Sara EA

Definitely don't claim any loss without evidence.  We had a client with a multi-million dollar loss that was used against gains on some of his other endeavors over the years.  Boy was he upset when he had a huge gain and a huge tax bill.  He still had that big loss in his mind and assumed he'd never have to pay taxes again.

As I understand it, water is not an allowable expense for a home office. (It is for home day cares and home-based hair salons.) The repair is not relevant to the business, just like having the pool cleaned is not.

6 hours ago, Lion EA said:

Remember all the Baby Bells before covered trades?

I tell clients who owned original AT&T stock and now own 28 companies that themselves have had mergers and splits to never sell.  Just let their kids inherit the stock to save us all a lot of trouble!

Immigrant tax reporting aside, this agreement violates the sanctity of the privacy bond between taxpayers and the IRS. We voluntarily give them our most private data and that of our household members and they lock it up so tightly that most of their own employees can't access it.  In my Master's course I learned that IRS can share your data with NO ONE, the only exceptions being suspected terrorism and money laundering.  We used to joke that you could list your occupation as Hit Man or Bank Robber and the IRS would keep it a secret.  Breaking that bond can further dent the agency's tarnished image.

ICE is demanding this disclosure to get immigrants' addresses.  I think the tax return is not a good place to look.  People move, have PO boxes, use someone else's address to get their mail because their own box is insecure, still use Mom's address because they're away at school or she always handles everything.  I'm sure all of us have had a client or two who suddenly notices that the address we've been using for five years has the wrong street number of spelling.

The taxpayer's name of course goes on the name line.  On the address line, I always put "c/o" and the fiduciary's name before the street:  c/o Smith 123 Main St.

If you haven't raised prices in 10 years (what were you thinking?), you will have to do it gradually, although yours are so  low you could start with 20%.  I'll bet that some of your clients react with, "What took you so long?"  Beware though; we had a client who came in every year with her check already made out so a price increase would be hard to impose.  

Different tiers for services with different pricing would be hard to keep track of.  We use a client contact sheet to record all off-season encounters.  Anything that requires extensive computations and/or takes more than a half hour gets charged.  If there are just routine questions or whatever but a lot of them, price of tax prep goes up next year. 

Not many of us have the nerve to get rid of our PIA clients, but those who do seem to be unanimous in saying what a relief it is and why didn't they do it years ago.  And it's better for our mental health to be the ones doing the firing instead of the clients firing us, as was the case for Judy.  In her case, my hunch is the parents got annoyed and decided to go elsewhere, dragging the kids along.  Those complex returns surely took a lot of time, so the silver lining is that she might just be able to go home earlier a few nights.

He receives the items, so his basis in them is the amount of the remaining depreciation.  Why was a farm reporting on Sch C instead of F?

Some states are really aggressive in residency audits, especially if the person maintains a residence in the nonresident state.  If state budgets start getting pressured by all the cuts being made in Washington they may all start looking harder.  Your TX/WI friend may just have to produce every bank and credit card statement, utility bill, gas receipt, doctor visit history, etc to prove where he is spending most of his time.  Residency audits are nasty.

I agree that NY just doesn't know about the rental income.  You have to include the income now, but the depreciation schedule will be a dead giveaway.  "Date placed in service" will not coincide with the current tax year.  The client should hire a tax attorney who will calculate the amount of unpaid taxes and make an anonymous offer to the state.  Basically they approach the state saying that some unnamed individual may have $X in unreported income, owing $Y in taxes, interest and penalties.  The person may be willing to pay $Z to settle the debt in full (Z < Y).  The state may negotiate a bit but often accepts because if they don't, they have no idea who the person is and will likely get nothing.

Adults have tax milestones too, like when they turn 59 1/2 and 65.

A trust beneficiary is a related party to the trust.

Were the charities actually beneficiaries?  Most often bequests are made to charities, e.g., give $10k to my church.  Any charity of person for that matter that receives a bequest does not get a K-1.  K-1s go to those who share in the income and expenses and remainder of the estate.

22 hours ago, BulldogTom said:

What I don't want is those stupid ba$ta3ds to require me to get an ID.me account to pay them.

