BulldogTom

It gets back to KC's question. If the company includes the value of the vacation hours into the employee's gross wages, it is a deductible contribution. If the company just takes 3 days away from the employee's accrued vacation time and makes a donation with a notation that it came from this employee, not deductible. Tom Hollister, CA

Its good to work for the IRS. They don't do anything very fast. Bet they gave her every opportunity to clear herself. The Service wants to show that they are clean and tax preparers are dirty. You don't think they want this kind of story out there, that their own employees are dirty. If this had been an H&R Block or Liberty or one of the big advertisers of "pennies on the dollar settlements", this would have been all over the news. Tom Hollister, CA

Did he take the rewards miles in as taxable income at some point? If not, he can't deduct. The concept is that the previous flights or charges that he made on his credit card were discounted by the rewards that he earned, so if they were used as a deduction, they would have been overstated by the value of the rewards earned. So when he uses those rewards for another deductible flight, the value has already been deducted. Here is a simple example. Executive X takes 20 business flights during the year. He properly deducts the cost of those flights. The credit card company rewards him with a free flight, which he uses for business. The 20 flights actually were discounted by the amount of the 21st flight taken, so the cost has already been deducted when those 20 flights were deducted as business expense. Does that makes sense? I know it is a very simplified example. Tom Hollister, CA

Self Employed may not use the lodging portion of the per diem rate. All lodging on a Sch. C must be substantiated. Tom Hollister, CA

OK, now that makes sense. Every once in a while I get that on my traveling laptop. Never knew why it did not happen on the main computer. Now I know. I have the laptop set to go to sleep in 10 minutes if inactive. Thanks Jack. Tom Hollister, CA

Well, I am trying to talk my youngest son into applying to Vanderbilt, but he is not so keen on the idea. But if I can get him there, we will have to meet up at a Commodores football game. Love SEC football and Nashville, but I guess that is not a good enough reason for my son to spend 4 years there. Tom Hollister, CA

Rita, you keep changing your avatar. For a while there, I thought you were the spokesperson for an insurance company. And weren't you in Colorado before? What is with the TN address now. Is that your daughter in the picture? If so, I have a son I would like to introduce her to. But I am still afraid of you, so, maybe I shouldn't introduce my son to your daughter.......hmmmm Tom Hollister, CA

The legality is very simple. A regulatory agency (ie the IRS and Treasury Department) get their authority from Congress. Only those regulatory actions specifically granted by Congress can be carried out by the agency. The IRS tried to sidestep this constitutional requirement. The court said that the law of 1894 that the IRS was relying upon for their regulatory authority was not valid. They need to go back to congress and get specific regulatory authority to regulate tax return preparation. For those of us who are EA's, CPA's and Attorneys, we are regulated under the authority to "practice before the IRS". This goes back to the Revenue acts passed during the post civil war era, and are specifically granted authority to the Treasury Department. The IRS has tried to make the argument that tax preparation is "practice" and has been shut down by the courts. This latest attempt to regulate "preparers" was shot down as well, as the court found that the law did not contemplate tax return preparation as a area for the Treasury Department to regulate. So IRS can appeal or drop the fight in the courts. Their best bet, in my humble opinion, is to go to Congress and ask for the specific authority to regulate preparers. I am for licensing of preparers. I am also for regulation of IRS employees to the same standard that the preparers and practitioners are held. I would like to see the OPR become an independent agency of the Treasury that writes the rules for preparation, practice, and discipline for preparers, pracitioners, and agents of the Treasury department with full authority to disbar or discipline any preparer or Revenue agent that does not follow the rules. Tom Hollister, CA

Personal tax return just had this same issue. We gave a donation over $250 to a local church to help with their Vacation Bilble School. We have no children who attended the VBS, just knew that they were short on funds. We asked the pastor if VBS was budgeted and if we could designate our giving to that cause in the church. Yes, it was a line item in the budget and he was thrilled to get the help for the porgram. Fast forward to Jan 31st. Giving statement comes in from the church and shows the amount as non-deductible. We called up the administrator and he was adament that any designated gift was not deductible. My wife threw a stink. It did help when she indicated that she had been doing taxes for 14 years and that her husband (me) had set up and processed donation reciepts for churches in the past and that if they wanted to meet with me and review the rules, I would be happy to do so. They reviewed the issue and resent the reciept showing it as deductible. Just a lack of knowledge for a complicated tax code. Tom Hollister, CA

Just got back from church and took the brisket out. It is resting right now and will be cut up into delectable little pieces in about 20 minutes. I could just pull it apart, it is very tender. KC, you could get here in time for dinner. I will save you some. Tom Hollister, CA

Most taxpayers hear that they can get their money out of a plan under the "hardship rules" and think that applies to the tax law as well. I don't know how we got to the place where people don't know the difference between advice given by a 401K plan administrator about a plan and tax advice. It costs them so much money for the things they do under the advice of the wrong expert. Tom Hollister, CA

