Edsel

Thanks Terry - I understand and agree. I had to explain things to Judy, and didn't want it to appear as banter. I trust Judy and I are fine.

Judy, you don't really know how I'm involved. I'm not going to banter the conversation, but when I get time I will send you a private message. Thank you for your concern.

I would imagine most of us encounter some exposure to GAAP in our practice if we are confronted with M-1 reconciliations and have small business customers who will not or cannot pay for a review or audit. There are other issues as well from time to time that I have to deal with, as well as heavy workload after April 15 when tax work is over. On a couple larger customers in the last 5 years, their bank has insisted on an audit, whereby the work encountered a clean slate. Only one exception since 1998 where I failed to recognize one month of Prepaid Medical insurance that was paid in December. From these responses and others in the past, I will cease bringing GAAP issues to this forum. Some of our CPA members have been very gracious, often Judy who tries to be helpful. Others have acted like I shouldn't be touching the Ark of the Covenant from the old Harrison Ford movie. Best regards, Edsel

A company uses: 1) Half year convention on acquistions and dispositions 2) MACRS lives 3)Double-declining balance 4) 1/2 yr depreciation on acquisitions and dispositions. Is this a valid election under GAAP? Those who know are welcome to comment. Have no concern why I am asking about GAAP on a tax forum - I have to deal with the issue.

Thanks Eric. Of course, any portion of a 4797 gain which is capital gains would not be subject to s.199A. I should have thought of that when I posed the question. I believe everything you state in your response is correct.

If Farm profits are subject to the QBI deduction, it appears that gains on sale of farm equipment, cattle, etc. resulting from Form 4797 are NOT subject to QBI. Does this make sense? (Not that any tax regulation has to make sense). Any ideas why not?

I reported what I believe to be a glitch to Drake today - I hope I am correct. A guy, reasonably low income, qualifies for $1000 retirement savers credit. However, in 2017 he received a $53K distribution of an IRA. This would invalidate his Retirement Savers Credit, except he qualified for an exception. The $53K IRA distribution was inherited from his deceased father, who died the same year. From what I can research, this is one of about a half-dozen exceptions which would prevent a distribution from blocking the credit. Although there is a box to check for an exception, Drake had no provision for an exception to be identified in the data, and the distribution was blocking the credit. I reported it to a customer support guy as a bug in the software. However, I'm worried that I may be wrong, in spite of my research. Here's why. These exceptions have been around for quite a while, and the developers at Drake should have had this fixed years ago. Whereas the taxpayers who fall into this situation do not number in the millions, I believe it may number in the thousands if properly reported. There should have been enough incidents for this to come to the attention of Drake before now. Most preparers are more accomplished than myself and surely one of the preparers has run into this before. This is not a slam on Drake. I've known Phil Drake since he was unknown in the '80s and am very happy with the software. Have I missed something? Are there other Drake users who have run into this?

What are you going to do if the intended recipient claims he never got the money?? I believe the answer is "Yes" it can be done, but "No" unless you're asking for all manner of possible problems.

What is the purpose for the IRS creation of new form 1040-SR? And does it calculate any differently from a conventional 1040?

Several suggestions that work. Thanks to all respondents. Edsel

Specifically looking for Form 8879. Thanks for the link, but it opens up forms that are not fillable.

Jack, the answer to this (as in practically everything else) is money. With the big chain tax stores offering advances on tax returns, many taxpayers have nothing to show for their occupational work except 1099s. No W-2s. Many folks are putting pressure on payers to get their hands on a 1099 as soon as they can. You and I both know the 1099 is not to replace receipts to be tracked by legitimate businesses, but you can imagine how easy it is to let the payers do the bookkeeping and not claim any more revenue than what has been turned into the govt.

How is the best way to acquire (or download) fill-in forms from the IRS website? I can imagine there are commercial firms making these available for a fee, but I would think the IRS furnishes fill-in forms somewhere on their massive website...

Yes, time for another gath'ring after tax season and warm weather is here. I thoroughly enjoyed being at Rita's and meeting many of you in 2018. Rita had a great and spacious place, but unfair to expect this from her again when there may be other places we can meet. I have a smaller house, and have 45 unimproved acres about 60 miles from home, but the acreage doesn't have facilities. Depending on location, I'll make an effort to meet.

The Supreme Court ruling in 2017 did away with the sales tax exemption on interstate sales for companies over a certain revenue amount - I think $2 million. Giant companies like Amazon were getting away with selling gazillions of dollars outside of Washington and not having to charge sales tax.

I've heard clips where NJ has passed legislation to avoid the $10K ceiling on deductible taxes. Is there anything different about this than the California version? Will it work?

