BulldogTom

Sorry this is late, but I would be careful advising that she is eligible. Did they file a joint return in any of the years that they were married and if so, was any mortgage interest or property tax deductions taken? The IRS will have all the amunition they need to disallow the credit if there is a prior year tax return within 3 years showing mortgage interest or property taxes. Just my 2 cents. Sorry to be a wet blanket. Tom Lodi, CA

SBBT has sent a letter saying that they believe the law in several states (CA for me) requires registration as a loan broker to offer RAL's. Their position is they cannot offer a rebate and the preparer cannot charge the taxpayer for RAL's in CA unless they are registered as a loan broker. They are therefor suspending payments of rebates on RAL's to tax preparers in CA. Did any of you recieve this letter? Do you think they are correct in their opinion? I hate RAL's, but I have to offer them to stay in business. I wish they would outlaw the darn things. Tom Lodi, CA

I am sitting on the fence here a little bit. I think the SS8 is a good idea because it shows the employee immediately took action when the eroneous form was recieved. Kinda kills any argument that the employee ever agreed to being an IC. I would file the subsitute for w-2 and not include the 1099 anywhere. When the letters come, let it come. Oh, and by the way, your client might make some money by turning this tax cheat in. I forget what the form is, but file it and tattle tale on the employer. It might be enough to pay the bill for your fees for cleaning up this mess. Tom Lodi, CA

I love it.

I don't know that this was a change in proceedure. In my own church, I am occasionally approached by members who want to give me donations for the youth group I am in charge of. I accept the checks and forward them to the bookkeeper for recording in our fund account. I am not sure how he normally gives to special funds in his church, but I know he does make many separate checks for various funds outside the general fund. Having been on the inside of the workings of a church finance committee and knowing that the offering is the worst place to make a designated gift (becuase the volunteers are trying to count the cash very quickly and get home on Sunday) I would assume that this was his rational for going directly to the chair with the check. I know he delivered another check this week to pay for a server upgrade at his church (after I convinced him not to buy the server and give it, but to have the church buy it and give them a check for the cost). He took it in during the week and gave it to them. I can't answer your question Jainen, but thank you for confirming my analysis of this transaction. Just a follow up - an elder of his church called me and wanted to know why their was a problem with the way they did this. They trully just thought they were being expedient. The other issue that was brought up was confidentiality. My friend never intended that they knew he knew that they were on hard times. Tom Lodi, CA

Margaret, I was not picking on Feed the Children, they are an excellent organization. I hope it did not sound like I was? I was just using them as an example of a donation going directly to the benefit of an individual. Jainen, As for my friend, he is in the top tax bracket and is more concerned about being audited than he is about getting the deduction. He is very generous to his church and gives to this particular fund on a regular basis. His jewels in his crown are more important than the deduction on his tax return. Jesus said, "Render unto Caesar what is Caesar's, render unto God what is God's". I just believe we should take the deduction when we follow this instruction. But, Caesar's rules are also to be followed in taking the deductions. I think the rules were not followed and no deduction. My friend is a good man, a generous man, and this was not motivated by tax avoidance. He never told the church to give to this family, and he never said how much to give. Tom Lodi, CA

Except that the friend never told the committee who to give the money to. He merely brought the family to the attention of the committee, and then gave a donation designated to that fund. The church committee chair directed the donor to put a name on the check. I hear what you say, and I think that you are correct, (not about tax avoidance - that was never the motive). I think it was not my friend who made this non-deductible, I believe it is the church that created the problem. How about this for a comparable scenario. Feed the Children has a funds drive and they ask you to sponsor a child. You give $100 per month for the direct support of a needy child. They send you a picture of the child you are supporting. Is this no longer deductible, even though sent to the qualified charity, because it is made for the benefit of a single individual? Is this merely a tax avoidance scheme? Tom Lodi, CA

A friend of mine passed this by me for my opinion. He knew of a family in his church that was having a hard time. He asked the chairman of the benevolent committee if they would do some thing for the family and they said they would. So he wrote a check for $1000 to the church and gave it to the committee chairman. The committee chaiman told him to put the family name on the check in the memo line, which he did. Then the chairman gave the check directly to the member in need. My take is this is a direct contribution to an individual and not deductible. What do you say? I still want to know how the family was able to cash the check, but that is a different question. And this is not a family member, close friend, or otherwise related party to my friend. Just someone in his church on hard times. Tom Lodi, CA

http://www.legalbitstream.com/scripts/isys...y/irl88f7/1/doc KC, I don't know how to insert a hyperlink, but the link above goes to LegalBitStream.com and Notice 2005-1. In Part C, Question 15, it seems to say that once you adopt a non-qualified deferred comp plan, no early payouts are allowed. I am still looking for other guidance, but this seems pretty clear. Unless it was superceeded gy other guidance, I think the CPA is correct. Are you aware of anything after this notice that might be germain to the situation? Tom Lodi, CA

This is an area I am not very familiar with. Client has an unfunded Deferred Comp plan for 1 key employee. No deductions on books yet. No income to key employee yet. First payment scheduled in 2011. Client is having a good year - yes a very good year. He wants to accelerate the payments on the plan to take the deductions this year. CPA is telling Key Employee there is a 20% penalty for doing this. Anyone have experience with this situation. Tom Lodi, CA