You don't need an IRS account to make a payment.  At IRS.gov there is a link to make a payment that does not require sign in, just name and last year's filing status I believe.

The $5200 was most likely a tuition assistance employee benefit from Starbucks, not a scholarship. It can be used for more than tuition https://www.irs.gov/newsroom/employer-offered-educational-assistance-programs-can-help-pay-for-college  That said, Pub 970, figure 2.1, makes clear that the same expenses covered by the employer-provided tuition assistance can't be used for the education credits. Seems like you have a taxable scholarship of $3200 - expenses for books, equipment, etc.

Note that the choice to include a scholarship in income isn't that simple.  The terms of the scholarship must specify that it may be used for nonqualified expenses like room and board.  Most scholarships specify that they are for tuition only.  I once researched whether a particular scholarship allowed nonqualified education expenses and that info just isn't out there.

A trust can be simple one year and complex another, depending on what it did with its income that year.  A simple trust has to pass through all income to the beneficiaries so it will have none of its own income to offset with a charitable donation.  If the trust document allows and it made a charitable contribution out of its income, it will be a complex trust that year.

The trust may have been closed on paper but not for tax purposes if it is still collecting income in its EIN.  If the trust is closed and the money is going to the beneficiaries directly in their SS numbers, no trust return required.

"$398K early distribution from IRA with NO tax withheld.  They bought Bitcoin with the proceeds.  You can't fix stupid."  To use an interrobang, they did WHAT?!  Or to borrow from Scarlett O'Hara, God's nightgown!  Hope they are ready to sell a lot of that bitcoin to cover the immense tax bill.  Reminds me of the client who took a lump sum for his wife's generous government pension that could have sustained them for life because he could do so much better investing it. (Said he, who already had $400k in long-term cap losses, being written off at $3k per year, evidence of his investing prowess.)

Did you ask him how he got his return done in the past?

5 hours ago, Abby Normal said:

I wish the IRS had made the QCD a subtraction on the Sch A so it was clearer what was going on. Also, adding a box to the 1099R for QCDs would help.

A Sch A deduction would be of no benefit to the majority of retirees who don't itemize, plus it wouldn't reduce AGI for state tax calculations.  I've pondered why the 1099R doesn't show a QCD.  All I can come up with is that most IRA custodians make the check out to the charity but send it to the taxpayer to pass on.  Since the custodian has no idea if the taxpayer did so in a timely fashion, they wouldn't be able to put the amount in some box on the form.  Any other ideas?

Not all the nursing home expenses are deductible.  Some nondeductible personal expenses include phone, cable TV, and hairdresser.

And what are all the people who can never find their SSA1099 going to do now?  It was fairly quick and easy to head to the local SSA office.

No.   This is a donation of a partial interest in property.  See Pub 526.

Most likely there is a lot more to this case than just failure to file.  CI investigates major crimes like fraud, money laundering, narcotics--things that land the perpetrator in prison.  The only failure to file cases listed on the website as part of their duties are those jerks who claim income taxes are illegal.  I've sat through several presentations by CI and learned that these people carry guns, often work with the FBI, and mean business.  That said, do not discuss the case further with your client.  If you do and she is called to testify, anything she tells you is not privileged as it would be with an attorney.

It can't.  Just report the income on the estate return, noting "Reported to xxx-xx-xxxx."  If there was withholding, then you'll want it reissued.  Let the retirement plan trustee decide to whom it should be issued.

13 hours ago, Randall said:

I thought a Grantor Trust didn't file a tax return.  All items reported as the grantor's individual return with his/her ssn.

It depends on how the assets are titled.  If the trust has an EIN and bank accounts etc. are reported to that number, the trust has to file a 1041.  It can choose to pass all income and expenses to the grantor via a statement attached to the 1041.

Scholarships are generally nontaxable if used for qualified expenses.  (Only those used for room and board, travel, etc. are taxable.)  You don't have to report anything.  If the AOC had been claimed in the prior year and reduced the qualified expenses, you would have to recapture some of the credit, but that isn't the case with your client. 

Definitely read the trust docs.  You might even end with the A-B trusts that used to be the way to go when the estate tax exemption was small.