Cathy

Deb, If your clients drew Social Security and lived with his/her spouse at any time in 2014, remember that 85% of the social security is automatically taxable without considering the $25,000 calculation for a MFS taxpayer who did not live with his/her spouse at all during 2014. Cathy

Terry, Proceed with caution. If student is paying his Mom rent, it sounds like you need more information as to mother's income and expenses she pays for the student. If she has a low income, maybe she is just accustomed to getting the EIC, AOC (40% refundable), HOH, etc.....and doesn't want to give it up. Is the reason the mother has her return prepared somewhere else is because of claiming her child when she shouldn't? Under the circumstances with your particular client's situation, I would want to be very careful to make sure I wasn't helping mother to be able to file improperly by the student giving up his exemption (education credit - possibly also) unless I knew the whole financial situation of the mother...plus I would want to make positively sure my client is filing properly whether he gets a bigger refund by filing properly or not. Your client has already told you something to the effect that "he doesn't want to get his parents in trouble".........Terry, you shouldn't put your neck on the line for your client's mother by not filing properly so his mother can get a larger refund than she is entitled to..... If it was me, I would suggest that your client go to the preparer who prepared his mother's return as she would know her financial picture, by knowing her income versus the student's income....whether or not the mother claims the rent her son pays her, etc.... I wouldn't let the client get me involved in any wrong filing procedure.....send him down the road..... Again, my opinion and suggestion is based on the fact that your client has told you he doesn't want to get his mother in trouble....what he has told you already is enough for you to know that something doesn't smell right! Cathy

Marilyn, Sounds like it's time to open the Comparison form...but hooray for you if your clients will let it slide that they have a balance due for "no apparent reason". The Comparison form will let you nail what happened in 2014 that was different in 2013. I usually find a change in jobs together with a change in withholding (claiming more exemptions) is usually the culprit. Once I show my clients that it was THEM and not my preparation skills, they leave satisfied with plans to correct their withholding....or plans to call me BEFORE they take an early distribution from a retirement account as 20% is usually not enough withholding tax. On second thought, maybe you do have the right idea with the "no apparent reason" theory. Take care, Cathy

Deb, I'm familiar with the procedure you mentioned with regard to the no standard mileage rate for heavy vehicles as they don't qualify for it....school buses for sure must use actual expenses... In Quickfinders I saw a reference to Rev Pro 2010-51 "for detailed definitions and discussion of using standard mileage rates".. You will probably find what you're looking for in that Procedure. Holler if not and when I get a little extra time, I'll find what you need...I need a copy for my records to keep handy! Cathy

Just read those releases in my email. I thought I might be hallucinating, so thanks, Lynn, for the confirmation! I have a little more courage now and just might make it til 4-15! Cathy

I know misery loves company, but no company here as I haven't crashed at all. You might want to talk to support about the issue, however, if they can't find a technical reason for the crashes possibly you might need to upgrade your computer. I remember the year before I upgraded my computer was horrible with all kinds of things (including crashes) occurring daily. Good luck as I know you have GOT to be frustrated! Cathy

Chowdahead, Will you please share with us whether this e-file was accepted or not, and the month of the death? Thanks, Cathy

"My take - the beneficiaries cannot take a deduction for the taxes and interest on the loan. All of it is investment expense or investment interest, and can only be carried forward until there is income to absorb the loss. Am I on the right track?" Tom, It appears you are on the right track. If there is never any income (or not enough income) to absorb the losses, they cannot be used on the taxpayers personal tax returns until after the trust is dissolved. The trust I dealt with had capital gain losses from the sale of securities each year so my client is now deducting (since the trust no longer exists) the $3,000 maximum capital gain loss each year until the loss is completely used. HOWEVER, you have a unique situation as the funds used to create the losses have been loaned to the trust....I would research it more, but since the losses are because of a loan(s), I would think that the loan(s) (with interest) would have to be repaid before any of the losses are taken on the beneficiaries returns??? Sounds like the research can be delayed as it sounds like it might be years and years before the trust can be dissolved. Cathy

