Edsel

It is very good to see some of us pausing in these terrible times to talk to each other, and advise of problems we're having. Misfortune has fallen on some of our most familiar forum members. If we live very long (as most of us have), we've been through storms of life. Some periods of time are just horribly difficult. These critical times don't happen every year, in fact just a few times in our lifetime. The tough times in my life are different than yours. Different than my next door neighbor - but he has been through the storms of life just like the rest of us. I have been through a few of these major events - and I'm not just talking inconvenient nuisances - I talking about times so bad I didn't know how to get through. They don't happen to us very often, but the kind of people we are deep inside are what pulls us through. One of my favorite bluegrass songs is "Mansion on the Hill" where a father and daughter drive to the edge of town and look high upon the hill where sits a mansion behind copper gates. They wish they could be like the residents and wish for their riches and lifestyle. But they have no idea what these wealthy people have going on in their lives - very possible those rich folks would prefer to swap lives with the father and daughter down below. For Posse and Judy, and anyone else with trying times, it is good that you take the time to advise us of what's going on. Gives many forum members the chance to show they really care. In particular Judy - some of you know that Judy and I have had a number of knock-down, drag-out disagreements. But all of you know that there is none among us more professional, more knowledgeable, or more helpful than she. And I join the rest of you in hoping for the best possible results in her corner of the world. Happy that many of you have belief in prayer - I'm not saying that I don't - but somewhat perplexed about my own effectiveness. We have some great people among us, and I'm told that the prayers of righteous people are heard.

I think everyone has been clear enough, but I'll offer an example. The exemptions are multiples of $15,000 and if not exceeded, no requirement exists for the donor: Dad gives son a $50,000 gift. Exemption is $15,000, so gift tax return of $35,000 is required. The money comes off Dad's estate tax return when he passes, and unless estate is valued over $23 million, no tax would ever calculated. Son is married and Dad thinks their marriage is stable, so he gives son and daughter-in-law a $50,000 gift. Exemption is now doubled at $30,000, and gift tax return of $20,000 is required. Son is married and Dad and Mom BOTH give $25,000 to the son and $25,000 to daughter-in-law to complete their intended gift of $50,000. Exemption is now $60,000, exceeding the $50,000 in gifts. No gift tax or other disclosure is required.

Can't help with NH (dunno), but it has become common for some states to withhold state tax at the point of sale of real estate. This assures that in the event the sale is even partially taxable, the seller won't be able to skip town without being forced to file a return to get most of his money back. The legislation has been floating in and out of Alabama for awhile.

I haven't heard of any such thing yet, but what if the April 15th deadline was extended to July 15th? And without any penalty for failure to pay by April 15? Some of my customers are becoming afraid to meet with me (or anyone else). Extending the deadline per the above would help me much more than the train wreck associated with removing payroll taxes. Not to mention much, much cheaper.

Thanks for the responses. Good link, Max.

Does an involuntary conversion include pressure from creditors to release equity in a home? i.e. Financial Distress? Home was a former residence converted to a rental home. Home was sold by owners and not repossessed by creditors. The proceeds only partially satisfied the remaining creditors.

Thank you JRS. The first thing I've seen which specifically disallows it.

Are there any circumstances where solar energy credit can be refundable? My research: Never found where it could be, or where it couldn't be. Since deductions and credits are by grace of the tax law, I would say "no."

Thank you Gail. I admire your intelligence and willingness to help.

Long ago, parents set up a Coverdell for their daughter. In 2019, withdrawals from the Coverdell totalled $9000. The funds were issued in the name of the daughter and were used exclusively for tuition. Daughter also worked part-time as a sound engineer in a Nashville recording studio, and made $6000. Question: Can the $9000 be considered as "support" for the daughter when considering whether the daughter can claim herself as a dependent? If so, her "support" would be $15,000 for this purpose, even though only $6000 is taxable. There are other factors which affect whether the daughter can claim herself, but I believe the question above can have a "yes" or "no" answer. Appreciate responses.

Thanks to all of you for your response. Client has a stack of transmittals directly to the charity. I will communicate the results of our discussion with the client.

As fewer people are itemizing, those who are old enough for RMDs are increasingly directing retirement distributions to be sent to charities. The effect is to reduce taxable income, and to correspondingly invalidate charitable deductions (which most of them can't use anyway). I have a few of these clients. I have seen 1099-Rs showing gross distributions with zero as taxable amounts. This year one of them is showing the amount contributed as gross distribution and taxable as well. And the "taxable amount not determined" is checked. My client went back to his stockbroker to question this. He was told the 1099-R was correct as issued, and he would not correct it. He was also told that the "very finest tax people" are insisting this was the proper issuance of a 1099-R under the circumstances, which are known. I believe this will result in my client ultimately being taxed on the higher amount, and will find relief upon meticulous presentation of records. Before entertaining the presentation of records, the IRS will first send him back to the issuer to get the 1099-R corrected. What say ye?

Of course I don't have the time to display all the characteristics of my customer, and my prior conversations with him about payroll, attempts at same, and 1099s - in some years issued more because the IRS will accept a 1099 to an owner to satisfy their requirements for a "fair compensation" for S corps. Basically the straw that broke the camel's back (the chief reason among others) is the fact that a 4th quarter payroll implies that he was paid the amount during the fourth quarter. That is clearly a misstatement of facts (in Tennessee behind-the-barn language, a lie). Recharacterization of income or expenses is one thing - a blatant untruth is something different. This crosses the ethical and moral line.

If it makes any difference at this point, the quasi-"payroll" would replace a 1099-MISC issued to him in January for $128,000. And yes he has paid himself at least this much, including all distributions. No, they were not all made in December. I hope I would give myself credit enough to not backdate a check into December.

