Edsel

I am tackling prior years' return for a physician. There is a pile of some $1.5MM in 1099-MISC forms and 1099-Ks issued to him. Most of the 1099s have dollar amounts in the "Medical Payments" box instead of the "Non-Employee Compensation" box. Is there any difference between the two for either taxable revenue purposes or self-employment tax purposes?

If a taxpayer chooses to pay tax on a cash basis, but also wishes to follow GAAP, I'll continue with what I THINK should happen. I may have posted this before but not sure I got answers I could wrap my arms around. Usually there is a large book-to-tax difference. GAAP does not allow cash accounting so the entire amount of tax must be expensed even though it is not paid. The difference in taxes must be analyzed to separate permanent differences from timing differences. The full amount of timing differences must be shown as a liability called "deferred income taxes." Whether I'm correct above or not, does not bear on the following question. What if the entity choosing taxes on cash basis but financial reporting on GAAP is a partnership or an S-corp? There are no deferred taxes to allow, thus no liability to calculate. But the effect is there nonetheless. The partners/shareholders will ultimately have to deal with the taxes they avoided, and the calculation would be a different tax bracket rates. I can't think of any way to show this effect on a K-1. Question: Should the deferred effect be shown anywhere on a K-1? If so, how?

Don't necessarily disagree with Judy in a perfect world. And I agree totally that a single woman's living expenses, consistently running about $2,000 per month should be nothing but guaranteed payments. And the aforementioned "perfect world" should be a worthy goal, and not unattainable simply because we are looking for excuses not to do what needs to be done. But those of us in practice cannot force partners to draft a partnership agreement. Self-described partnerships occur when a couple of guys show up with missing teeth and tell us "Duh--we're sorta partners." And distributions are not planned or declared but instead result in the same fashion as "constructive receipts." What's worse, they almost never in proportion to anything resembling a declared "split." This leads to bizarre detail in the equity section. Perhaps the best way to do everything right would be to simply refuse to prepare any partnerships for partners who cannot supply a partnership agreement, and I can't blame anyone if they take this position. Around my part of the country, this will result in partners leaving me and going to shifty-eyed Sam on the other side of town. Will not result in partners drafting a partnership agreement. The particular partnership in question has been making minimal profits since its inception in 2014 - just enough for the managing partner to draw out living expenses - and yes I have always treated these as guaranteed payments. However the partnership just won a major contract which will geometrically increase their profit beginning in 2019, and we are planning for the future. A partnership agreement was drafted in 2014 but so much has happened since then that the agreement has not been able to morph into anything relevant in 2019. Thanks to all - especially for Judy for shining the light on proper practice.

Thanks to all respondents. Two features seem to eminate from Judy's article; The IRS and courts have not reached any consistent application as to what constitutes a guaranteed payment. This is typical, often the result of court decisions that go all over the map, and often the intention of the IRS to not be painted into a corner as a safe harbor that taxpayers can depend on. Consistency in the taxpayer's history can establish a pattern for determining both guaranteed payments and capital distributions. Many of us encounter flimsy-planned partnerships which do not have a partnership agreement. This can be not only the product of ignorance, but also a purposeful avoidance of precepts which lock the partners into prescribed behavior. One prodigious truth I learned in the days when I worked for a company was that management would insist on written policies to help govern activities, then more often than not these policies would be broken by management itself. Partnership agreements are similar.

A 95% partner is paid basic living expenses by the partnership, and they charge guaranteed payments. Instead of this, what about considering a distribution, even if the 5% partner receives a prorated distribution as well. The effect: $0 guaranteed payments, and a higher partnership income subject to QBI. Good strategy???

Gail, it helps tremendously. Actually, when you access "Name Manager", all manner of names can be listed for any number of reasons. The only ones who need to be deleted are the ones which are associated with "Workbook". Only the ones that are designated "Workbook" will copy forward if not deleted. Thanks Gail, and others who have responded. Come back to Tennessee soon!