Max, thanks for your response, and yes I think the post by CBSLEE was terrific. Terry D, war stories such as yours are common. One reason these "subcontractors" insist on not receiving a 1099 is because they are so cheap. I encountered someone painting a large barn who told my client he would paint it for $1500 but would have to get $2500 if he was to receive a 1099. I told my client that the effect of not deducting these payments means he would be paying the taxes that the painter didn't want to pay. Client says if the IRS came calling he would tell them that guy painted his house and he couldn't deduct it anyway. I believe the burden is on the payer to issue a 1099 even if he gets no benefit from the deduction, and irrespective of whether the subcontractor has intentions of claiming it or not.

Thank you CBSLEE. Very helpful post and greatly needed. Edsel

"They really have to think if the trade off is worth it". Sara, you are absolutely correct because there is definitely an upside and a downside. The "upsides" of being employee, however, may be quite different depending on where your clientele lives and works. Your location in VA could range from Alexandria in DC area to Clintwood in the mountains - and employees who work would have drastically different "upsides." I am in rural Tennessee, where more than half of the "employees" in my county earn $10.00 or less, with no benefits outside of the required payroll benefits. Our largest corporate employer is WalMart, who built their fortune on working employees with part-time hours and zero benefits. Fat chance of a future for those working there. The minimum wage has not been raised since 2007 (except for some states - NONE of them states down here). This varies greatly compared to places like Nashville, where good jobs are abundant and employers HAVE to provide better pay and benefits, or else their best employees will go down the street and get a better job. Black Bart also lives in a rural area - would love to hear what he thinks. Thanks to all who have responded, but the impact has mostly been on the lack of wisdom advising taxpayers to be true consultants and subcontractors, and no comment on whether the IRS will proceed, as if on a vendetta, to slash these arrangements. For what it's worth, just yesterday I advised one of my larger clients to do just the reverse - to begin a payroll because they are issuing 1099s for subcontractors who are not legitimate.

Lion, I too have had aggressive action by the SUTA people. One prolific instance was a Tennessee Dept of Labor auditor who reclassified a recipient of $25,000 when the recipient had $500,000 of other revenue from 4 other payers. We had an appointment at 2:30, and she showed up at 12:00 and terrified the payer into reclassifying. The recipient was medical professional who had issued 1099s of her own.

One of the strategies I have recommended for my clientele is to find reasons to work as a consultant or sideline business, as the ability to deduct expenses on Sch A have been diminished, and totally eliminated for job expenses. Do all of you remember about 10 years ago when the IRS audited and slashed through gazillions of Schedule Cs and reclassified almost everyone to employee status? Very few of these taxpayers survived the reclassification. For some of these, they really were employees. For others, it didn't seem to matter about the 20 factors (which they threw out and replaced with totally objective opinions of the auditor). Legitimate consultants and subcontractors were reclassified according to the IRS agenda. The obvious solution to employee expenses will be an accountable plan, but many taxpayers will be switching to consultant status as I've advised them to do if they can qualify. Do you believe in light of increased status of consultants and subcontractors that the IRS will return to its agenda of reclassification no matter what?

Good comments from those who have ventured opinions. The IRS has not improved their level of quality either. You would think after the cuts of 2013-14 they would realize just how bad they have become. More support for Catherine's comment about representation. The speaker at my last seminar was from Illinois, and he stated their were NO trained IRS auditors south of Springfield in his state. The IRS has issued a requisition to hire one college graduate to fill the need. The graduate needs a degree in anything, not necessarily a degree in accounting or taxation. This level of expertise explains why you have to be referred to a couple tiers of supervisors in order to intelligently discuss anything when you call in. I'm thankful for the clientele that I have - I have not gravitated to the February crowd, and leave myself exposed to the fleeing public described by Pacun. He emphasized with several examples that our customers' own interests would prevail over personal service.

I would just love for someone on the other end for the IRS validate the information on Form 8867 like we have to...

The Tax Laws are not simpler - but for most people they are. It has been reported that the number of people itemizing deductions has shrunk from 25% to 8%. I believe that means the IRS can avoid complicated returns and process most people's taxes simply by compiling information returns. They have been at war with itemized deductions my entire career - the standard deduction was called "low income allowance" and hardly anyone took it back then. An increasing number of taxpayers can now very easily file taxes themselves, online, or TurboTax. I am recommending for taxpayers to engage in a sideline business, or buy rental property, or otherwise complicate things. Not so I can continue with their tax preparation, but for their own benefit to deduct expenses that are now lost. And I expect in the near future, the IRS will swoop down and reclassify legitimate consulting businesses to employees. I have enough clientele left to sustain me - for most of mine have rental property, small business, exotic investments, etc. But as an industry, I see a shrinking customer base. One telling look-around at CE seminars reveal most people at those seminars are 55 or older. It is a new year, and we've got to pay attention to handwriting on the wall.

Interesting Dan, and thank you. Appears if taxpayer's Gross Receipts are sufficiently low, the change from accrual to cash has the same status as an "automatic" change.