UPDATE: While the State of Louisiana and ATX talk back and forth (48 hours now), they haven't come up with an answer as to whether it's ATX software or a change made in error by the State to the requirements of the software... In the interim, the following is the work-around that I discovered: Add a MS return to your client's file and enter the total Mississippi State Income Taxes withheld as the total tax liability on the Mississippi return...you don't need to do anything else....don't worry about anything else on the MS return. After you do that, there will be a line on the worksheet for Line 1 of Sch. G (LA return) that lists MS as the State and the total entered on the dummy MS return as the credit. Of course, don't e-file the MS return...and ATX won't automatically add the e-file forms for MS anyway!

Just e-filed a MFJ (Filing as Surviving Spouse) for 2013. Had every "i" dotted and every "t" crossed. It REJECTED because Social Security told IRS that the Primary taxpayer on the return was deceased......duh?.....EXACTLY and they were informed of the day he died also! Hope it was because of the 2013 situation.....it's funny how IRS goes from one extreme to the other! As Social Security is one of the first entities that is notified of deaths (especially older clients), hope they don't start rejecting the current filing year also....have to wait and see...guess it depends on how long the person has been dead.

Lynn, The following link will get you to the Mef Handbook/Personal 2014 (don't know if it's for the taxable year of 2014 or was printed in 2014.. regardless, GO TO PAGE 5 FOR CONTACT INFO...(SURE YOU'LL FIND THE DIVISION YOU NEED) http://revenue.louisiana.gov/Miscellaneous/2014LouisianaEFileHandbook.pdf

It appears that the Louisiana return either has a glitch or Louisiana incorrectly wanted the worksheet for "Taxes Paid to Other States" to reflect JUST the out of state returns contained in the return. ....in other words, the ATX worksheet where you list the State and taxes paid will not let you add another line for taxes paid to another state without having an out of state return for that state along with the 1040, etc... However, MS is one that doesn't include gambling on it's return so, as you know, we include the MS income taxes on the worksheet which flows to the Credit for Taxes Paid to Another State. Furthermore, the worksheet for 2014, unlike 2013 won't let you add any lines at all....when you are preparing the out of state returns, the State automatically appears on the worksheet. I'll get with Louisiana E-file office tomorrow and ATX and see what I can find out and will let everyone know....in the interim, if it's me that's the problem, please let me know! Thanks, Cathy P.S. I just checked the Mississippi website and there was no change for the 2014 returns insofar as the MS withholding taxes on gambling income is concerned. I have been handling MS gambling State taxes on the Louisiana return since Mississippi quit showing gambling income on their State returns....Louisiana even put out a memorandum on this situation within the last couple of years acknowledging that the way to handle it would be to show the MS taxes withheld on the Louisiana return and to send in copies of W-2G for Mississippi with the Louisiana return as proof.

My clients report 8 days so far for the Federal refunds.

Quickbooks "complete with payroll" .............. sounds familiar? Had the social networks been then what they are today, bet we could have stopped that price gouging dead in its tracks". However, reminiscing about the past with Intuit and Quickbooks makes me glad I'm through with them!

Have new client who's been away for a few years in California. She had a couple of months of disability payments in 2014 through the EDD Dept. with California. She said it's not taxable as it's a benefit the State has for them. I looked up their website and saw where the employee has premiums deducted from their paychecks, thus the reason why the payments wouldn't be taxable. Just wondering if the State of California also puts up any premium which would make the monthly payments partially taxable income. Thanks! Cathy

Michael, In the fall of 2014, I closed with my bank, Capital One, on a re-fi. There is NO WAY I would pay for another appraisal. If you are dealing with a major bank, chances are the left hand doesn't know what the right hand is doing. I call my experience "the re-fi from hell", and now that my payments have started, nothing is any better. Hope you aren't dealing with my bank! You might want to mention to someone at the bank that you are contemplating contacting your state's banking commission (or financial commission) to check on the legality of requiring the second appraisal in 2 to 3 weeks.

There was recently a new CCA (Chief Counsel Advice) on the SE tax question relating to limited partners. You can see the full text of the ruling at CCA 201436049. The email I received follows below. I've seen where CCA's pulled a lot of weight over other IRS Memos, etc..even to the extent that returns would be audited to make sure the taxpayer followed the CCA's procedures regarding sensitive issues. I realize the CCA doesn't directly answer JB's initial question, however, I did see where several members of the forum say that limited partners owe SE taxes regardless, which can be in direct conflict with the CCA. Towards the end of the email highlighted in blue is the basic findings in the CCA. Limited partner income in LLCs probably not subject to SE tax Is this email not displaying correctly? View it in your browser Unsubscribe from this list Dear Tax Professional, Western CPE is committed to presenting cutting-edge tax law, case analysis, and case presentation to you so that you are always in the know. When you attend one of our annualFederal Tax Update seminars, you will not only receive the most comprehensive tax manual available, you will get season-long manual updates and breaking news straight to your inbox. Just take a look below as we present the IRS’s latest update on self-employment tax for LLC members. Be sure to sign up for one of our seminars today—seating is limited! Warm regards, Vern Hoven, CPA, with a Master’s in Tax eTax Alert™ IRS (Finally) Discusses SE Tax for LLC Members A new Chief Counsel Advice (CCA) addresses the issue of when LLC members are subject to self-employment (SE) tax on their distributive share of LLC income. Section1402(a)(13) provides that the distributive share of income of a limited partner is not included in self-employment income¹. Accordingly, limited partners are not subject to SE tax. Is an LLC member like a limited partner? If an LLC member is treated like a limited partner, the LLC member would not be subject to SE tax on his or her share of the LLC income. In 1997 (yes, 17 years ago), the IRS issued proposed regulations² that would have determined when the distributive share of LLC income is included in the member’s SE income. The regulations were never finalized, even though LLCs are now recognized in all 50 states, and more than 2.1 million LLCs file Form 1065 each year. Finally in a new CCA, the IRS discusses the SE tax issue. Note: The first LLCs were established in Wyoming in 1977. Management Company LLC provides services to a family of funds. In the CCA, the Office of the Chief Counsel looked at a large investment management company organized as an LLC that acts as the manager of a family of funds, each organized as a limited partnership. The investment management company, Management Company LLC, generally has full authority and responsibility to manage and control the affairs and business of each fund. Thus, Management Company LLC is primarily responsible for carrying out the extensive market research and trading activity of each of the funds. It carries on all investment activities, such as the purchasing, managing, restructuring, and selling of the funds’ investment assets. Members of Management Company LLC and its employees provide these extensive services to the funds. Management Company LLC’s primary source of income is from fees for providing management services to the funds. Members were treated as employees of Management Company LLC. The members of Management Company LLC worked full-time, performing a wide range of professional services, including services related to investment management, analysis, trading, portfolio management, accounting and tax, information technology, etc. Each member was paid wages and received a Form W‑2 from Management Company LLC. Note: Rev. Rul. 69-184 states that “members of a partnership are not employees of the partnership.” The members should have been compensated with a guaranteed payment. It is likely that Management Company LLC paid wages to its members so that it could make the argument that follows regarding reasonable compensation. Management Company LLC says its members should be treated like S Corporation employee/shareholders. On its Form 1065, Management Company LLC treated all of its members as limited partners not subject to self‑employment tax on their distributive share. Management Company LLC stated that the “wage” amounts represent “reasonable compensation” for each member, and that each member is a limited partner with respect to his or her distributive share. Management Company LLC reasoned that because Management Company LLC has the same role and business as the S corporation it succeeded, it can continue to apply the same “reasonable compensation” wage rules applicable to corporations. However, if Management Company LLC wanted its members to have the same tax treatment as S corporation shareholders, then it should have stayed an S corporation. The LLC must obey partnership tax law. Management Company LLC members perform services for the business. Members perform extensive investment and operational management services for the LLC in their capacity as members (i.e., acting in the manner of self‑employed persons) and Management Company LLC derives its income described in §702(a)(8) from the investment management services performed by its members. The income earned by members through Management Company LLC is not income that is basically of an investment nature of the sort that Congress sought to exclude from self‑employment tax when it enacted the predecessor to §1402(a)(13). Accordingly, members of Management Company LLC are not limited partners within the meaning of §1402(a)(13), and they are subject to self‑employment tax on their distributive shares of Management Company LLC’s income described in §702(a)(8). Why are limited partners different? Section 1402(a)(13) was enacted to exclude for coverage purposes certain earnings that are basically of an investment nature and akin to that of a passive investor. The applicable statute did not, and still does not, define a “limited partner³.” In 1997, the Treasury Department and the IRS promulgated proposed regulations defining “limited partner” for §1402(a)(13) purposes. The proposed regulations (which were never finalized) generally provide that an individual is treated as a limited partner unless the individual: Has personal liability for the debts of or claims against the partnership by reason of being a partner, Has authority to contract on behalf of the partnership, or Participates in the partnership’s trade or business for more than 500 hours. Additionally, the 1997 proposed regulations provided that service providers in service partnerships (e.g., law firms, accounting firms, and medical practices) may not be limited partners. The 1997 proposed regulations applied to all partnerships (including LLCs). What did we learn from the CCA? If the member performs services in the business of the LLC, the IRS position is clearly that the member’s distributive share of LLC income is subject to SE tax. If the member’s ownership interest resembles that of a limited partner, in that he or she cannot participate and does not participate in the business of the LLC, the distributive share of LLC income is probably not subject to SE tax. Planning idea: For years, we have been saying, “Put it in writing.” If you want your member to be treated like a limited partner, then the LLC operating agreement should spell out that the member is a “non-managing member” and restrict the member’s ability to participate in the management of the LLC’s business. If the member’s income is like a limited partner’s, then it will be passive (§469) and may be subject to the new 3.8% tax on net investment income. See the full text of the ruling at CCA 201436049. ¹Guaranteed payments as described in §707© are included in self-employment income for general and limited partners. ²Congress imposed a “temporary” moratorium on finalizing the 1997 proposed regulations, which expired in 1998. ³At the time of the statute’s enactment, the Revised Uniform Limited Partnership Act of 1976 provided that a “limited partner” would lose his limited liability protection if, in addition to the exercise of his rights and powers as a limited partner, he takes part in the control of the business. Revised Unif. Ltd. Pship. Act (1976), sec. 303(a), 6B U.L.A. 180 (2008). Sharon Kreider © 2014

