Sara EA

I love their periodicals. Tax Pro Monthly covers recent events like tax law changes, court cases, etc. and picks some topic and shows how to do it, e.g., foreign earned income exclusion, forms and all. The quarterly journal is full of interesting and helpful articles. I find their education overpriced and many of the seminars were a bit too basic for me but probably just right for others depending on what types of return you do. I find membership well worth the price.

This is what happens when the IRS is given more and more to do, facing sudden tax law changes and pressure to "get the money out there," using antiquated computer systems and not having enough staff. If any one of us was facing this at our jobs, we'd quit. IRS can't do that but can't do all that congress demands of it without the resources. I agree with the Taxpayer Advocate who for years has beseeched congress to adequately fund the agency.

CT started this practice, and its history tells you to beware! The entity must pay 6.99% for each partner/shareholder (the state's top tax rate that usually applies to people who make $1 million or so). Initially only 93% of that got passed through to the individuals. Made sense--the entity deducted 7% from its income and the individuals got 93% of the payment because the income passed through has already been reduced. Now, however, the individuals only get 87.5%, so the state is keeping the difference (a disguised entity tax?) Also, entities must pay quarterly and electronically--no excuse if they don't have any money like some small entities (like a partnership that has to pay say $3k quarterly but only has $2k in the bank at the time--what to do?) While it sounds like the state is trying to help folks overcome the SALT limit, it's a money grab. Some states only require the tax on nonresident partners whom they might not otherwise hear from.

IRS has been unhappy with the back door approach for years but congress won't change it. Who knows, maybe most of them take advantage of it? Heed Danrvan's advice if the client already has a traditional IRA. Say you're over AGI and contribute $6k to your traditional that's nondeductible. You can't just pull that $6k out and convert it to a Roth. If your IRA balance was $100k and you convert the $6k, only .06 percent will be treated as basis and the rest will be taxable. Also be aware that before this year, people 70 1/2 or older couldn't contribute to a traditional at all, so the back door was closed.

I do a partnership and the individual returns for the partners. All of them have their personal tax liabilities direct debited from the same partnership account, which is in the name of the partnership and doesn't have any of their names on it. Money comes out on time, every time.

The penalty is indeed based on the number of partners, not the tax liability (partnerships usually pay no federal income tax). It can be waived using the first-time penalty abatement. Be sure it's a first timer. I had a partner once who was chronically late, got hit with a penalty, and to appease him I wrote a letter asking for the first-time abatement. I knew he wouldn't get it, and he didn't. After that year he got his docs to me well before Oct 16 (now that would have to be Sept 15)! Be aware that no penalty if they file an extension, but if they miss the Sept 15 deadline the penalty is assessed back to March.

What a relief that must be Donna--no more worrying about if there's enough paper or light bulbs or if the client paid or not. Don't expect UT to be user-friendly. A really big help is that you can toggle between the input and form views. If you know where something is supposed to go on the return but can't find where in UT to input it, go to the form view and put your cursor where the data goes, then switch to input and there you are (doesn't always put you in the right place for some of the esoteric entries). You can also be in a field and click on help for usually good info on what to do there (for example, how to mark a qualified charitable distribution or Covid-related distribution). It's a powerful program and can do most everything. Kiddie tax is a breeze--go into the child's return, pick tools, and mark off 8615 and the parent and sibling files--all that info imports instantly and the return is done. Instantly optimize MFS or education credits too. Excellent diagnostics. The tax projection component isn't perfect, but maybe where you work has sprung for the separate better module.

This has got to stop, and regulation of cryptocurrencies has to happen. If the hackers don't have anonymity with payments they will have to go back to meeting victims in dark alleys with suitcases full of cash. Since most of them are in a few far-away countries that look the other way (and likely demand some of the loot), they'll have to find a new line of work. There is so much pressure to do everything in the cloud. NO! I won't even bank on my phone. I'm seriously beginning to think that most of us will have to have a separate computer in our offices that connects to the internet and that is where we will do research, email, etc. All the others will be off-line. It will be a nuisance but hopefully it will be safe. My son works in IT and has told me that if I knew what he knows about the internet, I'd never use it. If only that were possible in today's world....

Agree with Abby, make the client call IRS. I've been doing this more and more because I can't charge for two hours waiting on hold. I have had a few clients with bank accounts who wanted paper checks because "some people I know" have access to the account.

