Edsel

I wish QB had never been invented. Yes, it works. Yes, it has capabilities. But yes, it allows any irstwhile business to create their own accounting mess. When the advertised features of a product tell you This will allow you to do anything you want to do, and You can do everything yourself ...then you end up with what you deserve...

Oregon - no sales tax. Washington - no income tax. Do y'all have border wars? People crossing the river to buy groceries? Crossing the river to get a job?? I don't even know what river it is. Snake? Columbia? Both?

cbslee, I like your title "Too Big to Fail". From my point of view, "Too Big to Fail" should be synonymous with "Too Big to Exist."

Catherine, FINALLY a gal after my own heart!! I can just hear them whine and whine about not getting a free pass into your bank account. And a free pass is exactly what it is! I'm not opposed to receiving an e-mail with a notice due, and then sending an ACH payment. That way I remain in control. Let's face it -- there is a savings in postage, printing, mailing, labor involved, etc. that the vendors are bailing out of. And they have no intention of passing any of this savings on to the customer. So it's not asking too much that they send an e-mail notice due instead of insisting on sucking whatever money they wish out of the bank. Yes, I know if they are reputable they will make amends in case of an error. However that will not include possible collateral damage or disputed amounts, and the bank will not stop them from taking whatever they want if it has been pre-authorized. If you think the bank is going to police your account, better think again.

The most prolific example I can think of was a subchapter S where the major shareholder was required to pay the interest on the building note. Interest would be ordinary and necessary, and not be affected by an accountable plan. Interpreting what I read from the above, the interest would be deducted on schedule A, in the area subject to the 2%, and NOT in the section devoted to interest, and NOT as "Investment" interest. Not knowing better, I deducted it as PUE even though it was a Sub S corp. Drake let me do it. It gets worse. If you think this through, you've probably wondered why a building (real estate) would be owned by a corporation to begin with. I did not allow this to happen without protest - I argued until I was blue in the face. Some lawyer told him to put the building under corporate ownership, believe it or not. no..no..no..no..no...... So much easier to rent the building to the corporation, then ALL such ordinary/necessary expenses are deductible right off the top.

Again, the time for editing has lapsed, so I will add that the above will probably be construed as rants against taxing authorities. Whereas this is obviously my perspective, my purpose is to inquire what we do when we encounter a "pay" requirement when we don't have signature authority or access to funds. Also the increasingly encounters we have with banking arrangements that are so replete with pre-authorized drafts that clients can't manage their accounts, and what to do when taxing authorities draft duplicates, incorrect amounts, disputed amounts, etc.

Agree, my friend from Oregon. All of these agencies have a recorded message which plays over and over again while you are endlessly waiting on the phone, inviting you to solve your problem at their website instead of tying up someone on the phone. All the taxing authorities have websites similar to irs.gov. Problem is the websites do nothing to resolve problems. Most of them offer dialogue but will not conclude or solve anything. Also, more and more topics are added continuously, therefore making the websites increasingly unnavigable. The movement begins with an unholy alliance of legislators and cabinet heads who force these changes because people will never know "who dunnit." They need to think of what can happen when taxpayers have barriers placed in front of them when they try to pay. The effect of this on efficiency, and even accuracy, is unquestioned if it works correctly. However, I point to the loss of control over one's bank account with so many sources insisting on this sucking money out, and also the obstruction to us tax preparers when we encounter this upon filing.

How many of you have noticed state legislatures passing laws to require business returns be filed electronically and paid electronically. A mad rush by governments (and others) to force electronic banking. A discussion may be had for required electronic filing, but not this one. This one is for payments REQUIRED to be paid electronically. So many businesses are requiring electronic drafts that people are losing control of their bank accounts. A $200 electric bill. $100 cable bill. $300 insurance bill. All of them insisting on the right to suck money out of your bank account whenever they want and for whatever amount they want. Not true, you say? Better check with the bank. The bank is not going to do anyone's accounting for them. To them it's "Yes they can" or "no they can't." If you are accidentally billed twice during the month, or for an amount greater than your electric bill, maybe an amount for someone else's electric bill, or for a disputed amount, the bank will NOT protect you. Some of your clients are large enough to deal with this on their own, as they file their own payroll taxes, bills, etc. Many small businesses, however, use people like US to file sales tax returns, payroll taxes, state income taxes, corporate taxes, etc. And preparers like myself do not have signature authority, and often no bank account inquiry to know the status of a client's drafting ability. So as we electronically file, we are supposedly required to pay at the same session. It can get worse. Do any of us want the liability that comes with signature authority for a client (electronically or otherwise)? Or how about my own clients' experience with three states: 1)Virginia SIT duplicated a $1000 draft and we spent 15 months calling and writing letters to get it back. 2)Georgia takes $900 in corporate taxes, and does not respond to any letters or phone calls, and 3)Illinois overdraws $240 in SIT and we decide simply not to pursue it. If you would like to respond or comment, you are welcome to discuss client options (such as ACH electronic payments which are triggered by your CLIENT, and not by the taxing authority). Or discuss anything else relevant to subject. You are also welcome to tell me that I'm sticking my head in the sand and refuse to accept modern trends in electronic commerce. If so, I plead guilty. Individual control should not be steamrolled by interests who want to control everything you do at your own peril.

