BulldogTom

Nope. Cinabon can't compare to the fair. Tom Lodi, CA

It is a little cold out here too. Breezy and about 65 today. Lots of pollen in the air from all the trees blooming. Just terrible. Sorry, I couldn't resist. Tom Lodi, CA

Mel, you are cruel. Out here in CA, there is a small company that runs the fair circuit in the summer. They make some of the best cinnamon rolls, and they smear a bunch of cream cheese on them and sprinkle them with walnuts. It is the best $6 I spend at the fair every year. And you can watch them make them right through the window of their trailer. The fair is still so far away, and so is Hawaii. Hey Mel, if I take my wife to Hawaii for a three day weekend in April, will you make some rolls for us? I am serious. I have to take Patty for a long weekend after tax season for missing our anneversary in March. I was going to take her to Monterey, but Hawaii would work too. Tom Lodi, CA

This was my question on an earlier thread, and I have not found an answer. If you have any source material on this, please post it. I have a client who is purchasing a quadplex. He will live in one unit. My first thought, which will probably not be right, is that you treat it the same way you would for depreciation. The square footage of the entire property divided into the total purchase price times the square footage for the personal portion. That will give you the purchase prices of the personal residence, which will then be used to determine the 10% limit for the credit. Using my example, if the quadplex is 2000 square feet and cost 400K, and the personal residence is 500 square feet, the purchase price of the personal residence is 100K (400K / 2000 sq ft X 500 sq ft). The limit imposed by the law is 10% of the purchase price or 8K. In this example, he would get the 8K credit (or the 7500 if purchased in 2008) and the 300K would be the rental portion to be depreciated (minus land of course) on the E. This is how I am going to approach this until I see some better guidance from the IRS. Anyone who has some source material, please post it. I would really like something with authority other than my own thoughts. Thanks. Tom Lodi, CA

Many 401K plans are written in such a way that withdrawals are not allowed except for certain reasons. One of those reasons is a "hardship" as defined by the individual plan. In order to prevent the tax and penalty, the 401K will sometimes permit a "hardship loan" from the 401K. Many 401K accounts do not allow a loan because of the administrative cost of allowing them. If they do allow a hardship withdrawal, they are not exempt from tax and are only exempt from penalty if they meet one of the code provided exceptions. There are a lot of plan specific rules about taking withdrawals from a 401K, and employees will often confuse these rules with tax rules. Hope this helps. Tom Lodi, CA

Mike - here is a joke you might like. It has nothing to do with birthdays, but I like it. A church lost their pastor and formed a search committee. They interview process included the candidate giving a Sunday sermon. One young man really impressed the search committee, and was scheduled to preach that Sunday. He lit up the pulpit with a sermon on serving God, and the entire congregation was enthralled by his exhortations and passion. The elders immediately hired the young pastor. He accepted and arrived the following Sunday to preach. He gave, word for word, the exact same sermon as the prior week. The elders were suprised, but let it go, assuming that he did not have time to prepare another sermon. The following week, the young pastor again delivered the exact same sermon. The elders got together and decided to let it go for one more week, as it was a very good sermon. The fourth Sunday came, and the young pastor delivered, word for word, the same sermon. The elders had had it. They called the pastor on the carpet and demanded an explanation. His response was short and to the point. "When the elders and congregation act on this sermon, I will move to my next topic." Happy Birthday Mike. Tom Lodi, CA

<<<and just because you are too lazy to read the notice?>>> I did read the notice - all ten pages. Please see my original post :0) The notice does say that I can send an amended return. It says to send it to the address on the front of the notice, which I am doing. I appreciate what you are saying joanmcq. However, my distrust of the IRS runs deep. And I know that if I send in an amended return, I am in a better position should the IRS audit at a later date. The CP2000 is just a mis-match on information that they have in the system. It is a notice that something is not matching up. And since the 1040X now has a foreign tax credit that is available to the client now, it seems to me to make more sense to present a complete and acurate return to the IRS with all schedules and attachments that prove the positions taken on the "new and improved" tax return. In the future, if it is a very simple change, like a small W2 the client forgot about, I will consider your advice. But for this particular client, I think I will send in the 1040X (which the notice clearly says I can do) and go from there. Thanks for the reply. Tom Lodi, CA

I have started adding the 2 year comparison to every return of prior year clients. I review it before I finish the return, just to make sure I don't miss something like that. It is also very helpful when the client asks the invitable question "Why is my refund different from last year?". I just show them the differences. Tom Lodi, CA

Deduct the tuition and fees. It is only non-taxable re-imbursement that you need to worry about. Tom Lodi, CA