Danrvan is correct, the value of the gift is no longer included in the estate except under certain circumstances. (Under the old rules it was--I've been doing this too long!) So there are two things to consider. First is who pays the IRS? The decedent had the money and chose to give it to people instead of paying the taxes on it. The executor is responsible for paying the decedent's taxes but since there was nothing in the estate to pay with, it might make sense to ask a tax attorney. However, since you said the amount due isn't all that much, it might be cheaper for the heirs just to pay it, which they may have to do anyway. A gift tax return must be filed if any one person got more than $15k. No, paying the decedent's taxes doesn't lower the amount of the gift because the donees are assuming responsibility for the decedent's taxes whether they pay from her money or their own. Medicaid in most if not all states has a five-year look-back period. Any money gifted in that time period can be clawed back from whomever received it. I was using an average nursing home stay at $12k a month, with the decedent paying $2k and Medicaid the rest. Say she was in a really low cost home, say, $5k a month (does such a place exist?), she paid $2k, so the donees are responsible for $3k a month. Unless she had a lot of Soc Sec and pension to contribute, they will likely owe more than a few hundred to Medicaid.

Not much to pay back? That could be $10k a month! I am totally with you that it's just not right for people to give away all their money to family so we, the taxpayers who have less than they do, will pay for their care. The look-back rule has helped somewhat. Yet I have seen what you are seeing--staff in senior care facilities and even attorneys advising people to get rid of their money. Often that person is old and frail and likely to need care within months, so it's totally inappropriate advice coming way too late. I know you don't care if the attorney gets paid or not, but the way laws are written (by attorneys, of course) I believe their fees are priority debts. Just hope the heirs didn't spend everything yet. You won't need to file a 1041 unless the estate had more than $600 in income. You might want to wait to file the decedent's final return until you learn how much will be paid back to Medicaid. Say it is $30k. That amount can then be deducted as medical expenses on the decedent's final return, which may lower the tax bill. (There is an election to claim the decedent's medical expenses paid after death on the final 1040.)

I wouldn't bother. With PTPs, losses can only be taken against income from the same PTP. If no losses are deductible, they won't affect federal or state income in states that start with federal AGI. It will only make a difference when the shares are sold, and the worksheet the PTP provides at that time should show the state amounts. Does anyone ever pay attention to that long list of state amounts on the K-1s? There are not enough days in the year to do that. I figure if the states actually notice they'll tell us.

Jerry W is absolutely correct. No money is to be distributed from the estate until all the bills are paid. If the beneficiaries took the cash before the creditors, they are indeed liable for the bills. Don't even think OIC, the law is pretty clear. In this case, it may be that the money was distributed before the taxpayer died? If so, were gift tax returns filed? Gifts made within three years of death are included in the estate, so the heirs can't claim it only has $1k. Its bank account may only have $1k, but the rest is sitting in their bank accounts.

Excellent advice. I assume you already agreed on a price for the business based on percentage of invoices of retained clients. In that case, your question is how much should you be paid as an employee of the new owner. Do you really want to be paid on commission? That tactic is used by HRB and others to ensure that employees actually work instead of play on their phones all day. You are a professional and unlikely to do that, so you either need an hourly rate or salary. With your credentials and experience, and being in VA Beach, I would think $40+ an hour. I think commission-based pay can be detrimental in the tax business. People will decline to do returns they know will require research, or slack on the research. They may cut off clients who need help with say W4s or an IRS notice. No one is going to want to do an amendment on a return a former employee of the company messed up. Face it, a lot of what we do as a service to our clients is unpaid but is excellent client service, which is what keeps them coming back. On the other hand, if I was paid on commission I would never take another phone call about the stimulus payment or advance CTC!

Yesterday I decided to learn more about the new CTC, advance, repayment etc. I ended up more confused than when I began. The advance phases out after AGI of $150k MSJ, $112k HOH, and &75k all others. The phase out is $50 for every $1k over. I didn't do the math to see where it ends. The normal $2k credit begins to phase out at $400k MFS and $200k everyone else. Repayment has a couple of safe harbors but I couldn't figure out how they intertwine--something like no repayment for AGI $120k, $100k, $80k, and full forgiveness up to $2k if IRS claimed the advance on too many kids for AGIs less than $60k, $50k, $40k. I might have the above all mixed up, but notice how every calculation has a different AGI starting/ending point? Who came up with this confusing/complex/no rhyme or reason perplexity??? I think we're all going to have to do something we hate to do--blindly rely on the software. Or maybe we should all demand that any politician who wants our vote have to submit the answer to the CTC for, say, a couple with three kids making $190k, and show proof of work done by hand!