While outfits such as "Legal Zoom" sound tempting, I whole heartedley recommend having a sit down appointment with a local attorney and let him/her draw up the will. The first thing in Louisiana that I didn't know was the fact that there is a big difference in an Administrator and an Independent Administrator of an estate. If the will approves the use of an Independent Administrator, then after a simple one page document is signed by the court, the Independent Administrator is free to basically make all sells necessary, split up assets, etc... and actually close out the estate thereby saving the heirs many dollars in attorney fees. There are other considerations as well that apply to different states that I would only rely on a good respected attorney to inform me correctly. Our attorney discussed the Living Will situation with us. He said on his last trip to the hospital for knee surgery, when the hospital personnel asked him if he had a living will, he replied "yes" and then pointed to his wife of 40 years and said she is my Living Will. "She knows exactly what I want if it comes to that." I was glad to hear him say that as I have seen several cases of when hospital personnel used a "Living Will" improperly such as holding off on giving a patient oxygen when the patient requested it. The reason given to the patient was "we can't do it because you have a Living Will". The Living Will is to be used if the patient is basically brain dead and doesn't want to be left on machines to keep them alive. As long as the patient is coherent and is able to voice what they prefer, the "Living Will" doesn't come into effect. Very scary situation!! Those who think they don't need a will are usually the ones who need one the most.