Thank all of you for responding. It doesn't bother me to have my character impugned so long as all of you are speaking your mind. At the center of this is a seeming issue of integrity - prostituting principles of right and wrong in order to save $$ for a client. If it is allowed, the unsavory nature that many of you find reprehensible actually pales in comparison to the many regulations and actions of the IRS which are stacked against taxpayers with even less regard to right/wrong. I would imagine even my Fresno State colleague has chosen actions to help clients simply because they were allowed. Allowable options are exactly that - "allowable". That was the essence of my original question. Additionally, as is so often the case, no one but myself knows all the circumstances of the client - yes, a long-time client of 20 years. For what it may be worth, I have decided against creating a payroll, based on evaluating the upsides and downsides of the situation. Again, I appreciate all the responses, and encourage any and all of you to speak freely. Best regards, Edsel

One long-time client made a ton of $$ last year. He is over the reporting threshold for necessitating payroll and thus stands to lose QBI because he has zero payroll. He owns a Sub S in construction, and conceivably can create a payroll for 2019 paying himself $128,000 in December. He would be filing a 941 for the 4th quarter, and will be penalized for late deposit of FICA and state SUTA. Not sure whether these penalties would offset the benefit, and I sure don't plan to do this free. As a matter of fact, I'm reluctant to do this to begin with, but would be obligated to save my client $$$ if I can do so ethically. I can't find it in my research materials, but seems like I remember in a seminar where I was told that for QBI purposes, the amount of payroll would be limited to the payroll reported by January 31. If this is the case, the above plan would be worthless. Comments?

Killer tornado system (at least 5 dead) tracked between Monterey and Clarkrange Tennessee over the night. This is dangerously close to where Rita lives. We would like to hear from Rita to make sure she is O.K.

BHoffman are you still out there? Looking for a preparer in the Phoenix area. Potential customer lives in San Tan Valley. Would love to hear from you. If you don't wish to put your contact information in a response, you can send me a private message. Best regards, Edsel

Thanks for the discussion. Not terribly important for us, but very important for some of our clients. And yes, we get many "When"?? questions from our customers.

For years, it seemed the IRS would launch refunds, and my clients would always receive the funds in their bank on Fridays. Always Friday. One of them thanked me yesterday and told me their refund appeared Wednesday. They needed it badly and checked "Where's My Refund" every day. Is this the "new" normal? Can refunds appear any day of the week now? I'm sure we as preparers don't keep up with when all our customers receive their money, but I'm thinking some of us might know. And I can't advise them to look just for Fridays anymore (not that I ever committed to it).

Fat chance Abby. Governments do not impede other governments, in fact they can "tag team" and crush ordinary taxpayers.

Thank you for your response cbslee. You refer to "upper-end" pricing, and you are quite correct. One of the Nissans is determined by the IRS to retail at $4500 per year, when practically anyone can go in and lease this model for $300/month, tax and all. Nissan should have accounting personnel well-trained in the subject matter, and there is no real excuse if they don't. But I am finding out increasingly that Fortune 500 companies rush to hire $7.25/hr. clerks just like everyone else, especially in non-visible areas such as accounting. Nissan's own manual (see Judy's post) plainly says the taxation should rest with the amount of the discount, not the value of the lease. A few years ago, I saw a similar situation with an airline stewardess who used free flights. The flights were valued at one-day-notice first-class (most normal people ride "coach"), three-martinis, and where you tipped the flight attendant to peel you a grape. This stewardess might have been better off buying her own ticket or just staying home. My client and I are going to try - and we may not win. If not, they will simply quit leasing from Nissan. I appreciate the experience and expertise you bring to the forum.

Thanks Judy. I believe all the items in your suggestion are available, but I will confirm with the client.

Thanks Judy - I'm reasonably sure the numbers I'm getting from my client are good. I have some idea what these cars sell for, and lease for, and one of the family members has done well getting the payment numbers together. I haven't audited the numbers but I have to trust them unless I have reason to be suspicious. My understanding of the real benefit is exactly as you have presented above. My next question: Is there a document or form I can submit with the tax return that will oppose the W-2 and reduce it accordingly to the proper amount? The Nissan W-2 is for the IRS defined market values without any reduction for payments.

Be ready to spend some time reading this if you're interested - if you're short on time better wait til you get unburied -- A client is a retired Nissan employee, and still receives Employee discounts when he buys or leases new cars. The gov't considers these discounts as income taxable to the lessee. It get worse: he not only leases for himself, but also leases for other family members. For the most part these are high-end Nissan cars and the leases last for 3 years. The govt believes the discounted amount is taxable income to the ex-employee, and not only that, considers it to be earned income. So they issue a W-2 to the employee every year. The W-2 for 2019 was nearly $20,000 for three vehicles. However, the $20,000 is the gross value of the leases and not the discounted value. For example, one of the vehicles has a lease value of $5000, but the employee has paid $3800 according the lease contract. The taxation of such a vehicle should be $1200, not $5000. I don't have a problem with the assignment of gross value by the IRS, although they appear high. However, I believe it is the responsibility of Nissan to subtract the amount actually paid, then issue a W-2 for the amount of discount - not the gross value of the lease. My client has gone back to Nissan several times to protest but he gets told the IRS is controlling this and there's nothing they can do. I would like for someone to take Nissan to court over this, but that's not going to happen with my client. Assuming Nissan is not going to change, is there a form or attachment my client can take in order to protest or reduce the amount of the Nissan W-2? Thanking you in advance for reading this far - Edsel