Thanks to all. I am admittedly using an old version (Excel 2007) For other reasons I'm going to hang on to it for as long as I can. The pop-up box reads: "A formula or sheet you want to move or copy contains the name 'Print_Area', which already exists on the destination worksheet. Do you want to use this version of the name? To use the name as defined in the destination sheet, click Yes. To rename the range referred to in the formula or worksheet, click No and enter a new name in the Name Conflict dialog box. I will also state that the "destination worksheet" would be brand new and could not possible contain the Print Area except for the fact that it must have existed on the source worksheet. Answering "Yes" stops everything, and the name is on the destination worksheet and anything further copied. Answering "No" brings up another dialogue box where you have the opportunity to rename the range. Neither option stops the range from being copied. Thanks to all who have responded. If you don't have this problem, I'm happy for you.

Thanks Judy - mine has the same feature to clear, but upon copying the spreadsheet, the pop-up dialogue box still claims that I have a print range, with a "yes" or "no" and no way to win. Something I'm doing wrong, no doubt. Thanks Judy for your endless help.

Not remotely related to taxes. If an Excel spreadsheet has a range(s) specified, and an attempt is made to make a copy of that spreadsheet: Pop-up messages appear and blow me out of the chair, asking me to answer "yes" or "no". A "yes" answer means the old range will appear on the new spreadsheet, and a "no" answer will require me to rename the range. In other words, no option is available to me to not have a range at all in the new spreadsheet. I am doomed to have the range on the new spreadsheet regardless of how I answer the question. I have thought of removing the range on the original spreadsheet but can't find it, and don't even know whether that would work or not. Is there a solution which would stop the range dead in its tracks from being transferred to the new spreadsheet?? This seems like an elementary question that any idiot should know, but I guess that's who you have on the forum with you.

If we had a union, the first group I would exert union influence would be the IRS. For telling us we aren't expected to audit, then requiring Form 8867.

Good Article. Describes the upsides and downsides of deducting interest and nullifying LTCG/QualDiv treatment. Does not discuss whether there is an election to capitalize the interest instead of deducting on 4952. As there is no known support, I can only assume this election is not available. Thanks for responding.

Looks like no one who has read this has any solutions, either. Another casualty of the new tax law and higher standard deduction. Important: Is there an election option to capitalize the investment interest instead of wasting the 4852 process? This would result in adding the interest every year to the basis of the bond investment. Almost certainly would result in a loss when the bond is sold, against LTCG income. Other additions to basis would be amortization of bond discount, but this feature should not result in a loss upon disposition.

A good plan. Can rent the vehicle for a little more and show a profit - and it will wash so long as the client is a 100% shareholder. Problem is, if this guy is not going to be bothered enough to change the title, will he be bothered enough to prepare a lease? Or what about an accountable plan for mileage reimbursement? Might be a good idea to give this guy an estimate of how much more in taxes he will have to pay if he's not going to do anything.

Thanks for the responses. I learn something new every day.

Taxpayer wants to employ grandchild who turns 18 during year. His birthday is June 1. Until June 1st he is paid $2500, and he is paid $3000 on payrolls after June 1. Which of the following are true for his W-2 wages? His Total wages are $5500, and $3000 is taxable for Social Security Wages. His Total wages are $5500, and $5500 is taxable for Social Security Wages. Turning 18 at any time during the year is construed as turning 18 on January 1 of that year for social security wage purposes. His Total wages are $5500, and $ 0 is taxable for Social Security Wages. Turning 18 at any time during the year is construed as turning 18 on January 1 of the succeeding year for social security wage purposes.

C'mon Abby. Think of the consumer, who in most cases has already been ripped off once. When something is wrong, fix the whole thing, not just the scum on top of a dirty pond.

