kcjenkins

Glad that helped. It's so nice when the client asks first, isn't it? Instead of asking his barber or his brother-in-law who works in a bank, etc. I always thought the old rule on taxi's made sense, I do not understand why they changed it.

http://www.accountingtoday.com/news/Ten-things-you-can-do-now-to-have-a-great-tax-season-64517-1.html#read 10 Things You Can Do Now to Have a Great Tax Season Lots of good ideas, and a couple of stinkers. Outsourcing? NO WAY. Audit guaranteeing the returns prepared by someone else, whom the client left to come to you? Not smart unless you have already reviewed those returns carefully, as the odds are most of the ones who take the offer are the ones who know that they have hidden landmines in their old returns. But most of the other ideas are good ones. A few, like pre-scheduling and using Qruntworxs, may only be good for larger practices. But that does not mean that the reader can not get some good ideas even from the ideas they are not ready for yet. Over all, it's a valuable article for all of us to think about.

Oh, OK, I misunderstood your point. I think Google 'watches' almost everything, that is how they are able to give us so many links to almost anything....

Yeah, Elrod, but if you mean me, I've only deleted one post in all the time we've had this board, and only warned 2 others. And I apologized for that one. I think Eric did one. Almost anything goes here, as long as it's done politely. We do insist on courtesy, but allow all points of view.

I know we all hesitate to click on you-tube videos that are sent, but this one is something I really think we all need to know about. This is not funny or cute, but it's something worth watching, and being aware of. I found it by accident, but it has made me really think about these things more deeply. PLEASE WATCH IT. This is not political at all, but important to all of us. http://www.wimp.com/filterbubbles/

you don't. you just have to read them anyway, if you want to.

LOVE IT!!!!!!

From the Cash Intensive Businesses Audit Techniques Guide - Chapter 17 Lacking adequate records, the examiner can use the "cab formula" to reconstruct income or gross receipts. See e.g. Salami v. Comm’r, 74 TCM 236, TC Memo. 1997-347. This formula was developed during the IRS program involving taxicab drivers that looked at 1987 to 1989 returns in the Los Angeles, CA district. Tailored to the taxpayer, it remains a reasonable method for reconstruction. See the "Tax Law, Regulations, Court Cases, and Other Authorities" section of this guide for more information. Using the taxi formula (a.k.a. the "cab formula") The examiner’s first step is to calculate the amount the driver earns for entry. See Market Segment Specialization Program Guideline, TAXICABS, Exhibit C, 1993 WL 13156510. Annualize the driver’s approximate number of trips per year by multiplying the average number of customers per day by the number of days per year the driver works. Multiply this figure by the driver’s entry rate to get the total earned entry amount. Many times this data can be obtained from the transportation regulatory agency. In addition, many of the regulatory agencies include an average number of trips per shift and revenue by shift. The second step is to figure business miles driven. Divide total fuel expense by average cost per gallon to get number of gallons used. Multiply number of gallons used by the vehicle miles per gallon to get total miles driven. Deduct non-business miles to get total business miles. The third step calculates total gross receipts: Multiply total business miles by the rate the driver charges per mile Add the total earned entry amount Add tips and lease income Add any other income such as wait time Subtract gross receipts per return from total gross receipts to figure unreported income.

W.R. Batt, Sr. v. Comm’r, 24 TCM 565, TC Memo 1965-104. On the evidence, and in the absence, of the taxpayer's records, the court determined that the earnings of an independent taxicab driver were in excess of the amounts reported. When a taxpayer fails to maintain records, necessitating income reconstruction by the Service under a formula, and the taxpayer takes the matter into litigation, courts view the Service’s method of accounting to be presumptively correct.

Taxi is considered "commercial use" and were previously not eligible for standard mileage rate. Revenue Procedure 2010-51, 2010-51 I.R.B. 883. Removed the limitation on the use of the standard mileage rate for "automobiles used for hire, such as taxicabs" effective 1-1-2011. The change is not retroactive. Revenue Procedures applicable to previous years prohibited the use of the standard mileage rate for automobiles used for hire, requiring these taxpayers to use actual costs. So he can chose that method for the new vehicle. But make sure that he understands that he still has to keep good records. In fact, in an audit, they are going to want to see repair bills to help substantiate the mileage reported. Salam v. Comm’r, 74 TCM 236, TC Memo. 1997-347, using the "cab formula" to determine that petitioner, a cab driver in Chicago, IL, had omitted income for the tax years in question. Substantiation of expenses: A taxicab driver failed to present any records to show that he was entitled to business expense deductions with respect to his taxicabs in excess of the amounts allowed by the IRS. Although the substantiation requirements [section 274(d)(4)] of individual expenses for listed property were inapplicable because taxicabs did not qualify as "passenger automobiles," the driver nonetheless failed to meet his burden of proof on the issue. Reconstructing income: The IRS properly used the "cab formula" (see the "Using the cab formula" section of this guide) to reconstruct the income of a taxicab driver who failed to maintain adequate records of his gross receipts and did not present any printouts from the taxi meters of his taxicabs as evidence of his method of calculating his gross receipts.

