Sara EA

Did you complete Schedule AI of the 2210? It is not enough to "explain" that your income varies by quarter, you have to do the math on this schedule. I've done it for clients multiple times. It's a pain to fill out and very time-consuming. Even when huge increases in income occur in the last quarter, I have never seen the result amount to more than a minimal reduction in tax. I've stopped doing them because it was ridiculous to charge the client $150 for my time to save them $20 in tax.

When I filed my mother's inventory with the state years ago, the attorney told me that she was the only decedent she'd ever encountered who had cash in her possession!

I doubt that any of us even question clients about these lesser gifts. I've filed lots of gift tax returns but have never asked if they also gave their offspring $25 with a birthday card, bought them a sweater for Christmas, or took them out for lunch last Sunday. Nor has any client volunteered this info. Should I be asking? Would the IRS actually ask about this? The only ones I can think of who would care would be the states if the giver eventually applied for Medicaid. Christian, Pub 550 contains detailed information and an example of how to report previously taxed interest. Essentially you report the amount on the 1099INT when the bond is cased (which will be all the interest the bond earned since purchased), the enter on another line "U.S. Savings Bond Interest Previously Reported” as a negative number. This will include the accrued interest her dad reported when he transferred the bond and the accrued interest she was required to report each year after that. Since most savings bonds are online now, and this one will be when transferred, do advise your clients to create an inventory at treasurydirect.gov. You enter the bond purchase date, face amount, and serial number, and you can update it each year. While treasurydirect will give you the accrued interest each year, only the inventory gives you the lifetime amounts as well. This way when the bond is cashed you have a clear record of how much accrued interest was already taxed. (I once complained to treasurydirect that I couldn't find the total accrued interest, and they told me to use the inventory feature.)

From the instructions to Form 709: The value of a gift is the fair market value (FMV) of the property on the date the gift is made (valuation date). I don't think basis comes into play, unless Series H bonds. Your client will report the current value of the bonds as the gift and report all previously accrued interest on his tax return. While he seems to want to avoid filing a gift tax return (even though it is unlikely any gift tax will be due), the bigger problem is adding all that interest to his income in one year, potentially raising his marginal bracket, taxing more Soc Sec, increased Medicare surcharge, etc. You can crunch those numbers for him and perhaps end up advising him to spread the gift over a few years.

When ownership of a US Savings Bond is transferred, the original owner must report all previously accrued interest on his or her tax return for that year. The new owner must then continue to report the interest that accrues each year. The same rules apply to inherited bonds. From Pub 550: Ownership transferred. If you bought Series E, Series EE, or Series I bonds entirely with your own funds and had them reissued in your co-owner's name or beneficiary's name alone, you must include in your gross income for the year of reissue all interest that you earned on these bonds and have not previously reported. The current value of the bonds would be the amount gifted. I'm not sure how you'd calculate basis. Heck, is this guy ever going to reach the $12M lifetime exemption? Just give the daughter the bonds and file a gift tax return. No gift tax owed, and the expense of filing the return will probably be less than looking up the law on basis of gifted bonds and crunching all those numbers.

Electronic records are the way to go. Hire a student for the summer to start scanning, starting with the most recent prior year. We did this and went back ten years. All the paperwork was then shredded. We did keep the paper records of a very few clients who had really complex histories, but now all original docs are returned to the client when the return is completed. We also keep original docs with sigs for POAs. We offered clients with massive old files the opportunity to retrieve them if them desired--only one did. It is so easy to find things in the electronic file cabinet--no digging in file drawers, where something is always misfiled, no need to refile anything. Client needs W2s for the past three years? Print them out in a minute. IRS notice and your response? Right there under the year in question. The back room is now usable instead of being lined with filing cabinets, and no one has to muster the courage to go down in the basement.

I guess it depends on the platform. Bitcoin takes something like ten minutes, maybe less, but sometimes much longer. Remember the viral story about the man who ordered a $20 pizza and by the time the transaction cleared it cost something like $26? The newer crypto staking platforms are supposedly quicker. Bitcoin is still using proof of work.

The prices of crypto change not every day but every nanosecond. So I pay my $1k tax bill in bitcoin, and by the time the transaction clears it's worth $850, or $1100. The exchanges charge higher fees than credit card companies too. If any of my clients ask to pay in crypto, I will politely tell them to go to the state tax website and figure it out themselves. These schemes must have been cooked up when the prices of crypto were soaring. Now that they've tanked big time, maybe these states will reconsider.

Our office is highly electronic, but for tracking clients we use a routing sheet for every return that comes in. There are lines for client name, ID, date in, date completed, preparer, tax form type like 1040 or 1065, date client contacted on completion, method of delivery, states outside of our own, date efiled, date accepted, payment type, and checkboxes for the two signed docs. The bottom third or so has lines for notes, like questions, requests for missing docs, etc. The sheet is attached to each client folder and goes to the preparer, the billing box, the ready to efile pile, the awaiting acks pile, and finally when all is settled it gets scanned into our electronic file cabinet. So I guess we have this sheet and various defined places it follows the return, so you need both the tracking sheet and places to keep things in order. It really works. We don't use the sheet but make a list for extensions.

IRS Pub 1457.

Who exactly is going to claim the deduction? The estate cannot claim the deduction, because it can only deduct donations that come out of income and then only if the will specifies. The "family" is how many people? Do any of them even itemize? This query may be all sound and fury that ends up signifying nothing.

The 1120 should be filed with income/expenses until the date of death. After that, it's a 1041 because the estate is now running the business. The estate can adopt a fiscal year, which in your case will end June 30 2022 if that helps.