This means that distributions are now dividends instead of repayment of a loan. Stupid me, right? because Dividends are not taxable anyway!! Stupid I may be - but not for this reason. This is not universally true. Some states do not honor the subchapter S election, particularly the states that don't have an income tax. If these states didn't tax like a C Corp there wouldn't be any taxable people to "pass through" to. Additionally, what would happen if an S corp wanted to change down the road? Would the historical dividends be sequestred just like if the reverse election were true?

Thank you. The link is very informative. If you can remember all this stuff, you are indeed gifted.

Right, Lion. Of course there is always a partnership agreement, right? I keep referring to the two guys that show up in your office and say "Duh...we're sorta partners..." Fat chance of getting them to execute a partnership agreement. Due to transient nature of a situation like this, we might be well advised to simply never do a partnership return until we've seen the agreement. No agreement - no 1065. Two schedule Cs instead.

Can the science of "Partner's Unreimbursed Expenses" apply to Subchapter S corporations as well? Don't know why it couldn't, except it would now be "Shareholders' Unreimbursed Expenses". If set out early in the articles of corporation, looks like it would work. Do any of y'all know?

A few days have passed since I last visited this thread - I'm still as igginernt now as then. I'll ask the questions to the group, and maybe better illustrate with a hypothetical example. Receivables furnished by partner were $10,000 and are still outstanding at the close of business. Eventual recovery turned out to be $10,400. Partner's share of otherwise ordinary income is $25,000. How is the recovery of the hot receivables reported? Here are some possibilites, and no, I don't know the answer: Ordinary Income K-1 Box 1 becomes $25,400. (If this happens there will be SE tax) Net short-term capital gain K-1 Box 8 is $400. Partnership issues 1099-B to partner for $10,400, Partner files on 8949 (short-term) None of the above. I've never been good at "special" allocations. Not my strong suit.

Looks like I was wrong about these receivables. I still think my calculation of gain/loss is appropriate. Judy, my question at this point is how to report. Should it simply be allocated (along with other ordinary income) to the partner in box 1 "Ordinary Income?"

My suggestion is to report the gain/loss on Sch D, or whatever 8949 category fits. Accts Receivable is an asset just like any other. The carrying value before gain/loss should be reported as the cost basis, and the amount actually collected should be the proceeds. Both numbers should be known factors when consummated, so there should be no problem.

Incredible we can proliferate dozens of posts referencing toilet paper. Since there are starving children, global warming, hurricane damage and a host of other problems I won't add to the toilet paper frenzy. Except to say one of my Yankee friends thought Johnny Cash was a pay toilet...

As you can tell, I've given the basis calculation for a partnership, not an S-corp. Upon reading the original post, I edited the message above when discovered (less than 2 minutes). I received a message that too much time had elapsed and that the message could not be edited. I don't know what else to say.

I use the following. I've never encountered a situation which didn't fit: +Beginning Balance +Partner contributions +Partner's share of increase in guaranteed debt +Partner's share of non-taxable income +Partner's share of Taxable income -Restoration of previously suspended losses (if any) -Partner's share of Non-deductible expenses -Partner's share of Deductible Losses -Partner's share of decrease in guaranteed debt -Partner withdrawals Guaranteed payments do not affect the calculation, as they should be a deduction for the partnership. Guaranteed debt is not available for Subchapter S basis calculations, and that is one thing that should be considered when deciding on the type of entity. Special allocations (such as hot assets) should be computed before partner's share of anything is established. If a complete partnership return is to be prepared, it should include Schedule L (balance sheet), and reconciling schedules M-1 and M-2. Preparing these schedules means that "capital balances" should also be encountered and calculated. It should be emphasized to the client that "Capital Balance" and "Basis" are two different things, as the client will tend to believe his capital balance is his proper measure of ownership in the event of a sale.