Thanks for responding Gail. Under section 125, there is a rare provision that the taxpayer CAN deduct the expense, but the employee does not have to claim it as income. This is rare indeed. From what you're saying, perhaps employees covered by these "elite" plans must pay on the premiums and thus not qualify under section 125. I agree with you and this would make sense, but my association with medium-sized companies is such that they have their W-2s reduced under s. 125 nonetheless. The only exception I've seen is for a 2% shareholder of a Sub S.

There are some people who are fond of investing in bonds. Bonds are paying very pitiful returns, typically less than 1.5% but are very stable investments. Municipal bonds are tax-free but pay even less. Savvy investors increase their returns by leveraging their assets with loans. Definitely increases the return, but at some point the two combined factors of interest expense plus risk establish a point of diminishing return on how much of the investment can be leveraged with loans. With the new tax law, the "investment interest" available on Form 4952 can have virtually no tax benefit, with the new standard deductions. Fewer than 8% of my clientele now file a Schedule A. This is perhaps an investment topic rather than a tax topic, but as preparers we encounter questions from clients who want to negotiate the best treatment in these days of higher standard deductions. Are there suggestions as to how to maximize the tax benefit of investment interest?

It may be that no one knows why they're getting away with it. Zero replies which address the problem.

The language with which we are familiar from section 125 is clear about discrimination in the provision of fringe benefits. The application of benefits can be somewhat stratified, but are not supposed to discriminate in favor of individuals. Yet companies routinely establish an elite class of benefits for executives. Sometimes the medical insurance benefits carry a separate policy which pays better and with lower co-pays. Sometimes there is no employee participation for the chosen few, whereas other employees have to pay thousands of $$ over the course of the year. Immediate matching in retirement plans such as 401k, whereas lower-paid employees have a six-month period to vest. I can go on and on. The practice is widespread among medium-size and large-size companies. And the providers of benefits push these special plans. Comments please, as to how they are getting away with this. Thanks.

Keep responding Catherine. You are as gracious a member as we have, and are rarely wrong. For what it's worth, I think she's right too after reading the texts very carefully.

Thanks folks - I need to get this straight...because it will determine whether we choose the credit or not. Remember they are in a 35% tax bracket (plus 5% for state), so we want to be careful to not lose more than we gain. Start-up Costs: $2000. Credit equals 50% of first $1000, or $500 credit. Deduction for start-up costs: $2000 minus $500 credit, or $1500?? I'm trying to read Judy's text above. If the deduction is only $1000, taking the credit is almost worthless. Thanks for all who have responded... p.s. this has convinced me I need to brush up on the general business credits. There's a wheelbarrow full of them.

Amazing. Thank you Catherine. One remaining question. It appears if we take the credit on Form 8881, we cannot take the deduction. We either get the deduction or the tax credit, but not both. Administrative Fee is $2000. Maximum credit is $500. Taxpayer is in 35% tax bracket. Which of the following is true? We can take the credit of $500 but can only deduct $1500 of the $2000 paid. We can take the credit of $500 but cannot deduct ANY of the $2000 paid. If this works like most of the General Business Credits, I would think the first selection to be true.

[Salesmans Old Fish Stories] We've heard of these before - "Lease your car" for tax breaks, Buy my "Energy Star" product for tax credits, etc. For the most part there is only an element of truth - enough to mislead the consumer. I heard one today for the first time - I would like to present this to you for your comment, review, or clarification: A large client is establishing a 401(k) plan next January. The plan consists of an employee's deferred payroll deduction, an employer's match, and an administrative fee billed to the employer annually. As far as I know this is typical. The administrative fee is $2000 annually. Agent for the custodian told my client there is a 25% tax credit associated with the $2000 fee, and they will get $500 back. What??? For Real??? Have I missed something? Comments please...

The reference from 2017 provided above was for someone else. I don't know all the facts that are missing, for the time being second-hand information. We've ordered 4506-T to see what information the IRS can provide. Thanks, Edsel.