BulldogTom

Not Mike, but let me take a shot at this one. Yes, the expenses would be deductible as business related, 2106, 2% haircut, only if he itemizes. No chance that it can be put on 2006 return if paid in 2007 and going in 2008 (did you really mean 2006 or is that a typo?). But I would approach it in a different way. I would see if the chuch has a way to pay for the trip for him in one of his budget categories. Some churches have Ministry Related Expense plans that re-imburse the pastor for out of pocket expenses. If his church has one, get it reimbursed. If not, see if the church will pay the cost and reduce his budget next year as it relates to his salary/expenses. My 2 cents. Tom Lodi, CA

How old is your client? Did he take some cash? If he took money out of the retirement fund, he will get a 1099R from the 401K administrator at the end of the year. Depending on what his age is will depend on the way the 1099R will be coded. If he is over 59 1/2 it should just show a normal retirement distribution. If he is under 59.5 and none of the exceptions apply, the 1099R will be coded for an early distribution and the 10% penalty will apply. In either case, the distribution will be taxable at ordinary rates. If he did not take any money, just sold some stock within the 401K and replaced it with some other asset (bond fund, other stocks, MM cash account), it is a non-taxable transaction and will have no effect on his income tax return for this year. Hope this helps. Tom Lodi, CA

I hear you. I have spent the last 2 days trying to track down my client's tax return so we can finish the audit. We used to get very good service from the Practitioner Helpline, but that seems to be invaded by the "lumps of flesh" that normally exist on the taxpayer phone lines. I had a very simple question - "Where is my client's tax return? I received a letter 7 weeks ago that said it was going to the local office. Where is it?" Then I got to take a telephone tour of the United States from Atlanta, to Philadelphia, to Ogden, back to the practioner (no)helpline which is somewhere, to Fresno, only to be told that Fresno does not know for sure where the return is, but that they would send a request to some office to call either me or the taxpayer at some point, but that there is no deadline or timeline for them to respond. Tom Lodi, CA

It makes CCH look pretty smart that they bought ATX when 90% plus of the client list they bought is planning to stay. They probably thought it was going to be less retention than that, but hey, with the concentration between the big three providers, they probably figured they would get a fair share to switch to one of their other products anyway. I am still waiting for Melvin to release his software. I want to be the first customer. Tom Lodi, CA

What I really would appreciate is the return of William. Oh where are you sweet Willy? Tom Lodi, CA

Do you have a guilty consience Jainen? I am not worried about my practices, but apparently the new 230 requirements have worried you. I have always been very careful about my tax advice and my interview. I sleep well at night because of it. I am not worried about the new rules. I conduct my business with integrity, and I don't see a need to change my interview because the IRS might look at my practice. I am not afraid. I have nothing to hide. Tom Lodi, CA

I will take the Spidell update as I do every year. Mortgage debt forgiveness is not a law yet, hence not to be fretted over. The Davis Case is still in the courts and we will not be able to do anything with it until the court rules. The RDP mess will be a mess no matter what the Governator signs. I don't think CA will even track down the RDP's who file single anyway. As for the preparer penalties in Cir 230, see my earlier post - I don't worry about that. I don't make mistakes. Tom Lodi, CA

I guess I have seen all of this in previous material so I am not really suprised. But your point is well taken. I have a client who may get the AMT credit, and a client who has a son in college who might get a suprise on the kiddie tax. I have no spousal partnerships, only Schedule C's. And I am ready to prepare a California Domestic Partnership return if it walks in the door. But I don't have to worry about preparer penalties because I never give bad advice and never miss on the tax law. All my clients are honest and every return I prepare is accurate. NO WORRIES - MON! Tom Lodi, CA

Thanks Wayne. That is what I was looking for. Nothing new or earth shaking, mostly just inflation adjustments. The MIP deduction is going to be a pain when the clients don't know it only applies to loans originated in 2007. Tom Lodi, CA

I have been looking around for new laws for 2007 and not really seeing anything. I was wondering if I am missing something. Is this just a real quite year for new tax legislation? Tom Lodi, CA

M M = Melvin the Surfer Tax Dude? M M = Mike the Preacher Tax Dude? You two need to give us a clue as to which one you are. Poor KC can't keep you straight. But I enjoy reading both of your posts. Tom Lodi, CA

CNA for me to!!! Sole Proprietor, spouse employee, some bookkeeping revenue. Got it through a broker called Dimarak out of San Diego (I think). I believe I pay $185. Tom Lodi, CA

KC, I know that, I was trying to be funny - guess it didn't work. Lawyers are usually an easy target for a quick joke. Of course, that does hit a little too close to home for you. Good to see you back on the board. Do you have an update for us? You are in my prayers. Tom Lodi, CA

Did the lawyers have to pay back their Fee for helping their clients defraud the company? That is the more interesting question. Tom Lodi, CA

Mike, I bought my first home under a program similar to what is described by Gene, except it was not a gift but a loan. It was basically a piggyback loan of the 20% down payment. The program was called DAP - Downpayment Assistance Program - and was intended for first time homebuyers. Worked a miracle for us as I was able to buy a new home with good credit and closing costs while I was still a senior in college. It sounds like there is a private group or foundation in SoCal that has attracted the attention of the IRS and your client was linked to them in some way. Has your client bought or sold property in the last couple of years? Is it possible that there is some SS# mix up? Could this group have reported some "creative" items on a closing statement where your client was involved in the transactions? I would advise the client to give you a power of attorney and stay out of any conversation with the IRS for the time being. You talk to the IRS and then advise the client if he needs the services of an attorney or if it is something the client can handle. Something smells - I would tread very lightly through this. And be careful not to make the client's problems your problems. Good Luck. Tom Lodi, CA

Bill, I want to start a new thread so it does not get buried. I just want to make sure I understand your post earlier. You got MAX for $695 plus S&H? Were you on Max last year? Would you mind posting the contents of the e-mail that you got from ATX (hopefully with a salesperson's name)? That is a huge discount, and if the rest of us can get on that offer, ATX will have a lot of renewals. I have not renewed, but I will for that price. BTW, ATX cannot stop you from posting that e-mail here - because they don't own the site. Isn't that cool? Maybe they will regret their decision to cancel their board. They could have deleted posts like this in the past. Tom Lodi, CA

You are in our prayers. Tom Lodi, CA

I appologize for my unclear post. I should have said "if the card is in the name of the owner and the organization is a corporation and there is mixed use, I would shy away from putting the CC on the balance sheet." My point was (1) if the entity is a proprietor, and the card is in the owners name, I have no issue with putting it on the BS and recording each transaction as either an expense or capital draw, (2) if the entity is a corp and the card is in the owners name, but strictly used for business purposes, I have no issue putting it on the balance sheet, and (3) if the entity is a corp and the card is in the name of the owner but is mixed use, I prefer not to put the card on the balance sheet, opting for recording the business transactions from the card usage as a transaction between the owner and the corporation. My assumption was always that the card was in the name of the owner, and I was approaching the question from that assumption. That is the problem with quick answers to questions, we sometimes think that what we think we said(or typed) is what will be understood. