.  IRS does not match K1 forms like they do 1099s. I think there is a statement that shows ownership changes.   

See if this helps. http://smallbusiness.chron.com/terminate-s-corp-election-revert-llc-23511.html

The UPE is deducted on his Schedule E page 2 on his form 1040 and appears nowhere on the partnership tax return or his K1 from the partnership.   The UPE must be shown as a separate line item on the Schedule E page 2.   I'm not sure what limits the amount of UPE other than perhaps the usual issues:  partner's basis, amount at risk, etc. in the event that the whole transaction (K1 income - UPE expenses) results in a loss.

The sale is supposed to take place this year 2017, but I don't think that's going to happen.  The company provides medical care and exclusively bills Medicare.  The correct estimate of collectible AR is hard to determine, and they still have open AR from a year ago.  I can give an educated guess that around 20% of open AR will not be collectible.   I think that is going to equate to around $600k in bad debt.  A material amount either way   

Should the company start booking an allowance for bad debt?  The broker isn't going to like that.  I'm going to press on the client how important it is to have the collectible amount on the books, and not just what has been billed.  

Judy, I did read that article and it is printed and kept in a special folder that I will refer to for this transaction.