BulldogTom

JohnH - that was really good. Someone ought to forward that post to the CEO of CCH. Tom Lodi, CA

I would ask that all of you of the faith might say a word of prayer for Eli over the next couple of hours. Hurricane Dolly is coming ashore and there will be some wind and rain coming his way. Eli, my friend, may God protect and comfort you and your family during this storm. God bless you. Tom Lodi, CA

No need to write it, it is just a check box. But I would print it out in case the IRS misses it. Tom Lodi, CA

I concur with my colleagues. I got your back on this one if you need it Kerry, but I came to the party late and they already have given you excellent advice. Tom Lodi, CA

Cool, all of us will get up on the stimulus payment in a hurry if we can get it for our businesses - dontcha think? Tom Lodi, CA

With interest, just over 3K. The client does not have it, so if we lose, it goes probably to currently uncollectable anyway. She is living on 1000 per month SS Disability with no other assets or income. Tom Lodi, CA

Which is why I would like to avoid the trial. Basically, her illness is severe depression which has caused multiple other physical and mental conditions. Great point and well taken. Thanks Tom Lodi, CA

Thank you for your thoughts. A couple of points of clarification. The client was ruled to be disabled as of the 2005 onset which caused her leave of absence from work by the administrative law judge. At that time, she recieved private disability insurance payments until the SS Disability determination by the administrative law judge, and those private disability payments were returned when the lump sum payment was made by SS in 2007. There is no question in my mind, and is clearly stated by the administrative law judge, the exact date on which she became disabled. The withdawal took place nearly a year after that date. >>Hit hard with that judge's description and hope the IRS doesn't think it was too narrow<< This was exactly what I planned to do, but before I took a hard line, I wanted to get some confirmation. >>they know they can't win if this gets as far as court but are betting that you aren't really prepared to handle a lawsuit. If you can present a coherent case, Appeals may back down<< I have no problem with my client going to court, although we would like to avoid that scenario. Question - we have asked for an S Case procedure. Should I change that to regular to show that we are ready to appeal if necessary? The S Case procedures work out better for a Pro Se taxpayer, and I believe that is still the case. But I know there is no appealing an S Case Ruling. I still beleive my client is right, and the tax law backs her up. I just don't want anything that I do to cloud the issue, so I want to be sure I don't make a mis-step on her behalf that would cause her to lose. Again, thanks for your responses. Jainen - as always, I value your knowledge and opinions. Tom Lodi, CA

Taxpayer became mentally disabled. Took a medical leave of absense for depression and other mental illness. Was terminated from her job and applied for SS Disability in 2005. Was receiving private disability income during 2005 and 2006. During 2006, taxpayer raided her retirement plan to provide for living and medical expenses. In late 2006, administrative law judge ruled she was 100% disabled because of her mental illness, and was unable to work in any gainful capacity. Taxpayer remains disabled on SS Disability. State of CA retirement plan issued 1099R with no known exceptions. We paid the tax, but not the 10% additional tax on the withdrawal and noted the disability exeption on the return. IRS audited and imposed the 10% additional tax. We responded with the judges ruling which included the medical testimony of her physician. The next letter was the Notice of Deficiency. We prepared the tax court petition. 3 weeks after notification of the tax court that they had recieved our petition, the Service Center that we sent our original response to sent us a letter explaining that they did recieve our letter but did not have time to respond yet. So we get the letter from the appeals officer which included the instructions to present a corrected 1099R at the scheduled conference. Since the letter included the appeals officer's number, I called her. My position is that the taxpayer has no means under which to compel the state of california retirement plan to issue a corrected 1099R. It is also my position that regardless of what the 1099R says, my taxpayer presented proof to the commissioner on his request that satisfies the statutory requirement for the disability exception (the administrative law judge description of her disability is almost verbatum from the code on the definition of disability). The appeals officer position is that unless the 1099R is corrected, they won't back down. I have been looking for cases on point that the judge has ruled a corrected 1099R was not provided and this was the deciding factor, but I have not found anything. Every case seems to be decided on the strength of the evidence presented that the taxpayer was disabled. I really thought this was a slam dunk for my client, but now I am having second thoughts. I am teleconferencing in 10 days with the appeals officer and I don't want to blow this. Is there a flaw in my analysis of this tax law? Am I missing something important? I can't beleive the appeals officer would only take a corrected 1099R as proof for the exception to apply. Your thoughts are appreciated. Tom Lodi, CA

On just the labor side, the donation of labor is not deductible to the donating party (assuming it is an individual), and would be to the extent of the cost of labor paid by the company, but already deductible as wages on the company's books - so there is no real benefit to the donees. I would suggest a certificate of appreciation. For the 501c organization on the products being received, it would be the FMV of the products, issued as a regular receipt of any kind that the organization has, like an 8 1/2 x 11 sheet of paper. The accounting would be something like a debit to inventory or materials on hand and a credit to some kind of in-kind donations account. For the donating company, the entry would be a credit to materials or inventory (COGS?) and a debit to contributions, subject to the normal charitable contributions rules. Hope this helps. Not sure if this is what you were looking for.

