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Everything posted by G2R

  1. Thank you everyone for the advice and encouragement! I really, really appreciate it.
  2. I've never used that form, but read about it multiple times on this forum. Ugh, @Abby Normal every time you answer one of my posts I have to actually LEARN a whole new section of the code. Skeleton in the Closet: Would filing this form make the IRS go back and review what depreciation they actually took? Because if so, the Pandora's box that might open could be a disaster.
  3. New client looking to sell their rental. Over 20 years ago, the property was their primary residence for a short time. They put in over $100k in improvements during that time, then converted it to rental. So basis, $100k purchase price, $100k improvements. They only used their purchase price as the basis for depreciation and failed to include any of the capital improvements (Land value wasn't a blip on the radar). The depreciation taken over the years is a disaster of mistakes. Regardless of the depreciation they took, I still calculate the depreciation as it should have been calculated and report the gain and depreciation recapture off the correct calculations despite the fact they didn't get the benefit of the depreciation deductions. Here's my dilemma. As crazy as this sounds, it make more sense for her to ignore the improvements all together so the bulk of the gain gets the favorable capital gains rate rather than the depreciation recapture rate? Selling price is north of $600k so were looking at big gains here and their in a very large tax bracket already. Is there another tax strategy out there maybe that might help and do I/can I ignore all the improvements they made?
  4. Has anyone seen confirmation that owners are eligible for ERC? A bunch of my S-Corps are single owner corps and I haven't seen any guidance from the IRS that owners are definitely eligible. Only that relatives of owners are not. As I'm filing Q1 941s (and looking over 2020's previously filed 941s that were PPP borrowers) it's a lot of potential money for most of them.
  5. Wow, that's sounds AWFUL. During questionably the worst tax season EVER, I can only imagine your stress level.
  6. Just wanted to do a follow up to this. I've now been using TaxDome for nearly two months and it becomes more and more apparent how valuable it is. I love the internal messaging I have with clients, signature features, document approval, email sync. Clients seem to find it VERY easy to use. They have a cell phone app too so getting client documents scanned and sent to me has been a MUCH, MUCH faster turnover. I only had two clients that had issues and it's because they are business and personal clients and they didn't know how to toggle between accounts. Other than that, it's been VERY smooth sailing. In addition, I abandoned my DocuSign subscription in place of TaxDome's signature option. I like that I can decide which forms I need KBA and which I don't. I've probably only used 20% of a capability and I'm still this happy. I find I'm not scrabbling around nearly as much trying to find documents from client's in the 20 different communication vehicles I was using before. Instead, I put a link to the client portal on my website and point everyone there for document transfers. And clients are abiding by that most of the time. When they send me sensitive stuff via email (like their SS# ) I kindly remind them to please use the portal. I haven't had one client object. They constantly do updates based on user feedback. All in all, I am very happy with it and for $600 for the year, I really think it's a steal. I do recommend learning to use it when you actually have a little down time to do it. It was a bit overwhelming to navigate at first while knee deep in tax season. Hope the review helps!
  7. G2R

    "Thank You" Money

    Taxpayer reached out to the guy that gave her the money and today he replied, "I should have given you a 1099-NEC, but I didn't. You owe the SE tax." Now I'm wondering if I have an argument for filing it on a Sch C, and claiming QBID.
  8. G2R

    "Thank You" Money

    Well she lives in NY sooo.... her taxes are worse than VA. :( I've explained her options and she's decided on the conservative route, she's filing as if she got a 1099-NEC. Thanks everyone for the input.
  9. G2R

