Corduroy Frog

Already have some, with increased activity showing up this past week. When I prepared taxes for 2020, I had to inquire from each client the amount of stimulus payments received to determine whether a credit would be forthcoming. Most of them were unprepared to answer - many of them had to review their bank accounts, and some of them tried to answer off the top of their heads. I would think the IRS (being the paying agent) should have records that are infinitely more accurate than taxpayers, but I think I'm giving them too much credit. I have a couple families that are being "corrected" when I can remember reviewing their bank statements with them in a sit-down session. I'm also throwing this out to ask the forum for possible remedies. No one wants to go to Tax Court, or any court for that matter.

One of the bills in front of the govt is to place upon banks the requirement to report any transaction flowing thru an individual's account if it exceeds $600.

Excellent information Sara. I have to compete with the big box franchises, as their primary appeal is for customers who want to rush their returns in and get refund money as soon as possible. In fact some of these taxpayers rush to claim their children before their ex-wife can legitimately claim them. Then when ex-wife comes to one of us, we can't electronically file because her kids have already been claimed. We have H&R around every block, also JH. If we don't have Liberty then that's one less we have to worry with. I'm not really bashing them - I can't compete with their resources that they have to prepare a return from check stubs and the like.

Scarcity of resources continues. It is important to note that the shortage created is gone, and has not been replaced at another location. One of my CPE lecturers (and a great one at that) is Chris Bird from Champagne/Urbana Illinois. He said that the entire IRS region below Springfield lost their only field auditor. The personnel requisition called for a graduate with a Bachelor's Degree. Did not have to be in Accounting, Math, Taxation, or anything relevant. They could have hired a candidate with a degree in Sociology or Physical Education, I suppose. No wonder we're having headaches with the IRS.

Assume you have absolutely nothing except current year statistics. If you don't have current year, you should not be doing the return. Reconstruct beginning balances by asking about real estate and equipment, and dates of purchase, then reconstruct accumulated depreciation. Current year cash can be rolled back to a Jan 1 balance. From amounts on loan service, you can deduct the amount interest, then reconstruct beginning balances on loans. Current year information is necessary anyway. Make sure you charge enough and tell them up front it will cost. For what it's worth, I do schedule L, M-1, and M-2 for every Partnership and Corporation regardless of size. Anything less means I am not setting forth proper due diligence.

I put the extinguishment of installment sale items in the following order: Depreciation recapture of S. 1245 property. Many times rental real estate has section 1245 property (such as large appliances) which bear more rapid depreciation than building components. IMMEDIATELY TAXABLE - No installment advantage. Depreciation recapture of S. 1250 property which is in excess of Straight line. IMMEDIATELY TAXABLE - No installment advantage. Section 1250 gains allocable to S/L depreciation. Eligible for installment treatment. Software has a bucket for this if we just look for it. Pure capital gains on remainder of assets not mentioned above. Eligible for installment treatment. Over the course of years, the above items may be relinquished in the order described.

Jackie if what you say is true, the selling price is less than the purchase price. I don't know where you live, but this is quite unusual unless he hasn't done any upkeep, or sold to a relative. I would question your client.

Not clear what kind of return you are preparing. Is it for the deceased or the estate?

I haven't been able to get back on the forum until late tonight, but there is an update. If I follow CBS initial advice about populating Line 6 on Sch M-1, everything magically is taken care of. FWIW, there is no requirement for the entity to furnish a Basis worksheet, as this requirement is only on the recipient of the K-1. Even though the tracking of basis is the responsibility of the recipient, I still try to furnish such a schedule privately on an Excel worksheet, since most recipients don't have a clue. Thanks again - Frog

WOW, thanks for being out there today! Thanks for the reply. Makes sense, and that might be why Drake does not allow for it. The big problem is Drake is now getting sticky about Basis worksheets, and Exempt Income increases Basis.

Maybe I'm an idiot, but I'm working this Labor Day, and I need help from Drake, who (like most sane people) is shut down for the Holiday. An LLC (Form 1065) has a large amount of Tax Exempt Income (e.g. PPP forgiveness). There appear to be no field whereby this amount can be entered - not on the K-1 distribution, or anywhere else. I am able to enter into the M-1 reconciliation, but that's about all. Does anyone out there know where to enter this? I don't blame anyone for not reading or responding and ruining their Holiday.

I haven't had unprofessional experience with IRS auditors either. When all the facts came out, they were usually more correct than my clients, who often were less than forthcoming with me when reporting their income or expenses. Like CBS, my worst experiences have been with State Unemployment auditors, who were definitely more hostile and wrong than IRS people. I've had to go to supervisors to get proper relief a couple times. But we are speaking of the IRS as it exists now. Not of the IRS when they receive regulatory powers. My guess is the regulators will not be the same people as the auditors.

Thank you for your help. Ironically Lion's Link to the CCH article meets Abby's criteria for being non-IRS publication.

Trying to read IRS publications to figure out how to depreciate leasehold improvements. Not having any luck. Can anyone point me to a reputable source? At some point I believed that Leasehold Improvements depreciate over 3 years or the term of the lease, whichever was longer. Is there any better or more recent information than this? Thanks in advance.

Apologize, ILLMAS, but Abby is correct. I didn't read deep enough into your post to ascertain that some of this money would never result in income.