lbbwest

I was worried about he SE issue, (increased by gross income attributable to interest.) Every day I make mistakes, on the good days I catch them before anyone else. On the moderate days someone else catches them before they go out, on the bad days, that's right, you already know about them. stay sane. lbb

Can client take the medicare supliment insurance paid for a dependent on the self employed insurance line. In addithion to the rest of the family of course.

This is a strange one.

Linda and buddy

Hi Linda & Buddy, long tax season, no time to post....lbb here, NO, this issue was debated ad nauseaum for several tax seasons, IRS said (don't remember, but I think Rev. Ruling) MUST be in the name of the business which precluded self-employed from taking spouses employed insurance co-pay or premium. That was the last I read on it, haven't reasearched it this year, sorry, no more specific, but you get what you pay for. Stay sane. lbb

>> I would be lacking other income information on the spouse.<<

I'll let the attorneys figure out about the information, but-- In my opinion, your client (assuming this is the one not in a community property state) is required to file a non-resident return for the community property state reporting his or her share of community income sourced to that state plus all of his own income. And the same world-wide income is presumably taxable in his home state.

The correct answer in Accounting & Tax is always....it depends. Taxpayer is active military stationed in LA (community property state) Michigan resident; military has right to declare home state, taxpayer owns primary residence in MI, his only income was military pay, (Michigan doesn't tax military pay) future ex-wifes income all from Michigan, she is currently a Alabama resident. (NO Louisiana income involved) THE COMPUTER simply refused to allow him to file mfs without her income on the return, please note NO Louisiana return filed or needs to be filed. Simply required by the programmer due to taxpayer's MAILING ADDRESS. I "fixed it." This is a good example of why if we rely too much on the programmers and not enough on tax law we can inadvertently create unneccessary issus. Have great tax season. lbb

Yes.. it was just a simple question (my only one in years) and as a tax practicing CPA of 30+ years I do update courses every year.

I guess if I ask a dumb question I deserve a dumb answer! Geezz

Thanks to all that replied.

Hey OldJack, how are you doing? Did you know you can read Pub 17 online now? Or even download it? (BEFORE you explode, it's lbb, I'm just joshing you.) See what happens when you ask questions? My first year posting on the old ATX board I asked a question about how to input a partnership return; it was an input question only. One famous poster gave me an indepth answer regarding patnerships being a flow-thru entity and how K-1's work. Unortunatley not one of the several postings giving me a K-1 (Class 101)lesson asnwered the question about how to input the *.X VERY BAD WORD, thing. I still find partnerships in ATX a challenge but can't handle posting the question. It would be great if we would all read the questions and all the answers before we post, but we don't. Including me. My favorit...(remember Roland Suggs?) that guy has forgotten more about tax law than I'll ever know, but he answered a question incorrectly & I caught it. Several lines down the thread he posted EUREKA, and agreed with my post. Sixteen posts after that agreed with his original error. "I think Roland is right.) Take what want, leave the rest. Have a great tax season! lbb

You just made me think of another one to add to that.

My step-son's step children get military settlement and soc sec because there Captain father was killed in IRAQ defending our country.

Their tax is OBSCENE! is over 1/3 of the money they get to replace their father

Joel

I'm not following the logic, the social security (which comes from tax dollars) is taxed only when there is taxable income beyond a certain limit; so these children must have income beyond the limt. If their dad had lived, his military pay would have been taxed. Dad unfortunately died defending his country. The country then paid his future potential earnings (which would have been taxed) to his surviving children; irregardless of their current financial situation. The government uses tax dollars to make these payments. It's my understanding that survivor's benefits are to help retain the survivor's current financial situation; not to better it. Please clarify my thinking. lbb

Thanks for your reply. The new partner has an equity ownership of 30%. There was no past work performed. The intent of the parties was for the new partner to perform services for the equity acquired although there is no written agreement.

Gee, I thought that there was supposed to be partnership agreement to refer to when allocating, income expense etc. Maybe they should think about having one drawn up? lbb

I talked to a very pleasant and knowledgeable gentleman from ATX (who was from Georgia, honey) who explained that I had to create a separate return (federal) for the spouse with VA income. I thought I would post back in case anybody else has this situation. lbb

The input sheet for the VA K-1 info in ATX doesn't match the VA Schedule VK-1. Neither can I directly input it on a form. There are NO VA adjustments or credits for this partner. HOW do I get the numbers from the VAK-1 issued by the Partnership to the VA nonresident return? (I don't know nothin bout birthin no babies Miss Scartlett) lbb

>>The return is obviously not accurately prepared. I have my client working to try and pull together all documentation<<

It sounds like the preparer didn't have accurate information to work with. Not only is there no P&L, the client doesn't even seem to know what he spent money on.

