Sara EA

Since the house was never rented, it is treated as investment property for tax purposes. Operating expenses are never capitalized. For individuals, real estate taxes can be capitalized but an election to do so must be made each year. If the rule is the same for partnerships, the best they can do is deduct any RE tax paid at the closing in 2019. Their basis is $200k, period.

The lawyers are the ones who should handle this. You stay out of it. It is not up to you to determine if they have to file jointly for 2019, and you certainly can't give him her W2. Usually in these cases she provides her lawyer with the requested info and that lawyer works it out with his lawyer. Civil court rulings do not override federal laws. I have had cases where a couple divorced before the end of the year and the divorce decree stated they had to file jointly for that year. I don't think so....

Illmas, you are not delaying your RMD, you don't have to take it all. Theoretically, that allows the money in the account to continue to grow tax free. Of course, it can also lose, and with this frothy market that isn't trading on fundamentals, who knows? I agree with Lion that if you don't need the money, this is a good year to convert what would have been your RMD to a Roth. Then you won't have to guess about what future tax rates will be and can take the money out when you need it, not because it's required.

I always put myself on extension and try not to get refunds, but sometimes it happens. I usually file in August and have never gotten interest on an overpayment before. This year I filed in May, only because I moved to VA which had a nonextended June 1 due date and being a part-year resident, I couldn't even guess what my tax liability would be so had to prepare the return. I had an IRS overpayment (my bad), and just had interest deposited to my bank. What??? The regular due date was July 15, so they were not even late in paying me (I actually applied the funds to 2020 so didn't even request a refund). It's like the IRS has reversed course, anxious to give away money instead of collect it.

Good decision. Pub 970 does state, "However, you may claim the credit if the student doesn't receive a Form 1098-T because the student's ed-ucational institution isn't required to furnish a Form 1098-T to the student under existing rules (for example, if the stu-dent ... is enrolled in courses for which no aca-demic credit is awarded). If a student's educational institu-tion isn't required to provide a Form 1098-T to the student, you may claim the credit without a Form 1098-T if you oth-erwise qualify, can demonstrate that you (or a dependent) were enrolled at an eligible educational institution, and can substantiate the payment of qualified tuition and rela-ted expenses." However, the pub also states "The course must be either part of a post-secondary degree program or taken by the student to ac-quire or improve job skills." Since your student has no job, it looks like no LLC. A bit of trivia: A number of years ago an anonymous donor gave the Yale School of Music a huge endowment to assure that all future music students would pay no tuition. What a beautiful bequest! Musicians even with world-class training at places like Yale do not have much chance of making big bucks right out of school like graduates with, say, MBAs or STEM degrees. To relieve them of the burden of student loans is truly a lifetime gift. There has been much speculation over the donor's identity. I think s/he was a highly successful musician (Ringo Starr? Cher?) who knows what it was like.

There are lots of divorced dads who can't claim their children as dependents but are required by the divorce decree to keep them on their insurance.

No client can admonish us for a mistake more than we admonish ourselves. I still regret the first error I made over 20 years ago, and the CPA I worked for still agonized over his first that was older than that. We made a pact that we were each allowed one guilt-free error per year, but that was easier said than done. Torturing yourself won't help, so you need to focus on fixing it. In this special case, I think in addition to paying interest and penalties, I would refund their tax prep fee. It would at least show that you feel awful and are doing your best to help them. We have all clients fill out a yes-no questionnaire (well, that doesn't always happen) that asks the questions we should ask for every return, e.g., foreign accounts, cryptocurrency, and marketplace insurance. It's a CYA, but it also alerts us to things we need to know. I scan the "yes" column to note that they have a new address, bank account, dependent, spouse, etc. You can't go back there now, but you may want to consider it going forward. You made one big mistake, but I bet you've prepared hundreds or thousands of perfectly accurate returns over the years. Congratulate yourself and then be the professional you are and fix this one boo boo.

We moved last year and changed banks. Our return was of course on extension, so when the IRS tried to deposit our stimulus payment into our old bank listed on our 2018 return it bounced back. They then sent up a check in the mail. Right on the envelope there was a dark black box that said something like "if recipient is deceased, check here and place in the mail." I don't think they meant for deceased people to get them.

Does anyone here question a client when they submit some huge figure like $30k for meals or 62k in mileage, especially if their gross doesn't seem to warrant such expenditures? I know we're not required to audit clients, but I wonder how others approach seemingly unreasonable figures.

Good Grief! We use UltraTax for most returns, one of the higher priced programs, and pay around $18k. We have way over 1500 clients, including C and S corps, partnerships, trusts and estates, in a zillion states. ATX is the most user-friendly for payroll. Everybody has add-ons of course. The tax projection module of UT is not great, but of course they sell a better version. Same for asset manager. You need to determine what features are most important to you, but I am sure you can do way better than you are doing now.

There are the clients for whom we dutifully print ES vouchers every single year, and every year not a single one gets paid even after we have pointed out year after year how much underpayment penalties they paid. Then there was the new client who used to calculate his own estimates--to the penny. No kidding, he's pay $3862.18 one quarter and $3542.03 the next. Most do exactly what we tell them, even writing the check number and date paid on the worksheet. It does take all kinds.