Yes, she has to file a gift tax return. No consequence unless she's already gifted her $12M lifetime exemption. She can spread the gift over five years, but no point in that since there won't be any tax. I don't think a 16 year old can legally own a car, so it would be in your name anyway.

I was so proud of myself after putting in a new shrub bed--spent a few weeks visiting local nurseries picking out just the right plants, then supervising hubby digging the perfect holes, adding the good nutrients, mulching, etc. Abby clearly outdid me in square footage and money and effort spent! And you can't just sit back and enjoy. New plants need deep watering, especially in this unseasonably hot weather. I've been spending a good half hour twice a week on watering, surely eclipsed by the amount of time Abby has to spend. Isn't it nice to have projects that go beyond measuring how many inches were reduced off our stack of paperwork each day? Randall's photo reminds me of our yard in CT when the tornado came through.

The key question here is whether the owner has "power of appointment," meaning she can change the terms of the agreement. If so, she didn't really make a gift of a current interest so the proceeds of the sale go to her. If she had no power of appointment, there should have been a gift tax return filed. Based on her age at the date of the gift, use IRS tables to determine the value of her interest and the remainder interest. I'm not sure, but I think you have to calculate the value of what's left of her interest when the house is sold using the same tables and the ORIGINAL value (I'm sure of that part) and her new age. The transferees essentially have to buy out her remaining interest by paying her for it. She may be eligible for the 121 exclusion but anything they receive above their basis is subject to cap gains tax. Answer to your specific question: She is gifting a home, so basis is always her basis just like any other gift. If she held power of appointment, she gets the proceeds and the 121 exclusion. If not, she gets her piece and the transferees have cap gains on their piece.

I have a client who lives in another country whose return was rejected because of lack of IP PIN. He never knew he had one (thinks his mom applied for everyone in the family). I sent him the link for the "retrieve your IP PIN" at the IRS website, and within 15 minutes he had it. He's computer literate.

The CPA firm I work for in CT has decided that the new minimum is $350, but in reality that can only apply to new clients. I have many long-term clients who are paying $225-275 for returns that aren't hard to complete, and a few really easy ones that are $150-200, so it would be shocking to them to boost their fees that much. From time to time we raise fees across the board maybe $10 or so, because costs go up every year, especially software. (An accountant who came to us from a neighboring town says his company raised fees 10% a year, and their minimum was $750.) The majority of my clients pay way more than $350, and I raise those fees if complexity increases one year from the prior. You also have to consider how much off-season attention clients demand. Clients who pay $1-2k often contact me multiple times throughout the year, which is fine. The $275 clients who contact you once a month deserve a big fee increase. Obviously, pricing is subjective. It's easier for me to price estates and trusts. Minimums are $500 and $450, respectively, and the fees increase with complexity and number of K-1 packages. Knowledge level simply has to play a part too. It takes time to learn to complete FBARs, foreign earned income exclusion, crypto, and the ever-changing landscape of business credits. Clients should pay for that, even if we've become so good at them that we can just whiz through.

I have three clients right now who have to file 1310s. All are anxious to get the decedents' final returns filed so they can finalize everything. One thankfully will not have a court-appointed fiduciary, which means we can efile. I'm still waiting to hear from the others on this issue. If there is a court-appointed rep, no efile, and those refunds will take forever. These poor folks might be able to make final distributions in 2023 if they're lucky. The TIGTA's recommendation that more forms become efile-able is spot on. If I can attach pages and pages of crypto transactions, why can't I attach a PDF of a court appointment???

Maybe time to consider an alarm company. If the alarm going off doesn't scare tntruders away, the police are also notified. It will cost you but might be worth it in peace of mind. I don't know your building set up, but maybe the whole place can be alarmed and the tenants can split the expense.

I've been dedicated to planting a new bed of shrubs, visiting many local nurseries to find just the right plants. This is our third spring in VA, but covid hampered our explorations the first two. It's so fun to find these wonderful places filled with gorgeous things just wanting to grow and be happy. Oh, and I've been ignoring the 50 or so returns I have on extension. I did manage to get my own done. VA was due May 2. To my dismay, first quarter estimates were due May 1, so I guess I'm late on that one. (Still trying to get the hang of their odd deadlines I'm not used to.) Oh well, the shrubs I've planted so far look wonderful, and I feel somewhat human again. Sure beats staring at a computer all day and responding to phone calls and emails. What a little manure won't do!

mc is correct, the estate will pay tax on the money it kept. It may have some deductions though, like probate or attorney fees.

I finished a return today that was on extension. Turns out the client owes IRS $6. With IRS interest rates so low, she might have 20-30 cents interest. I was going to tell her she likely won't hear from IRS, but now I'm not so sure. I think it's PA that doesn't bother if you owe less than $3. IRS usually works in whole numbers, so we'll see.

Dan is exactly right. Only depreciation claimed in excess of straight line would be subject to recapture. Since this taxpayer always claimed SL, no recapture. The depreciation claimed does reduce basis, however, increasing cap gains. The Sect 1250 recapture would only apply if the client has prior or future year losses, which won't be deductible to the extent of the unrecaptured gain resulting from depreciation.

Most of the time we just need a few pages of those lengthy consolidated 1099s, BUT sometimes we do. Today I worked on a client who moved back to the states after working abroad for a couple of years. I had to go through all 65 pages of that tome to pull out the income/gains paid while he was a resident of the state he moved to. I think the only times we really need the pages of dividends, etc. is for part-year residents of the states. Of course, there are those call and put options that appear near the end, and the "other info" sheet alerting us to the fact that a PPT K-1 should be in the mix.

Good luck finding out if a scholarship can be used for tuition or other expenses. I assume most are only for tuition, with the exception of some athletic scholarships.