The first part of your strategy is to determine what the audit goal is. You need to make sure the client understands that you can't guarantee success. In fact, if the rest of the return is as flakey it might be best to just take the hit and not let the IRS go asking any more questions. For one thing, this client can't handle the audit on his own and if you have to go for him it's probably going to cost at least a thousand dollars. I recommend an engagement letter to clarify exactly what the client should expect from you and what he must provide. Also, collect a non-refundable advance retainer for five or eight hours. Obviously you aren't going to be able to hang onto all those improper deductions, but maybe the auditor won't look too close if you just explain that they should have gone to Schedule E page 2 (unreimbursed partnership expenses) rather than Schedule C.

I usually agree with anything tax related 100% with the ever prickly jainen; and I do agree with the retainer up front, but my strategy would differ somewhat. I would prepare the return myself based upon documentation available requesting additional time if necessary; (the most time I have ever had to request was thirty days, and I have never been denied; it takes them longer than that to answer.) However if what you looked at does not appear to be redeemable perhaps my learned collegue's advice is better. Not my first rodeo, but not an "expert" lbb

This is a confusing one. Will try to explain as best I can:) Filed LLC with 3 partners in 2007. No problem there. In 2008 two parnters left, leaving sole owner. Now comes the confusing question. Working on 1065 for 2008. Thinking is should be 1120S instead because one owner. However, no change was made to change to 1120S ownership. I need help on how to handle this. If I file 1120S, is IRS going to question because no legal steps were taken by TP to change to 1120S or can I file a 1065 with one person:( Also, if changes to 1120S, is this going to change the Fed ID #. Very confusing, so if questions, please let me know. I am in a little bit over my head on this one. Thanks.

Sara

I was reading these postings and I think the advice is basically good but somewhat jumbled. There is a difference between you choosing an entity for the FUTURE and being stuck with what happened in 2008.

#1 go to your partnership agreement, it will address what is or is not a dissolution. KC was of course correct you must file a 1065 for the period that there was a partnership entity. HOWEVER, just because a partners "leaves" it doesn't necessarily constitute a dissolution. This is the problem with all small businesses; they conduct themselves exactly how they want to; disregarding entity rules. Your posting has not convinced there WAS a dissolution.

#2 If the partnership WAS dissolved, your buddy was a sole proprietor whether he wanted to be or not, for the balance of 2008. He did NOT file a change in entity; (an LLC declares type of entity upon registration), and as he did not file as another entity the business defaults to a sole prop.

#3 Please note we are more than halfway through 2009 you should sit down with him and go through the options for 2009 and get this issue resolved for this filing year.

Good Luck

lbb

I don't see how it could be a career change. Being a surgeon isn't a profession - it's a specialty within the general medical doctor profession. In this case it's even more granular. He's already a surgeon and now he wants to get certification in the sub-specialty of Orthopedic Surgeon.

Any licensed physician can hold himself/herself out as practicing any specialty if they choose to do so, without even completing any additional training. They go through the special training & internships for the purpose of obtaining board certification, not for the purpose of meeting any basic requirements of their profession. (At least, that's the way I've always understood it - I'd welcome being corrected if I'm wrong).

I don't think I used the term "career change." We are missing a lot of trees in this forest. #1 is wanna be surgeon EMPLOYED by the same EMPLOYER? or is wannabe SELF-EMPLOYED?

If Dr. wannabe is an employee for Mayo in Minneapolis and does a surgical residency for Mayo someplace else, looking to return to Minn after the "less than one year" he May have a case for unreimbursed employee expenses whether he returns or not. IF he is self employed and owns a home in Fun City or anywhere else and works as a surgical resident on a self-employed basis in Not Fun City keeping the home in Fun City he may make a case for "temporary work" if he is planning on returning to Fun City.

IF he is an employee of Mayo in Minneapolis and then becomes a surgical intern at Johns Hopkins as an employee HOW can you justify unreimbursed employee expenses? Which employer requires these expenses; the one he quit, or the one he started with?

IF he is self-employed, rents an apartment in Fun City, gives up the lease and then moves to Unfun City to practice as a self-employed surgical resident?????? not planning on returning to Fun, WHY is this temporary living expenses?

I think there are not enough facts submitted to assess the correct answer. lbb always humble, often wrong.

This is a surgeon. The inturnship is so he can become an orthopedic surgeon. He has been paying taxes here for some time making this his tax home.

I am not as knowledgeable as the more learned members of this board, however at first blush it appears to me that if he is on an "inturnship" sic so that he can BECOME an orthopedic surgeon, the IRS may make a case that his "temporary location" is attributable to educational purposes rather than necessitated by employment REQUIREMENTS. Additionally, if he has an apartment there, I would be REALLY hesitant about taking groceries AND dining out..... but then I don't know nuthin bout birthin no babies Miss Scarlett. lbb

Interesting that this thread came up at this time. Just got a call from a client with an issue on SS from Ireland. He receives an Irish Soc Sec check and had his taxes prepared by an accountant that showed it in 2007 as Ord Inc. In 2008 had different preparer that tld him that the Irish Soc Sec is not fully taxed in this country due to the treaty. I can see that U.S. taxes vs Ireland, but do not see how the treaty taxes it. 2008 accountant taxed it like U.S. SS so a portion was not taxed.

Any thoughts?

Go to the Ireland Tax Website, that last time I looked (a couple of years ago) it was quite thorough, the tax rates are unbelievably high!! My gut feeling is that if they didn't withhold in Ireland he's probably free there, how is he filing in the US? Resident alien? Partial year???? it all makes a difference. lbb

I agree with Joelgilb and Jainen, but I would also do as KC suggested and report the 1099 as income and back it out to preven a mis-match letter. Good luck!

I disagree, if it's wages it would be erroneous on the preparer's part to list it as "non-employee compensation" aka self-employment income on one part of the return, and state that the SAME income is employee income on another part of the return, hello???? to "prevent (sic) a mis-match letter" Once in a while I am on the side of truth, justice, and light, and you can bet your sweet bippy I am screaming as loudly as I can (which not to be immodest is quite loud) Bring on the letters Oh Baby! lbb

They do NOT self-destruct after a few years. Did you by any chance get a new computer? Sometimes when I get a new computer the old stuff is stored in another drive e.g. f drive, so the icon will be saying go to ATX2004 C: and now it's in F:,

am I making ANY sense??? lbb

BTW, LLB, I have a question about your CPA & EA licenses.

Please take this right way, as I am asking out of my own ignorance here and to educate myself. Even at my age I can learn something.

I understand why someone that is not a CPA or an Attorney would get the EA, but is there a reason to have both if you already have either the CPA or law degree?

Also, my partner is not an attorney or a CPA and I am working on him to take the exam and get his EA.

Is there any advantage in having both?

Yes, the major advantage is that the CPA designation is a STATE license and the EA is good in all Federal jurisdictions (remember last year the big debates about representation requirements???) I can move from Michigan anywhere else and use the EA designation. Personally, I'm hoping to retire to a sunny area, either next door to is it Taxbilly or OldJack in Florida???? I always get them confused because both of them make so much sense so often; or I could move next door to jainen in CA and finish my golden years having my thinking clarified. Thank you for your repost, you are doing very well for the 14th, as opposed to me who is biting off people's heads. BTW my MST is through the University of Utah school of law, they have a video program just for cpas & lawyers, where we come out with our MST and you get your llm. Happy Tomorrow!

This part is not a tax question but a pure legal question. So as a lawyer here is my answer.

It is not enough for the court to find that the attorney committed malpractice for there to be an award to the client. In cases like these you also need a likelyhood that the original attorney would have prevailed in he original case to get damages in the 2nd malpractice case.

So there is a connection to the inheritance.

Okay buddy, there is a "connection" to an inheritance (you are the mouthpiece we'll ASSume you are correct. What if the inheritance was all in a pre-tax retirement account? I'm just a lowly CPA & EA, but I was trained that until one SAW some documents one can't ASSume anything. My suggestion was to file an extension until all FACTS can be reviewed sans emotion and stress.

I stand by that opinion. But then I don't have to defend the mail-in audit when the IRS computers match up the 1099 to the return. So perhaps simply filing the return as if the proceeds from the lawsuit are not taxable is great. Personally, having done precisely this same scenario and successfully proving it nontaxble (sexual harassment suit in the year that 6th circuit said was nontaxable 9th circuit said it was or vice versa; a few years back , taxpayer lived in one circuit sued in other circuit etc etc etc) the computer will automatically generate a collection letter due to 1099; my professional opinion is that one's ducks should be in a row when one KNOWS the issue will be contested. Collection letter will most likely be requesting SE also.