Sometimes I think it's best to skip a first-quarter estimate and just add that amount to the extension request. For example, I never know what I'm going to owe either. I guess $1k and usually pay $2k or so each estimate. So I pay $3k with the extension. At least I don't underpay for the year, and what's left over gets rolled to the next year (hopefully close to what the first estimate should have been). I know a CPA who pays all four quarter estimates with his extension request. He says that's when his bank account is full with tax season receipts so he might as well. If he's under a bit, he has time to make it up in a later quarter.

Abby, NO! We had automatic extensions this year to July 15, and we saw what happened. The April 1st folks all came in July 1st. If they thought they had an automatic extension until October 15, they'll show up Oct 1. They will overlap with the usual extension folks who wait until October 10. Tax season will never end!

For anything relating to federal tax, go directly to IRS.gov and use their search box. The website is a bit clunky, but you won't get paid ads for the same free services. The exception is legal resources, which are impossible to find on irs.gov.

This is a tricky area. From Pub 970: "The scholarship or fellowship grant must be one that may qualify as a tax-free scholarship under the rules dis-cussed in chapter 1. Also, the scholarship or fellowship grant must be one that may (by its terms) be used for non-qualified expenses. Finally, the amount of the scholarship or fellowship grant that is applied to nonqualified expen-ses can't exceed the amount of the student's actual non-qualified expenses that are paid in the tax year." I have never been able to find the terms of a particular scholarship that might show it can be used for nontuition purposes. (I've actually looked on college websites.) I suspect most can't be. So you can't just say ok, the student got a scholarship but I'll make it taxable so the parents get a bigger credit. The scholarship must meet the conditions above.

I am so "by the book" the boss sometimes asks me for my IRS badge. In this case, however, I'm with Max and "family helping family." Why does everything have to have a tax consequence, and how would the IRS ever know? Gee, when our son took a semester off from school, we charged him room and board. I did not file a Sch E! (I put the money in a savings account and gave it to him when he got married a few years later. We just didn't want him to think he could live for free while he was working and not in school.) The whole multiple support thing could be a reason when people could take dependents, but now that a parent is worth a whole $500 there's not much for the siblings to lose just by giving the money and calling it a day. They could give some to dad and the rest to sis to come in under the gift tax limits.

I had a client who missed 14 years of RMDs from a 403b. I used the 5329 and said she didn't understand and now automated the payouts. I have never had them refuse to abate the 50% penalty. They know they already have a bad image and don't want to be featured on the nightly news taking money from poor old people.

The plot thickens when the child lives with both parents half the time. Yea, right. The IRS won't get involved unless they both happen to claim the same child in the same year. Due diligence, though, demands that we see some kind of proof. I once caved for a parent who said he had his child half the time, but I saved all 18 emails telling him what docs he needed to produce. To my surprise, the next year he had them all.

This is the type of mess that usually comes around in the summer--situations you never could have imagined. The problem is that this summer is still normal tax season, but these impossible dilemmas are still sticking to their usual schedule. In your situation, the bank may be the culprit here. The same bank had a lien on our home that we didn't know about until we were selling. They didn't know about it either, and we never even had a loan with them and owned our home outright. It took three weeks of daily phone calls and a threat to involve the state banking commissioner until they resolved it. Ever since we have dubbed it "the Worst Bank in America."

I try to send clients to their financial advisors to help with basis. If they changed brokers, some won't want to take on the task, but we all see how much those broker fees can be so let the FA earn it. Plus, FAs have access to all kinds of historical price data that we just don't, especially when companies merged and the original no longer exists. (Now basis info goes with transfers, but that's a recent development.) If the client has no FA or just owns the stock individually, as a last resort I look up the lowest price the stock ever sold for. This may be available on BigCharts or the company website. Even if it was in 1904, I'll go with that because the taxpayer could not have purchased it for less than its lowest price ever. Follow the advice of other posters, however. Put in the full amount with zero basis and see if that 0% tax applies--it's surprising how often it does even for clients with reasonable incomes. Now that basis tracking is mandated, just think--in 50 years tax pros won't have this problem (except with original AT&T stock--I tell my clients to hang on to it and let their heirs get stepped up.)

In our practice, the few clients who pay cash are almost all hairdressers and waitstaff. One is a waiter in a pretty fancy place and he pulls in over $80k a year. He has a lovely British accent, and I wonder if he gets bigger tips because of the charm factor.

I have received numerous cash tips over the years. (I consider flowers and booze and fruit to be gifts.) Often they come from the people who can least afford it. I try to refuse, tell them I'm paid very well, but I've come to realize that they have a need to express their appreciation that way and I hurt them if I don't accept. The cash goes into the office ice cream or pizza pool, so I've never reported it.

Was the student at least half time? First make sure the clients are eligible for the AOC. If so, you want to use the first $4k in expenses for the credit because it is much more valuable. To the remaining $100 of qualified education expenses, add books, room and board, possibly a computer for school. Let's say that total is $2550, or half the distribution, used for qualified ed expenses not counting those used for the AOC. That makes half of the earnings taxable. Your software should handle this. Just be sure not to count the first $4k in tuition used for the AOC as qualified expenses for the 529 distribution.

The IRS will go with substance over form, so I don't think it cares. I wonder about the banks though. I've had several clients who quit claimed their mortgaged homes to their kids. One would think the lender banks would care very much if the home was given away. I guess the parents never told the bank and as long as they continued to pay the mortgage no one was the wiser.

Exactly.