Sara EA

Like every time they stop at a fast food joint for lunch or a package store classified as "meals and entertainment"? I prefer the clients who classify half their entries as "ask accountant." My least favorite are those who don't have separate business debit/credit cards and just give you their bank statements. Everything is in there--groceries, gas, shoes, dating services, and of course cell phone payments for the entire family. Bookkeeping can take a LOT of time, but if you can charge enough for it, go for it. The answers are more black and white than positions on a tax return--if you can get the details from the client.

After years of hearing clients respond "what's the max?" when asked how much if anything they gave to charity, we expected almost everyone to claim $300 or $600. In our organizer, we didn't mention amounts but asked how much they gave in cash, debit, credit, or check to charities for which they had receipts. Surprisingly, the majority indicated zero. Many others entered amounts well below the cap. Those generous folks who gave more than those caps listed specific numbers like $2850 or whatever, so you know they weren't made up. No one said exactly $300 or $600. (My most generous client gave over $24k, working toward donating half his income, but he of course itemizes.) Anyone else experience this trend?

Degrading other tax pros because of their fee structures doesn't happen here thankfully. Occasionally someone will mention a fee and others will encourage them to up it because no matter where they live, they are giving their talent and work away. $75 for a 1040 with SCHs A and B--no way! Of course those who live in expensive areas have to charge more because their rent, property and state taxes, utilities, personnel, etc. cost way more. What matters is what's left over for you. Someone who charges $750 for a return may end up with $400, the same as someone who lives in a less costly area but charges $500 for the same return. I wonder if HRB fees vary from place to place. Anyone know? Specialized knowledge warrants premium prices above and beyond the expected hourly rate. Many preparers do not do estates, trusts, partnerships, corps, returns with foreign income, etc. Those who do should feel no guilt charging for the effort and expense they put into acquiring those skills. Some preparers have developed niches in cryptocurrency. I bet they charge a lot--and they should. Increase your fees at least enough to cover your increased expenses. Bear in mind that office supplies have gone way up and postage keeps increasing. Hopefully there will be enough to cover some pro bono work for clients who truly need but truly can't afford you.

I had an email from a client who had read the article and demanded to know what software we use to file returns. The article didn't make clear that it seemed to be DIY software that was passing along info. The IRS does take violations of taxpayer privacy seriously. It may take time to investigate and it will be difficult to impossible to identify the responsible parties, but I fully expect IRS to shut down these services and fine them more money than they have.

Has this report been verified or is it just a conspiracy theory? If so, sharing tax info is a major violation of Circular 230 and these firms can lose their ability to prepare tax returns. Back in the days when Block offered mortgages and financial services, there was a form clients could sign to allow sharing their tax info with these subsidiaries. Is there a form they now sign allowing sharing with Facebook?

In this case I would definitely not deduct travel as the beneficiary will directly benefit from her expense. Now I question whether the estate should reimburse her, which it can do because it still owns the house. Doing so, however, will lower the amount available for the estate to distribute to both beneficiaries when it closes. In other words, her sibling will be paying for half of her travel to a house she is inheriting. Ask her if she really wants to do that.

When the owner of our CPA firm died, many clients went into mourning with us. Some sent US flowers or goodies. No, they didn't show up for the memorial service (usually attended by family and close friends), but that didn't mean they didn't care. As for firing clients, raising fees rarely does it. I had one client who was such a PIA that I kept raising his fee a couple of hundred a year, but he kept coming back. (I stopped at $1500, for maybe a $600-$700 return) because at that fee I figured I was getting compensated for the aggravation. Best to just fire them. Every year we send a letter to some clients stating that our business direction is changing and their particular needs will be met better elsewhere. Every year a few of the recipients beg to stay. Sometimes we agree but not always. We also have too many clients and really need to cull the list.

Legal and accounting fees, taxes, etc. are specifically allowed by the Code and are fully deductible by the estate. It can reimburse whomever paid them and take the deduction. Travel is a little iffy. It is not listed among administrative expenses in the 1041 instructions. See the instructions for Line 15a, "other deductions," which states that costs that would normally be incurred by someone who owns a property are not deductible unless allowed under other sections of the Code (e.g., taxes). Sect 67 of the Code only allows "Deductions for costs paid or incurred in connection with the administration of the estate or trust which would not have been incurred if the property were not held in such estate or non-grantor trust." If someone owns vacant investment property and travels to check on it or prepare it for sale, travel is not deductible because there no longer are misc itemized deductions. (Different if it was rental property.) The beneficiary can be reimbursed, just as she would be if she paid for the funeral, but the estate can't deduct either cost. Does this estate have so much income that it needs the deduction?

She can charge a fee if the will permits and/or Probate approves. The amount will be taxable income to her, not subject to SE. To claim expenses, she'd have to report the income on Sch C, subject to SE. (And since she's not in the business of administering estates, Sch C is just wrong.) Why bother? Just let the estate reimburse her out of corpus.

She is not donating! The estate can reimburse her travel, so she is made whole. The question is whether the estate can deduct the expense from its income. Since she is a beneficiary, I think not. For example, estates commonly reimburse beneficiaries for funeral expenses they paid out of pocket, but funeral costs are not deductible on the 1041.