It probably is too late, but just want to make sure before I crank up the copy machine! Thanks! Cathy

I thought I had gotten my re-fi settled after 18 weeks of processing. I had a FICO score of 829, had done business with this bank for 15 years without being late on any of my loans...not one single day late....had the closing FINALLY and now they can't get my auto debits from my bank account at their bank straightened out. At first, it was comical at what all was happening.....have never seen such a mess before in my whole career. When the lady from the "President's office at the Bank" called me, I just knew things would be o'kay then. Not hardly...unfortunately! I went to my branch bank to pay my first note a day early since I had been informed that the auto debits weren't set up for my first payment yet. My branch manager took my payment to a teller and came right back. She told me that the teller said my payment would all apply to principal as my loan wasn't due yet. She was a tad bit upset to say the least! What is really mind boggling is that my neighbor who had a FICO in the 600's started a re-fi on the Internet with Quicken Loans 6 weeks after I started mine. She closed her loan in 5 weeks with a better interest rate than I have. They gave her a spiral bound book showing her all of the steps they went through on her loan, her loan papers, etc. When her loan was processing, she could log on to a Quicken website set up for her loan and see exactly at what step the loan was in at the time. After the neighbor's loan was approved, my loan closed 7 weeks later...a total of 18 weeks!!

Below is a link to a "paper" FAFSA that can answer any questions you might have. Note the questions on page 2, Section 2. If the student answers "yes" to any of those questions, the parents' income will not be considered.

Louisiana's due date is 11-15-14. Last year on the 15th of November, I tried to e-file and the program told me e-filing was over. I called Customer Service and they had the programmers to re-open e-file (for Louisiana at least).

Just discovered that there is a glitch with Schedule E for 2013. Earlier years were o'kay. I have a 65+ client who has a Louisiana State Employees Retirement and also an IRA distribution from a company that has nothing to do with the State of Louisiana. As you know, all of the Louisiana State Employees Retirement is exempt from income taxable to Louisiana, plus an additional amount up to $6,000 if the client has another retirement payment that is not specifically exempt from Louisiana taxable income as well . As the program would not allow the exemption for my client's IRA, I checked the Louisiana instructions for 2013 just to play it safe and Louisiana's instructions still says to add all retirement payments, then subtract "retirement income you received and reported as code, 02E, 03E, 04E, and 05E of Schedule E". Using the Louisiana instructions, the Louisiana State Employees Retirement amount is subtracted from the total retirement and then my clients other retirement payment(s) (not otherwise exempt from Louisiana taxable income), shows exempt and the code that appears is 06E "Retirement Income Exemp. 65 or over". (And it goes without saying that up to $6,000 of the IRA would be tax exempt.) I will report it, but in the interim, I had to override the worksheet for line 06E. Take care, Cathy

A client may indeed owe income tax even if all of their income is from capital gains or qualified dividends. It's only the part of the taxable income that falls in the 10% or 15% bracket that the tax rate is -0-. Also, if a client's only income is capital gains, and some of the capital gains falls in the 10% or 15% bracket, it's my understanding that a return must be filed to indicate to IRS why they don't owe taxes.....under the "Who Must File a 2013 Return" requirements based on the standard deduction plus the exemption amounts for the taxpayer (and spouse if MFJ). If all of the capital gains falls within the -0- bracket, then no return is necessary for the tax year of 2013. For the 2014 tax year, we need to remember that even though a client's gross income meets the test necessary for not being required to file a return, A TAX RETURN FOR THE TAX YEAR OF 2014 MUST BE FILED if a client has received a subsidy in 2014 for health insurance obtained under the AFFORDABLE CARE ACT.