What state are you in jasdlm? I would tell my client the same thing. Get a corrected W2, you are an employee. But I would also warn him of the potential consequences of this action (see below). Everything that an employer pays and employee is wages unless you can find a code section that says it isn't. I don't know of a code section that exempts bonuses. They should have gone on the W2. I would advise that all employees get a revised W2, that you gross up their wages for the "net check" that they actually recieved, and pay the penalty and interest. I beleive this is what the IRS would tell you to do. Now, that being said, if you are in a state that has "at will" employment, you could just fix the one employee W2, hope it does not trigger an audit, and then very publicly have your client lay off the employee "for no reason, per our employment relationship agreement". The rest of the employees might get the hint. Then again, they may not. This is a very risky thing to do. Then go tell your client to never ever listen to the employees again and always cut a payroll check for bonuses. Tom Lodi, CA

Sweet. What a lucky man you are. Tom Lodi, CA

I was taught by a onery CPA the same way that Catherine was taught. 1040X, 1040 highlighted "Amended", supporting docs for changes, 1040 hightlighted "As Originally Filed, Do Not Process". I have been doing it this way since I was in college. Never had one come back for additional information. Tom Lodi, CA

Don't give your fee away. You are right. It is not your fault the taxpayer does not qualify for tax breaks. Take your fee. Just explain everything. If she walks, oh well. If she pays, you have a great client. Tom lodi, CA

I have been looking on IRS.gov and not finding anything. TP is single. Wants to buy quadplex. Move into 1 apartment and rent the other 3. I don't see anything that disqualifies him from taking first time homebuyer credit. Has not owned main home in prior three years. Will use the one apartment as his principle residence. Income qualifies. I assume he takes sqare footage and divides to get sales price of personal residence? Takes up to $8,000 in credit (10% of purchase price of principle residence portion)? Anyone have an cites or a problem with this approach? Thanks Tom Lodi, CA

May God bless him and keep him safe. It is cool to see young men answering the call of God and country at the same time. Was he really the inspiration for that Chris Farley skit. That was one hillarious joke. I never imagined there could really be someone behind that. Tom Lodi, CA

Thanks for the info KC, but the fact that the IRS has to work harder is not my issue. I have to protect my clients best interest, and I don't feel that an updated schedule D is the proper way to reflect the correct tax that should be paid by the taxpayer. I will trust the IRS to do the right thing when I can see the back of my neck (thanks again Jerry). Look at me, I am getting old and cranky, and I am still a young man. Tom Lodi, CA

OK, I will compromise. I will send the info to the correspondence office, but it will include an amended return. I need to send CA an amended return also. I will also have the taxpayer include the check for the difference. Tom Lodi, CA

I am really bored this morning. I actually read the entire 10 pages of a CP2000 of a new client. I found out something new. I have always approached an amended return the same way. It did not matter if it was a client seeing an error or the IRS telling them there was an error. Always file with the center where the original return was filed. If there is a CP 2000 or other correspondence involved, I take a POA and call the service to let them know I will be filing the amended return and give them a timetable on when I think it will be completed. It has always worked in the past. But the CP 2000 has instructions on where to file if you are filing an amended return. I never saw that before. But then again, I have never read all 10 pages of the CP 2000 before either. Is this new? I am a little antsy about sending an amended return to an examiner location rather than the service center. Should I just ignore the instructions on the CP 2000 or should I follow them. BTW - it is a simple issue. TP had his Son In Law prepare the 2007 return on turbo and the S-I-L did not enter the 1099B. So the IRS wants taxes on total proceeds of the stock transactions ignoring basis. They want tax on 27K, but it comes out to only 2K in LTCG, $200 in taxes. Tom Lodi, CA

Your client screwed this up. Make sure you charge them a TON of cash to teach them a lesson. You need to be paid for your headache. Tom Lodi, CA

It is not real easy, but the rules are fairly straightforward. You will have to allocate his income between the two states. Make sure you fill in all the dates in ATX for days in CA and make sure you have all the W2's coded for the correct states. Is there anything really complicated about the return? Tom Lodi, CA

My first thought is SS8. You want to have some fun and drag the military and the IRS into a fight over his status as an employee? I would, just for the fun of it. Then I would write a diary of everything that happens in the process, and give the diary to a newspaper reporter in the client's hometown. But, that is just me. Tom Lodi, CA

I am still unclear on one point. Did the spouse (your taxpayer) recieve any of the money? If she has constructively recieved the cash, I think the penalty is valid. If all the funds went to the incarcerated spouse or his attorney, then I think you have a good case for relief. Tom Lodi, CA

Check the community property laws in your state. If this was in CA, it would be a non-issue, because community ends when the couple separates with no intention of reconciling. So, if this client was in CA instead of WI, the income would go to the husband only. I don't know the laws in WI, but you should check out when community ends in your state. Tom Lodi, CA

That is not a silly question, it gets to the heart of the matter. Did he pay the partnership? Tom Lodi, CA

Terry, A really nice letter explaining that due to the state of the economy, you have noticed that many clients are slow paying their invoices. Due to the nature of your services, you will now require payment in advance. Also, you are so sorry to have to raise your fees to cover the cost of all these collection activities that take time away from your core business activities. Send it like it is a form letter to all your clients, but just mail it to them. IF they stay, you have an advance pay customer who is paying more. If they leave, good. Just my 2 cents. Tom Lodi, CA