A CP2000 is not a tax bill. It is a proposed change to the tax return. Until the tax is actually assessed, the IRS cannot take any refunds against it (there are exceptions for flight risks, but the commissioner has to approve them). So if you are worried about the refund, get an extension of time to provide the information. They will normally give you the time if you just say the client is compiling the documents and you have scheduled an appointment to review and respond to the notice. An extra 30 days should get the refund in the bank unless they are holding it for another reason. Tom Lodi, CA

To avoid all this confusion, I have gone exempt on my withholding. I will just make it all up on my bonus at the end of they year. Since withholding is considered to be taken out ratably throughout the year, no underwithholding penalty. I tried just going M12, but the CA tables still were taking too much. It is cool being the controller for the company, because I can just pop into the software and make the changes when I want to. So long as I don't get fired just before the bonus is paid, this strategy will work like a charm. Tom Lodi, CA

Hello........didn't you watch the movie? It was magic!!!! Tom Lodi, CA

It is 9AM in Ca. and I am sitting at a Drake Seminar. Anything you want me to ask them while I am here for the next 4 hours? Tom Lodi, CA

And don't forget about the DE 34 for independent contractors. They need to report contracts in excess of $600 within 20 days. Tom Lodi, CA

Damn old codger! Where the hell you been hiding? About time you got back here. Now go look at my post I just made and rip the $hit out of me for being stupid. Then tell me in your oh so smug way that if I just read _________ publication, court case, or code reference, it would be as clear as mud to anyone with half a brain. Good to see you posting again. Tom Lodi, CA

This is a better question for the client's lawyer, and I am wary of giving any advice....but..... Client had a rental home for 2 years. Could not make the payments and walked away. Filed Bankruptcy. Included the home debt in the bankruptcy filing. Bank says they cannot include the debt in bankruptcy and the client must go through foreclosure. Bank has offered to take a Deed in Lieu of Foreclosure from the client. Here are my questions/statements Can the bank force the issue out of bankruptcy? Could they even add the debt to the bankruptcy filing (this is the question they should ask their bankruptcy lawyer). I know if a debt is discharged in bankruptcy, there is no income. I know if a Deed in Lieu is delivered, it is a sale and the client has to prove insolvency to get relief. Is the bankruptcy proof of insolvency? Thanks for your help. Tom Lodi, cA

You guys and gals are the best. Thank you all for all the help and humor. I can't wait for Jan 15th to roll around again. Tom Lodi, cA

I don't have enough clients. Mine was done in February. I always use my own tax return as a test on the software. I don't finish it first, too many documents that I have to wait for, but I start mine first. I take the first couple weeks in Jan to get my books reconciled and put my Sch. C in. Then I use the last check stubs to dummy up income. Stock trades and Sch. A is all estimated until I have the documents to back them up. Estimate if the kids need to file a return also. Then I have my wife re-do everything but the sch. C when the rest of the documents arrive. Tom Lodi, cA

Unfortunately....yes. He has not posted in a long time. I bet he prowls the board at night when he thinks no one is on or will notice him. Tom Lodi, CA

I have to disagree with my collegues. You are in business to earn a profit. By making your clients do this correctly, you will maximize your fee. You should call the IRS and the state and tell them what happened (charge for this), then process all the corrected forms (charge for this) then spend the next 2-3 years answering notices and providing information to the IRS and the State (charge for this too). By following my advice, you will positively impact your firm's bottom line enough to afford that new fishing boat. (this is all tongue in cheek) Tom Lodi, CA

Thanks for your honesty Sasha. I am really suprised by the comment about Santa Barbara, as I used them for several years without a hitch until the CCH takeover. I will look at the other options this year. Tom Lodi, CA

I think they get the step up regardless of how the deed is written. Tom Lodi, CA

I believe, but don't take my word for it, that it is an option to take the deduction or not on an IRA contribution. If not deductible, and 8606 should have been filed to show the non-deductible portion. I would guess that you could recreate the contributions over the years and treat them as non-deductible, and then treat the distribution this year under the normal rules for an IRA with basis. This is off the top of my head and not researched. But I would look into it if it was my client. Tom Lodi, CA

Sasha, I read a few of your posts and I am wondering if you can provide some insight into Bank Products going forward. First, let me say I love my ATX software. The product has gotten better almost every year. I know it fairly well and don't have problems getting the results I need on tax prep. That being said, I am prepared to dump ATX becausse of the hassle every year with Bank Products. The sign up proceedure is a mess. You have to sign up on the CCH page, then with the bank on their page, and then wait for CCH to talk to your bank to finalize the set up. Calling in for banking support is a ping pong match - "it is the bank" no "it is CCH" no " it is the bank". I have lost early season customers because they can't get the bank products in time like they can with HRB. These early season clients don't care about the tax return, they want the money right now. I never had these problems with the bank on this scale until CCH took over and forced us onto their website application last year. It was no better this year. When you run a small practice like I do (and many of us on the board here), every client lost is a major loss. And when you live and work in a small town, word travels fast. I have friends that tell me they heard I don't get the checks out so they go to HRB - even though I am priced a lot less. They feel like they are paying for the service I can't provide in a timely manner. OH yeah - they will come to me if they get a letter from the IRS, but not to get the tax return and RAL. Customers can be funny like that. So, does CCH even see this as a problem? Is it something they will look at and address going forward? Do you have any insight? Thanks. Tom Lodi, CA