I used ATX in the days they were headquartered in Maine. Since this is an ATX board, I won't go into the issues of my departure - suffice it to say I do not like to change and would not have done so unless felt strongly. Many years have passed and I'm sure circumstances have moved on. However, I believe ATX is still form-based. For those of us old enough to remember what it was like to fill out the 1040 by hand, there is no comparison. Most of the other packages are questionnaire-based and not forms based. I believe this is the chief reason ATX customers have to spend less time on the phone than others. I am very happy with Drake, and don't wish to change. However, 75% of my time with their support is because I don't know what factors are causing a particular line item to read incorrectly. I must call and find out what needs to be changed because of a cause-and-effect relationship between the answer to some questionnaire and the tax line item. This would not be necessary if the software were forms-based. I have approached them about changing, but they have reasons to remain as they are. So if you are using ATX, you do have this advantage. For the record, you will find me quite adverse to the dumbing-down of the mind to reduce trained professionals to keypunch operators. Sit down - keypunch numbers into a software package - and [poof!!] out comes a tax return. And then print out a pre-determined invoice to charge the client for this service? Sorry - not as long as I'm alive and doing tax returns.

This client has a basis in the fence of $37,000 (if this was the amount he was reimbursed). It is depreciable as a land improvement, probably over 15 years. But he has to have an operation to accommodate the depreciation. In order to deduct he must operate the farm on Sch F, or rent on Form 4835, or otherwise have a for-profit operation involving the property. I have a few clients who spend a buncha $$ on their place and want to create deductions because they tell me they are "going to" have cattle or something soon. Some of these guys never begin an operation, and I believe they had no intention when the money was spent. They were just trying to get Uncle Sam to subsidize their expenditure. Unless I see the evidence, I tell them I will begin depreciating when they begin utilizing the land.

Pacun, get on your state website where your client is. Might not be DC, but possibly MD or VA. There should be an IFTA reporting website online. You will need for each unit, miles driven in every state, and gallons purchased in every state. If there are many units, this could take some time. Miles per gallon will be calculated by the website for each unit (truck). Let the website do this, don't depend on the client to tell you how wonderful his mileage is. The website should divide the mileage by the MPG, to derive the gallons which should have been burned in each state. If you have purchased that many gallons or more in that state, you will be entitled to a credit. Credit is calculated by the fuel tax per gallon times the "excess" gallons. The reverse is true if the unit has not purchased enough gallons in a state where they have burned gallons. The IFTA charges you for those states. The net of all the charges and credits results in an excess charge that you have to pay, and if there is a net credit, you simply apply it to the next quarter. Some states (e.g. Indiana and Kentucky) have a surcharge that is not charged at the pump. The surcharge is built into the IFTA calculation such that if your truck travels through such a state, you are likely to have to pay extra. Drivers love to fill up in South Carolina, who has the lowest pump tax of any other state. They will drive across the line from Charlotte, NC and places in Georgia just to buy cheaper fuel. However, if they don't drive more than this in South Carolina, the calculation will result in a credit from SC and a whopping charge for GA or NC. It all works out.

A client was rear-ended in her car. FMV of car was $12,000. Client is expecting insurance proceeds of $25,000. Form 4684 has the provision for a casualty to result in taxable income. I've just never seen this on an auto accident. Need to get a straight answer as to how the client was able to cover a $12K asset with $25K in coverage. Doesn't make sense. When I get to the bottom of this, I expect the excess is to cover medical damage. Only damage was a trip to clinic to check for whiplash. Minor expense. The way I look at this, there will be taxable income if the medical expense is what I expect it to be. Comments?

Margaret, for what it's worth, don't give up on doing partnership returns. If you do, you'll lose both experience and expertise. As fleeting as partnerships may be, there are some that you can perceive from the outset will have responsible and somewhat knowledgeable partners. A good clue is whether they are willing to spend the effort to draft articles of partnership, or similar agreements in the case of LLCs. If they are not willing to do this, the proof already exists that your engagement will be one of misery and possibly not even be able to collect your fees.

Evan, I am certain it was I. In recent days I had a discussion thread removed for political content. There ensued a lengthy discussion with one of the moderators about my posture and theirs on subject. All anyone else needs to know is that my post included too many references that made the post blatantly more political than focused on subject matter. Simple is that. The moderators are probably too professional to tell the forum who prompted the update, but I'll own up to it.

I heard yesterday about this from the Nashville Liaison Officer. The scam surfaces as an e-mail to the practitioner from a plaigerized known e-mail contact. Is it true that the IRS collaborates data from all PTINs and makes their phone number and e-mails available to anyone via a $25 CD? If so, the IRS could help eliminate the scam by ceasing this practice described above.