We recently had a client who had rented an office building to a nonprofit and eventually donated it to them. He got the certified appraisal (40 pages worth) that I told him he needed. However, the appraiser refused to sign Part IV of the 8283, claiming he didn't appraise it for IRS purposes or something like that. I believe the two of them are battling it out now about why the client paid for an appraisal to certify FMV and now the appraiser won't attest to it. Have your client hire an appraiser very carefully!

I had this happen to three taxpayers with the exact same error message one year. I contacted the IRS liaison for our region (they deal with systemic problems), he looked into it and found it was a programming error so it got fixed. My error messages occurred during filing season, so maybe after a certain date Soc Sec cuts off those numbers? Maybe the bug is back? You can notify your liaison, but at this point you have no choice but to paper file.

Don't want to sound like a snob or know-it-all, but most of the IRS freebies I've taken have been way too basic. Nothing there you can't learn from the pubs. I took one on due diligence this year just to find out what documentation is acceptable to prove a child lives with the taxpayer, etc. The presenter said you don't have to list any if the responses to the questions seemed "correct, complete, and consistent," but our software doesn't know that and won't pass a return through diagnostics unless something is listed there. I didn't lose any money, but that's an hour of my life I won't get back.

All this to opt out? I would think it would be necessary if someone was updating info like bank account, address, child added to return, in case any of those changes are fraudulent, but you have to prove who you are to say you don't want the advance? I have a client whom I advised to opt out because income will go way up this year, and she didn't complain of any problems. Are they asking everyone to do this?

The child tax credit is for children under the age of 17. The advance allows for children who turn 17 in 2021. Any other child, whether an 18-year-old student or 25-year disabled child does not qualify as a "child" for the credit. Your client's daughter does qualify her for the "qualifying relative" $500 deduction, but no child tax credits.

I just had a request for a first-time penalty abatement denied too, even though taxpayer has always been current. The reason given in the IRS letter was that he did not qualify for "reasonable cause," which is not what we asked for. Has artificial intelligence been answering these requests? If so, it's certainly not very intelligent.

I read today that IRS is ignoring the 30-day thing and allowing taxpayers to verify beyond that time limit. But the poor frightened people don't know that! I wonder why the online system is down. A few years ago the system to recover an IPPIN was disabled as was the sharing function for the FAFSA because the ID thieves had enough info on the taxpayers to answer the questions no problem. Did it happen again?

I have a retired client who has a similar notice and called IRS THIRTY times and never got through to anyone. Her notice said she could not verify online (she is capable of doing so). This is terrible customer service, and I told her to contact her US rep and senators to tell them to fund the IRS so it can actually serve taxpayers. What a horrible situation for all the recipients of these notices--they're scared that their ID has been compromised and then can't reach anyone to help, all under time pressure. Unacceptable.

Our firm has taken the position that we will not recommend that clients take the money or opt out (except in cases where 2021 income is certain to be above eligibility). We wrote a generic email to respond to client queries that explains that there is an enhanced CTC and that half of it will be paid in advance for taxpayers within certain income parameters. Receiving it may lower their 2021 refund, or if their income rises above the limits in the IRS letter, they will have to pay some or all of it back. If they think their income will rise or they like the idea of a big refund all at once, they might want to opt out. If they need the money now, they might choose not to opt out. (We are not calculating their amounts or making the decision for them!)

I've been dealing with crypto for years because I have a client who is a miner. I had to study it, was fascinated, and now I follow it (would never buy it). By now a few other clients are buying/selling various coins, so I'm able to handle them. I will back out if any one of them ever starts buying everyday items with crypto as the constantly changing price would be impossible to trace. Few actually use it as currency, and I don't know why any merchant would accept it. Say someone buys a Tesla for $80k, but by the time the transaction clears (up to 20 minutes for bitcoin), the value of the crypto could have gone down by $5k or more (or up). I read about a guy who ordered a pizza and by the time the transaction cleared it cost him $23 more. The exchanges are going to have to do the tracking (like Coinbase does) because otherwise the taxpayer and tax pro and IRS will never be able to figure it out. It would mean a five day audit for a $20 transaction.