PETA will not like you for that one, but I love it. Must try it with my neighbor's cat. Tom Hollister, CA

About time. You have been on this board as long as most of us. Took you long enough. Slacker! Just kidding. You are one of my regular "reads" on this board as we both have to deal with the quirks of CA. Congrats. Tom Hollister, CA

Got up early this morning and dropped a 15lb brisket on the grill. Supper is served at 1:30 today. Thanks to the weatherman for giving me a break in the much needed rain to get my grillin' on. Last night I made a 4 layer German Chocolate cake for my wife and son, who celebrate birthdays this week. Today is a good day. Tom Hollister, CA

Not to stray too far from the original post, but with all the exempt companies (those with less than 50 employees) out there, there is no way, as Obamacare is currently written, that the DD code can be used for a source document for any tax law. It is just not required to be calculated by all employers at this time. And it does not break out the level of plan that the employee has selected, so it cannot be used for determining whether the plan is "affordable". Also, it is an option to include dental coverage in the DD number. You don't have to, but you can. For example, I can select any of 12 plans at my day job. Only 1 of those plans is considered "affordable" for every employee in the company. It meets the minimum requirements under the law and is priced "affordably" according to our insurance broker who did the analysis. Almost no one in our company selected that policy. We also include dental insurance in the DD number calculation on the W2. Our company does not contribute to the dental plan, the employees pick up 100% of that cost under a salary reduction agreement. If you don't know this as the preparer for anyone in our company, how can you work with the number? What I am saying is that the DD code does not, will not, and can not give us any information that will be useful in calculating the penalty tax next year. Maybe they will tweek the law, but not in time for next tax season, as payroll is already going out for next year's returns. That DD number cannot be made useful for any year before 2015 tax returns, but most likely, not until 2017, to give all employers time to comply. Tom Hollister, CA

I am with Jack on this one. The church may not know the rules as a lot of the bookkeepers and treasurers are volunteers. The receipt must have the wording if the donation is in excess of $250. You said donations, indicating multiple giving events. If none of the amounts were in excess of $250, and the taxpayer has the cancelled checks, they will be all right. But if there are amounts over $250, the taxpayer must have a receipt in their possession at the time of the filing of the return. If they don't have a proper receipt, no deduction. Tom Hollister, CA

Not so fast Rich. That is the total amount of the cost of the policy, both the employer and employee portions. Whether it is pre tax or post tax will take some digging, but the amount in box 12 is not exclusively the employer paid portion. In general, most employers will have a salary reduction arraignment in place and the employee portion is pre-tax, but not always. A copy of the check stub and working your way back through the math on the SS taxes wilthheld can usually find the answer for you. Tom Hollister, CA

Did not know any of this. I learned something new today. Thanks. Tom Hollister, CA

I am not doing anything different with the auto backup. I let that go to default. I do a second backup to flash drives. I just click on the button on the backup screen and point to my flash drive for the off site storage backup. The first time I did it, the process took about 20 minutes, but I think that is because it was backing up all the payers, form rates, etc. Hope this helps. Tom Hollister, CA

I will take all the clients that want 5PM to 9PM appointments that you want to give me. Tom Hollister, CA

I would think you are right. Which would be a circular 230 violation for a CPA/JD. The invoice is proof that the preparer was paid, and if they did not fill out the bottom of the 1040 as the paid preparer, they are subject to sanctions for failure to sign the return. In addition, if the return was e-filed, the PTIN could be revoked. Why do preparers do this. The penalties are so harsh if you get caught. And for a few bucks. I don't understand it. Tom Hollister, CA

What is on the bottom of page 2 of the 1040. I am dying to know if they put the firm name and PTIN number on the return? I don't want to know the name, just if the preparer actually filled out the information. Thanks Tom Hollister, CA

Dear Client, Yes, I filed your tax return. I guess I did not make myself very clear when I said that if you don't hear from me, everything is fine. Please refer to your client letter, as it will tell you how to find out from www.irs.gov when the money will arrive in your account. As to your 3rd and 4th texts about the projected 21 days that the IRS is stating they will take to get your refund to you, all I can say is call your congressman and ask him to get the IRS off their collective butts and process your refund. FYI - due to the number of texts we have been exchanging today, I will be a little late from work tonight sweetheart, so please put my dinner in the microwave. Your husband and tax preparer, Tom Hollister, CA

The clients never read the letter anyways. I highlight www.irs.gov and tell them to go there when they don't get their refund. That is the only part of the client letter that they read anyway. Tom Hollister, CA

MAS is correct. The penalty waiver is only for IRA's, not 401K's. Your client did the wrong thing. He should have taken a loan from the 401K rather than a distribution. Alternatively, he could have done a trustee to trustee transfer from the 401K (if the plan allowed early roll overs) to an IRA and then taken the distribution. I have seen this before and it really is a shock when the client learns they did it wrong and have to pay the tax and penalty. A lot of times, they don't even realize that even though the penalty is waived, the distribution is still taxable. Tom Hollister, CA