Corduroy Frog

Sara, surely you know the answer as it probably has happened to you: They didn't ask their tax preparer. It can work sometimes as you have demonstrated. By the way, hidden between my lines is a complaint that they never seem to adjust the child care credit for inflation. Sara, I always read your comments carefully, and believe you to be extremely astute.

I find this "benefit" to be next to worthless. Am I missing something? Clients sign up for this benefit from the employer with a resounding "Whoopee!" Reducing the income - yay, yay. Until tax time comes. First of all, if the spouse doesn't work, all of the amount (typically $10,000) gets added back to Wages. Then, assuming the spouse DOES work and you attempt to take the child care credit - the base for the credit has to be reduced by the amount in box 10, which washes out any credit in most csses. A few of my clients have gone back to their employer with a "take this credit and shove it". Again, am I missing something? As an added note: the child care credit base has not been adjusted for inflation in dozens of years, except for the year of the pandemic.

Great response Lee. TN does not permit a child under age 14 to be employed. Thanks

A client suggests that they pay their 5 year old son to take out the garbage and vacuum the office. Pay not enough for the son to file taxes, yet take a business deduction. I like the idea except it doesn't seem realistic for a 05-year old. Plus he would be exempt from social security at that age and no withholding or payroll tax deposits. "Earned income" so no kiddie tax either. Is there a code or reg that specifies a minimum age? Other than just plain ole common sense. Even with no code or reg, I'm not going to buy into the idea.

Do any of you practice in Bradenton? If so, please send me a private message and I will refer a customer to you. Thanks.

Overtime Premium was mandatory under an Obama Executive order unless the employee was making $23.46 or better. The executive order was removed by some Federal Court, I believe. Mr. Medlin, I have an Alabama employer with Quickbooks. As long as the employee was not receiving premium, QB did not exempt Alabama Earnings. QuickBooks may be treating this properly, or it may not. I don't know.

Great answer Judyl Thank you.

Husband and wife jointly own residential rental property, when husband dies. It is my understanding that the surviving wife gets one-half of a step-up. But what about depreciation? Is it reduced by half? Example: Original cost for the property was $100,000, and it has incurred $30,000 in depreciation over 9 years of life. FMV at time of death was $180,000. Surviving wife gets 1/2 of step up, or $140,000 as new undepreciated basis. Which of these is correct? Wife must maintain $30,000 accum depreciation and must continue completing the remaining 19.5 life. Wife must maintain $30,000 accum depreciation and starts all over again with 28.5 yr life. Wife reduces accum deprecation down to $15,000 and must continue completing the remaining 19.5 life. Wife has no accum depreciation at all, and starts all over again with 28.5 yr life. None of the above. Thank you in advance.

Lee, if there are items to accrue is the entity really shut down?? Thanks in advance.

Most entities of one kind or another have a "Balance Sheet", normally Schedule L or something similar. When an entity (for example, an S corp) shuts down and is liquidated to the owners, should the balance sheet reflect zeros at the end of the period, or should it reflect the balances just prior to the liquidation?

A rip off to my customers. Never have, never will. In fact, I've even lost customers because I didn't offer the RALs. I remember a truck driver telling me he just bought a rig.. He had a $1500 refund, and wanted me to write him a check instantly for about $1200 because that's what HRB told them they would do. I told him to go back to HRB if he wanted to pay that much. He couldn't wait the 10-11 days it would take for the e-file to get his money back. Then he had the nerve to ask me if I thought he would make a great living driving his new tractor-trailor truck. I was frank with him and told him he would never be able to pay off the $90,000 he borrowed because he didn't have any clue about how finances work.

Thanks Lee B. So if an entity does not know it has to file, they have not willfully violated the law. Interesting. Again, ignorance is bliss. Judy, thanks for your link.

Has there been any change in the penalty? As long as it remains at $500/per day with no limit, I'm not going to touch it. I'll refer my LLC customers to a corporate attorney, or try to do it themselves. Does this apply to LLCs only, or does it apply to any entities (S corps, C corps, partnerships)??

Deductibility of mileage is a topic for discussion. I believe the full mileage cost per mile is applicable. But there might be some argument about how much mileage can be deducted. I believe IRS would prefer only the mileage which produces revenue would be deductible. The driver leaves home and drives 3 miles to pick up his passenger. He drives 20 miles to drop off his passenger, and drives home only 22 miles, being able to take a different route home. How much is his deductible mileage? 20 miles because that is the only mileage with the passenger? 40 miles because the charged rate assumes a round trip is necessary to return, even without the passenger? What about 45 miles, which would be ALL the mileage incurred including the trip from home? I don't have any Uber drivers among my clientele. At least not yet, but it may happen. I can tell you that so many people are using Uber that traditional taxicabs are hurting. Also Car Rentals such as Avis and Hertz.