    "Thank You" Money

    I agree, I think it's a big red flag. I have documented my own discussions with my client and asked she forward all written communication she had with the guy to detail the history of the payment and also detail her timeline of assistance for him. All points you've made are spot on. It's why I'm struggling so much with the reporting. I doubt a gift return was filed. I struggle with my client being liable for all FICA when she didn't have a profit seeking motive or business structure of any kind. Clearly the guy did something wrong, but what is her obligation to correct it at her own expense (paying both ER & EE FICA)?
  10. I joke that 1/3 of my clients could walk by on the street and I'd have no clue. Aside from copies of their Driver's Licenses for some state return filers, I have no idea what they look like. I haven't actually seen a client in my office in 2 years. Covid protocols nixed those couple old-schoolers than liked to come in person so now I'm totally remote.
  11. I set up a question on my tax organizer that asks how much they got for EIP1 in April/May of 2020 & EIP2 in Dec2020/Jan 2021. Having the dates there as a reference seemed to help most remember to go back and check their bank statements for the amounts.
  12. Given the abundance of "we forgive you, you don't have to pay back the error" approaches Congress continues to pass in our tax code, does anyone think that the CTC advance payments will likely be forgiven anyway come 2022 tax season? I mean it's like a carbon copy of the APTC, and I've got a number of clients who are getting away with murder in that area. Just my Saturday morning thoughts...
  13. Weird situation (what else is new these days.) Client worked for a company. Covid hits and the company goes under. She is laid off. The company hires another company to wind down the company's affairs and collect whatever outstanding invoices they could from customers. My client offers to help in the collections. There is no discussion of pay, no employment or contractor agreement at all. She'd worked for company a long time and just wanted to help where she could after a sad ending to the company. She never expected to be paid anything. (Hand to God, she's a good, honest person. There's nothing nefarious going on.) After three months of helping, the guy in charge says, thank you so much for everything you did, we couldn't have done it without you. As a thank you, here's $50k! Fast forward to this tax season, as she's collecting her tax stuff, she calls the guy and asks if he's suppose to issue her a 1099. He says, "I'm not filing one, don't worry about it." So, what do I do? She sort of worked for him, but sort of didn't. Gift? Other income? NEC subject to SE tax?
  14. Just finished watching Compass Tax Educators Webinar - American Rescue Plan Act of 2021. It was an EXCELLENT breakdown of the many complicated changes and tax strategies we can employ for 2020 & 2021 tax planning. I HIGHLY recommend it. In particular the MFJ vs MFS details in the webinar go against so many staples in tax prep thought but, it is what it is in today's wild times. I find their FB group quite valuable too. Just thought I'd review it for those looking for a good overview of many of the changes. If there are other webinars or newsletters you frequent for great info on today's tax discussions, I'd love to know.
  15. I assume you mean this one.... If so, this yes I had read that already. Your IRS FAQs you posted match the above approach. Still looking to see if others preparers that file 1120S are handling this on their returns the same way.
  16. Wow, this tax season feel like college. I have to learn something new every week! 1120S, 2 owners. Both on payroll, no other employees. They filed for the ERC in Q3 for $5000. I just want to confirm I'm reporting this credit accurately. 1120S, pg 1, line 7: Reduced the owner wages by $5k. Sch K, line 13g, code P: $5,000 (which prompts form 5884-A to open) Form 5884-A, line 3: $5,000 Does this look right? What I really hate about this approach is that the 1120S wages won't match the W-3. But I guess that's what the 5884 reconciles out. Also, if the IRS uses line 7 as a trigger for unreasonable compensation, this might trip it.
  17. Thanks Lion EA! One more quick question. Their other kid has $2k in capital losses. Would you file a return for that kid just to keep the carryforward?
  18. Client's kid has $250 dividends, $200 capital gain distributions, and $1300 in capital gains. So I'm in that over $1100, but under $2200 spot for the kiddie tax rules. Can someone please confirm: The fact that the child had capital gains means I cannot put the income on the parent's return. (Not that I want to, I think the tax is zero, but I just want to confirm this anyway.) If I'm calculating this right, the child still owes ZERO in taxes because everything except the capital gains is below $1100 and the capital gains that bumped them over $1100 are still taxed at 0 because they are capital gains. If all the above is true, and the tax is still zero, am I still required to file the return for the child? TIA!
  19. I just started using it this year. It's the first online tax portal I've ever used so I cannot compare to others. I like that they are constantly adding upgrades and seeking requests on ways to improve. My clients seem quite happy with it and getting their accounts activated has been very easy. I love how much more organized managing each client has been for me this year. No more One Drive expiring links, fishing for documents in various cloud portals, etc. I feel much more secure in my communications to clients and as they become more comfortable with this way of communicating, I think my days of SS# riddled documents in my email will be minimal. It took me quite a bit of time to understand how to use it and I'm still learning. I don't think I've even scratched the surface of what it can do. If you've already used a online tax portal the learning curve might be shorter. Also, keep in mind the unlimited signatures is true, but if you want KBA signature, it's $1 extra per signature request. I think as I learn to use it, I'll find it better and better. I haven't utilized the workflow feature at all yet. Mostly client communications, doc exchange, signature request and tasks communications. I look forward to post tax season learning about the workflow and pipeline features.
  20. I've spent every free moment of the last few days researching this thread's info. I come from a family of accountants and we always maintain books on a tax basis. Our clients are small mom and pop businesses and reporting books that mirror the tax return just makes explaining things so much easier. Quite honestly, I never knew S-corp bookkeeping to be any other way. In fact, my father adamantly followed the rule, "1120S Sch L R/E MUST = Schedule M-2." I now know better thanks to the knowledgeable members of this forum and countless tax articles & publications I've read since. For anyone reading this thread in the future with similar questions to the ones I had, there's another great ATX thread that I found extremely helpful in better understanding this concept and hope it helps you too. Thanks again ATX forum. I'm humbled as usual. _________________________________ Testing my updated Sub-S books to tax understanding... Using only the above details and pretending the profit was all kept in the bank. Books Balance Sheet: Bank Asset: $1,000 Loan Liability: $56,000 R/E: -$55,000 Tax Return: Sch L R/E: -$55,000 M-2 AAA: 0 K-1: Box 1: $1,000 Box 16, Code $56,000 Basis monitoring is done at the shareholder level so it's the responsibility of the SH to report a $1k profit on the schedule E, page 2 and a $55k capital gain for overdrawing their basis on Sch D. SH current basis in the corp: $0 Going forward, there will now be a permanent difference between R/E & AAA. Correct? (fingers crossed)
  21. Tracy Lee, you might find this thread helpful.
  22. The above order of operations is exactly how I close books. The only difference is I have always changed the name "Retained Earnings" to AAA in Sub-S client's Quickbooks as I found it easier to discuss AAA & basis monitoring with this change. Given I've never had a client overdraw their basis, I wondered how others handled the bookkeeping of that negative balance. jklcpa, Thank you for your time and considerate replies.
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