I smell extension. Has anyone here READ the case? At first blush it appears to me that taxpayer "thinks" his siblings ran off with his inheritance???? He hired an attorney. Attorney FAILED to file timely; sued the aforementioned attorney. We don't know if he would have even won the initial case; had his lawsuit been filed in a timely mannter. He sued the attorney for presumably negligence and malpractice.....by specific statutes ONLY can proceeds from lawsuits be exempt from taxation....Warning Will Robinson WARNING. lbb

I have a TP that owns a Sched C business. Not doing well. Finance company took back some of the equipment. Just gave 1099-A, no 1099-C. Here is my question - I record the loss of equipment as a disposition on the Assets with a selling price of 0? I have the FMV and Balance due on each item, but no money was exchanged. The finance company keeps calling and telling the TP that they owe less & less. My thinking is when the Finance company sells the equipment, they should be applying that money towards the TP bill. Is there any capital gain that needs to be recorded? - I say no. I am thinking that no gain is recorded until the TP receives a 1099-C for cancellation of Debt. That is when the income is recorded and then they get hit with the taxes. Am I clear on this or making no sense whatsoever. Any help would be appreciated or if more information is needed I will try to clarify. Very confusing. Thanks

Sara

WHOA, Warning Will Robinson Warning. 1099s of all kinds are simply information that is reported by a third party directly to the IRS. It May or MAY NOT reflect reality. This is a very precise question you are asking and the nature of this website doesn't avail you an exact and precise answer. #1 you have to take the purchase price of the equipment less the depreciation to find the basis. The "selling price" of the equipment is the redemption of the debt. The difference is cap gain or loss. FMV has NOTHING TO DO WITH IT. The Finance company may be offering a "settlement" which is why it is less and less. There are some precise rules regarding insolvency and taxable income on. I suggest you go to the IRS website and START your search regarding 1099-A. THEN when you have familiarized yourself with the process have your tp contact the finance company to clarify what is going on. Good luck! lobb

to be sent out in May.

http://www.ssa.gov/payment/

taxbilly

Thank you, good info...no time to keep up (BAD)

"I want my clients to pay the least tax they can legally - I thought that's what we were all trying to do?"

We agree on purpose, but appear to quibble about definitions.

I put them on the 8283.

taxbilly

Agree, also have client keep copies of receipt or receipts with copy of 8283.

Client moved into nursing home in early 2007. At that time the county tax rolls valued his house at $40K. Medicaid put lien against house to reimburse expenses Medicaid paid to nursing home. Family did not feel the house was worth that much and hired an appraiser in Feb 2008. Appraiser valued house at $22K and Medicaid agreed to this value. Client died in Nov 2007. In October of 2008 the people living next door to that house offered to buy it for the amount on the county tax rolls ($40K). (In the meantime the family did make some repairs to the house, but not of a significant value.)

Normally, I would use the appraiser's value as the basis of the house and then add the costs of the repairs. However, the FMV is what a willing buyer will pay a willing seller. Since (a few months later) the buyer offered to pay the county appraisal that seems to better fit the definition. In 2008, the value did not double over a few months. Not when most properties were decreasing in value.

In this scenario, does it make sense to disregard the appraiser's estimate? I don't think the fact that Medicaid accepted the lower appraisal is a factor in determining the basis.

Thanks

Just to make sure I understand, family didn't "think" house was worth 40K so hired someone to "guesstimate" lower, and sure enough person paying the appraiser turned out to get the result they wanted. Who'd a thunk? So, in this scenario the family only has to pay back the 22K for their dearly departed's care, you and I get to pay the rest of the cost, family keeps the balance, and you don't want to pay capital gains on what we had to pay. Is that correct? Don't forget to add the cost of the appraisal and "repairs" to basis....so then you can deduct a loss, right?

It's a wonderful country. lbb

I tend to lean towards putting it on the client's return, also. But there could be a gain (see my other post "basis of house"). An appraisal was done for significantly less than what the house sold for a short time later. That implies to me that it was a bad appraisal. Since the house sold within a year of date of death, I agree the gain should be small to non-existent. Especially in today's real estate market.

Once again, appraisals are "Guesstimates" of the Fair Market Value is. (Arms length willing buyer and willing seller.) Selling price IS fair market value if sold within previously posted criteria.

You all need to know about the secret SSA-1099 exclusion - the form isn't meant to be opened.

If you persist in trying to open it you must include the SocSec income on the tax return.

Retaining the form unopened entitles them to exclude the SocSec income from Line 20 altogether.

You mean it's taxable? The guy at the local Social Security Office explains to my clients that once they reach true retirement age 66, they don't have to pay taxes. Or at least that's what they heard.