I set up a reminder to donate a small sum to Eric for the benefit I receive from this website. It is a paltry sum compared to bringing questions to the group and getting knowledgeable answers from people whose expertise far exceeds my own. I'm sure many of you will do the same before year-end. I am wondering, however, about the deductibility of such an amount. It is not a donation freely given with nothing of substance being expected in return. In my opinion, there is a great deal of substance returned (whether required or not). It could possibly be a business expense (such as a membership) rather than a Schedule A contribution. Perhaps I should not tarnish the conversation by combining the tax consequences with the greater message. I can promise I am not trying to deduct millions of dollars...

I believe there is ample evidence that the amount of loan forgiveness should be added to his W-2 as taxable income, as well as taxable under social security. Not exactly the same as the exercise of a stock option, but if there are no code/regs stipulated, the impact should be the same. Stock options 100s at a strike prce of $10 versus market price of $100. Benefit $90 per share for exercising options on 100 shares. $9000 gets added to his W-2 taxable income and social security income if not over the limit. Employee basis in stock is $100 per share. Employer dictating this? Only to the extent that the employer set up this arrangement from the beginning.

Related topic but not exactly. My last seminar taught that effective 01/01/2025, ALL Employees (including Part-Time) will automatically have 2% withheld for retirement (401k, 403b whatever). Employer would not be required to match, unless company has a match for otherwise qualified employees. This will be automatic unless employee opts out, and the opt-out will be available. Any more news on this topic?

Not a tax topic, but certainly an economic topic. This is been going on for some time, but I'll start with an occasion several months ago. Wrote a check for $125 to our veterinarian. The clerk ran in through a machine, then gave the check back to me and told me they already had my money. End of story?? I would think so. But no. She shoved a piece of paper at me and told me to sign it. She said their lawyer is making them get these things signed any time they are tendered a check. Didn't make sense to me, so I refused to sign it, and found another veterinarian. Can anyone tell me what is going on with this??

I have to take my hats off to Abby Normal. I should hesitate because there are so many other great people on this board that should be mentioned. I am notorious for my cumbersome phraseology. Often I will ask a question and get responses from good people who, from their responses, are unclear what I am asking. This is my own problem, and not anyone else's. Often I have to repeat myself, and the conversation runs in many directions, very much like a "circular reference" in Excel. Occasionally you meet someone who can perceive what is in your mind - to the extent they know what you are saying before it ever comes out of your mouth. Hopefully, in your years of human experience, you have encountered a few such people. Abby Normal seems to know exactly what I am asking, why I'm asking, as if he is in my own shoes sharing the subject. Not just once, but consistently over and over again. I met this Abby Normal (and forgot his real name) at the gathering at Rita's in 2018, which was a delightful event for myself and my wife. Again, there are a number of helpful people in this community and I don't want to lessen their contributions by not mentioning them. Thanks to all who have put up with my awkward choice of words. Abby, wherever you are, please stay with us...

This issue of paying people for services rendered confronts most of us as tax preparers. First of all, NO ONE wants to have a payroll. I don't blame them because of the administrative time, expense, and penalties that the IRS jumps on them. No one wants a payroll, but the fact remains that in many cases, a payroll is the proper manner because the payer is determining the task and methods. Secondly, in lieu of anything better, I will offer to prepare 1099-NECs. If they don't want to do this, I give them the choice: either forego the deduction or find another preparer. As stated before, the deduction is still valid, but the failure to report is the violation. In spite of this, I take the position to force the client to comply with the need. The IRS can force the issue by making more audits. At my last seminar I was told that they would be examining 1099-NECs and looking for recipients that received only one 1099. If they are not receiving multiple 1099s then they are not really in business for themselves.

I believe that the mileage procuring tools, supplies, etc from the mainland really IS deductible, but must be supported with a log. Without a log, it is still just plain ole commuting.

A typical case of some bureaucrat with nothing better to do. We have these people down here in the Sunny South as well. Of course, I don't know New York law, but it seems that in lieu of statutory compliance, alternate proof should be acceptable. From what you tell us, this alternate proof is overwhelming. I hope you hear from someone familiar with NY.

More and more people are wanting to bail out of this electronic age. As the identity theft becomes more astute, websites/providers are having to put up more hoops to jump through all the time. Many folks are going back to simply writing checks and putting them in the mail, and looking for alternatives to electronic obstacle-dodging.

This one is marked final, and consists of various losses from the previous year. The long-term capital loss is over $4000, which is more than the $3000 limit. However, none of the beneficiaries (2) have LTCL over $3000, so I gather from previous comments that each beneficiary can get their entire loss rolled forward into this year. Admittedly, I am not very experienced with Estate returns and would not have accepted this, except it is my brother's estate.

The capital loss restriction of ($3000) appears to apply to fiduciaries as well as individuals. Does the $3000 loss ceiling apply to the entire estate or to each beneficiary?