I expect that a lot of the people choosing not to bother to get the RTRP are older ones who have just decided not to bother, preferring to retire rather than jump through any more hoops. I really doubt that the bad ones will be significantly reduced. We will have to wait several years, though, to get any real idea of it's effectiveness..

Glad to hear it. I was worried about you.

i agree with John, unless there are other factors, as there often are. Such as if he has different employees in the different businesses, for just one example, and he wants to take one into the ownership of one of the businesses. I know you can all think of a dozen other reasons why he might want to keep the two businesses separate. I'd just suggest starting by talking to the client about what his long range plans are, and why he's thinking of multiple corps. Let him do most of the talking until you get a feel for what is worrying him, what he's got in the back of his mind. Then you can advise him how best to get to where he wants to be. I think we sometimes push clients into the setup that WE think is best for them, before we find out enough about what their real goals are. I know I did a few times.

VERY SMART POLICY

Hey, Cat, how did you make it through Sandy? Still got power?

: A cabbie picked up a fare in Bowie, Md., and took him to a business area of town. Once arrived at the destination, the passenger demanded money in an apparent robbery attempt, and "struck the driver in the head and then threw some kind of liquid on him," said Bowie Police Chief Chuck Nesky. Not wanting to see what would happen next, the driver dove out of the taxi. The liquid was flammable: the passenger apparently ignited it just as the driver escaped with minor burns. The robber, however, did not escape: firefighters found his charred body in the back of the cab. (RC/Washington Post) ...Sometimes it really pays to think things through before you start.

Stay safe, girlfriend!

I believe the article is correct. It's the reason I advise all my clients not to invest in MLPs in their IRAs.

Gee, now that I think about this, they really do have some significant advantages, don't they?

Yep, Jainen has it right there. While it sometimes comes out the same, it is still wrong, and it may indeed make a serious difference. In such a case as taxxcpa had, I might have done it that way for that one year, but I'd only have done it if I got the client to agree to correct how he handled it for all future years, explaining as Jainen did so well that it might not always be the same.

Perhaps you don't need calculus, trigonometry and geometry, specifically, but you sure do need to know the rules of ordering, and of basic math and algebra!!!! While we all rely on our computers to do most of our calculations, we have to know enough to recognize when there is an error in our spreadsheet formulas. Just think of how often we look at a number on a tax return, recognize from our base of tax knowledge that this number is wrong, go back and check and find that we did not check a box that should have been checked, or we had checked one that should not have been checked or left out some critical info? Those who use Turbo Tax and screw up are a perfect example of the truth that no tax program [and no spreadsheet] can give you the right result if the person using it does not have a good understanding of the rules that govern the forms. We all tend to rely on our tools to "do it for us", but unless you have the knowledge to recognize an error, based on your knowledge of the subject behind the form, you are not a professional. Sorry if that sounds harsh, but while I think it is highly appropriate to let advanced students use calculators, for example they should not be allowed until after the student has a solid grounding in mathematics. Just as before you touch a tax program, you should study tax law, or else you do not even understand some of the questions you must answer on that tax program.

Step one, DOUBLE their fee. The interest on the 10% [rounding is appropriate here] would be operating expense, as will be all interest going forward.

and, of course, the pass rate is ridiculous. only 202 non-attorneys have been admitted to practice since the exam began in 1943.

Right, he can have different 'rates' he gets paid for different types of work, but it's just on different lines of the K-1. No 1099s.

I agree with you Tom. And you expressed the problem very well. Marco, the number of times they use the power is not the relevant issue. Besides, it's 'early days'. " Power corrupts" is a saying that has ALWAYS proved true. And yes, I know of at least one case where someone's PTIN was suspended in error, and only a call from a Senator on the Committee with oversight over the IRS got it corrected. This took two weeks in the middle of tax season. It could have totally destroyed that person's entire practice if he had not been personal friends with that Senator. Because there is no mechanism in the Code for allowing you to continue to operate while appealing their decision. They can "turn your number off" at any time, and it STAYS OFF from that minute until THEY decide to turn it back on. Could you continue your practice without it? That was several years ago, today the IRS power has been greatly expanded over preparers. We need to bring some balance back into the system. the IRS is not always right, but if they are the only ones who get to decide, who is right, they will always decide in their own favor. Tom's situation is a good example. The IRS action was in violation of their own rule, yet her only recourse was to comply with the mis-applied rule.