Something doesn't add up here. Take a close look at the IRS notice. It seems to have information that there was a $145k withdrawal, not $99k. And they seem to think $45k was repaid--does that match the return you filed? The notice should list where their info came from. Was there another 1099R you haven't seen? Your client paid tax on $33k in 2020, check. In 2021, $33k was repaid so no tax due for 2021, check. If the client repays $66k in 2022, no tax will be due and 2020 can be amended. Did the client elect for the 3-year-plan? Another thing to check.

It may depend on whether the executrix is a beneficiary. If her travel was to get the house ready for sale, and she will share in the proceeds, probably not deductible. Take a look at Sect 20.2053-1(b). The estate can reimburse her travel, but I'd be reluctant to deduct it on the 1041.

I find it very difficult to work with emailed docs (especially when they send piecemeal so you have to go back through ten emails to be sure you got everything--a portal would help here). It's not a big problem when they just have a couple of W2s and mortgage 1099, but when you start getting multiple brokerages or eight 1099Rs, I really have to print them out to put them in reasonable order. When I am done with a return, I manually add up all the W2 income, bank interest, withholding, etc. and check it against the return, then put a check mark on the original doc. I find it impossible to run this check on 25 helter-skelter docs. How do others work with emailed docs? Don't get me started on phone pictures of docs. Our client letter states in all caps NO PHONE PHOTOS. Never can read them, often can't print them or send to electronic file cabinet.

Job description: Answer 1,000 phone calls a day. Deflect 989 of them from callers who want to speak to their preparer by asking how you can help. Help them. Get the deluge of mail. Open the mail. Direct the mail to the appropriate person. Make 100 appointments a day, or if you're not taking appts or there are no openings, take abuse from 100 callers. Have lunch when you get home at 9PM.

As long as everything in the trust is listed in their SS#s, that's true. When a grantor trust has to file a 1041 is when income-producing assets are reported in the trust's EIN. This can be bank or brokerage accounts or rental properties that get 1099s with the EIN. Your clients may title their assets in the trust's name but as long as they use their SS#s, they are indeed indistinguishable from the grantors. If that brokerage acct is reported in the EIN, IRS matching computers will be looking for a 1041.

schirallicpa, EAs have to take two hours of ethics annually because THE IRS SAYS SO. Best ethics course I ever had was run by an IRS agent who began by saying she knew she was preaching to the choir. The worst I ever had was run by Karen Hawkins, then head of the Office of Professional Responsibility, who hated tax preparers. She spent the entire two hours reading Circular 230 to us, especially the juicy parts about monetary fines and sanctions. Interestingly, the ethics courses for CPAs are not eligible for CPEs for EAs, and vice versa. What do they teach you CPAs that they don't want EAs to know, and vice versa?

Tell him to look for a new preparer. He has to know that campaign expenses aren't business expenses. Telling instead of asking you what credits he's entitled to is another sign that this is not a desirable client.

I just took my annual ethics CPE today. I now know what the answer is! You do too, even if CPAs only have to take four hours of ethics every three years. We EAs, being the most ethical of the professions, have to take two hours every single year. (Or do we have to take more because we're the least ethical?) Gets old fast.

If not available for rent, it's not a rental but is out of service. He can deduct property taxes on Sch A, and mortgage interest if he doesn't already have a second home. He could have made an election to capitalize the carrying charges, but he would have had to do that the first year it became an investment property rather than a rental.

If the trust has more than $600 of GROSS income, then yes, a 1041 must be filed and K-1s issued to the grantors. This would be the case if income-producing assets like bank and brokerage accts, etc. are titled to the trust using the trust's EIN. If rental properties are titled to the trust, rental and income and expenses go to the trust. What are your clients putting into the trust? Does it have an EIN?

Do they need all that depreciation? Opt out of bonus and use just enough 179 to offset operating income. You don't mention guaranteed payments, but I believe they are always subject to SE because the partner actually received that money.

There may be a 1041. It depends on what assets are placed in the trust and whether tax docs are reported in the trust's EIN. If they are, the trust has to file. There is an election on the 1041 to report everything on the grantor's return, so instead of a K1 there is a statement showing income and expenses. Filing is still required though, or the IRS computer matching programs will discern a mismatch and generate a letter.

PA has an inheritance tax, and I'm not sure if revocable trusts that become irrevocable at death escape it. Find out why they are considering a trust. Did they go to one of those seminars that convince the attendees that they need to pay the lawyers a big chunk of change for essentially no benefit to them or their heirs? I have seen many people who really don't have much set these things up and really can't afford the 1041 annual tax filings. This is a legal decision though and you are right to refer them to an attorney. Just make sure s/he doesn't offer seminars.

Is half of their combined income over 400% poverty? If so, it all gets paid back in most cases, or they are eligible for a tiny subsidy.

The SSA usually keeps the SS# active until the final return is filed, then they deactivate it. Once they do, there is no way to reactivate it. You will have to mail the amendment. If they are due a refund, warn them to expect it in a year or so. If they owe money, no problem.