Thanks for the update, and please keep us posted. I wish that was not the answer, but you know best. I will be looking for the big announcement. Tom Lodi, CA

OK, from what you have stated, here is how you might want to proceed. 2005 and 2006 - activity is classified as a hobby. Advise that the returns need to be ammended to show the hobby income on the front of the 1040 and the expenses added to schedule A. Document your advice, let him make the decision to ammend or not, and move to 2007. 2007 the activity is now classified as a business. Take all the assets prior to 2007 purchase and add them to the depreciation schedule. Placed in service date is now the date the activity moved from a hobby to a business. Basis is lower of cost or FMV. Client can go to the supplier of the equipment and get a FMV estimate based on the age and condition of the used equipment. All equipment purchased after the business starting date is depreciated (sec 179?) in the normal manner. Help the client put some reasonable financial statement together that as best as possible reflects accurately the income and expense of the business. Put the client on notice that he must keep accurate records of the income and expense going forward. Help him set up something or do it for him (for a fee - of course). Next year, all is good. My 2 cents. Tom Lodi, CA

My experience with ATX and Timberline Software are the same as Mike's. They will have you connect to them, but you can actually take the mouse from them at any point in the session and override. In the case of Timberline, because I know the setup better than they do, I usually take them to the place in the software where I am having the issue, and then let them take over from there. It really makes support easier when you are both looking at the same screen and can run the report or operation and show the tech the error. In my opinion, you should not have misgivings about the security of your data when working with reputable support companies. Especially since you are watching what they are doing. Tom Lodi, CA

Don't you love it when our clients "help us out" on the audits? Tom Lodi, CA

Mel, I know you have said in the past that a new program is not likely this year from you. Can you give us a confirmation of that? I am still holding my breath hoping you will wake up one morning with a brilliant inspiration on how to get us a program for this year. But if not, is the following year a possibility? Especially with the new support group in Maine coming on line, a partnership/joint venture might make all the difference. Just curious. You are still one of us, and ATX is still them, and it is always better to be with us than to be with them. Tom Lodi, CA

The IRS is pretty easy to deal with on this matter. I am aware that they are usually reasonable. California, on the other hand can be a bear to deal with, but luckily, I got a very pleasant agent who was able to look up and identify the payment. The phone number I used was the Practitioner Hotline right off the FTB website. Here it is so you don't have to look it up. 916.845.7057 Tom Lodi, CA

I am aware of that. My real question, which was apparently not worded well, should have said: "Is there a form from the state of CA that I would need to produce for the client in order to request the refund?" If the payment was applied to 2007 or some other year, I would assume that an amended return might be needed, and if it was not applied to any year, a specific form might be needed. I was looking for such a form and not finding it, and not knowing what year the payment might have been applied to without speaking to the FTB, I was confused. I tried calling twice but the state was busy and told me each time to call back and hung up. Hence, my poorly worded question to this board asking if someone might know the proper procedure for making the request. Thanks for your help in pointing out that a letter would suffice. Tom Lodi, CA

Just spoke to the FTB and that was what they said. It was sitting there just waiting for the letter to arrive. Fax over a letter and they will send the money back. Tom Lodi, CA

This has never happened to me, and I can't get through to the FTB to find out how to correct it. Taxpayer had a large balance due to the IRS and a small refund from the state of CA. Somehow, they wrote a check for over 7K to the FTB instead of the IRS and mailed it to the FTB. The notice from the IRS for the balance due tipped them off that something was wrong. The client is Russian and speaks very little english. His son was my interpreter. I don't know how this got messed up, as I handed them the payment voucher for the IRS with the tax return when it was completed. How do I get the money back from FTB? The payment is not attached to any tax return (they did not put a year on the check). I don't think I should file an ammended return, but I don't know of any other way to make a claim for the money. Any help is appreciated. Tom Lodi, CA

Perhaps the best way to structure the sale is to have one sale of both parcels, and to then allocate the sales price between the farm and the home. While the IRS can challenge this if it appears unreasonable or contrived, an arms length transaction is fairly good evidence of the fair market value of the property sold. So, if the contract says the purchase price is (just and example) 1 million, and the allocation per the sales agreement is 300K for the farm and 700K for the home, and what constitutes the home is spelled out in the sales contract (only the portion that was used as the main home of the taxpayer), you should be in a defendable position. I would not be too agressive with the allocation, but arms length, written transactions are a good piece of evidence. Just a thought. Tom Lodi, CA

C Corp (closely held) has a deferred comp agreement with a key salesman that cliff vests after 5 years. The yearly accruals are unfunded and paid out in 5 annual installments after the five year vesting period. I am thinking this is a note in the financial statements until the vest. On the tax side, I think it is income when paid to the employee and deductible at that time to the corp. Any problems with this treatment? I am not an expert on FASB pronouncements, and I am sure they must have some guidance. Thanks in advance. Tom Lodi, CA

More truth in that than most would like to admit. Tom Lodi, CA

I am holding out for the famous "Companion Ticket". When I can fly on three days of the year with my spouse to 4 cities that I never wanted to go to, I will renew with ATX. Tom Lodi, CA

The guy who can re-wire the iphone to get it to work on sprint may order the ipod, but why, when he can re-wire the iphone and make it do everything an ipod can. That is a good one Mel. Tom Lodi, cA

National Champions - that little po-dunk school in a dusty little farm town in the middle of California is the best in the nation. I am so proud of my school and that team. I don't know if you caught the interview with the head coach, but he has 8 seniors on that team that will graduate with a degree. The left fielder is an Engineering major and carried a 4.0 in the spring semester while playing ball. Well done 'Dogs. Tom Lodi, CA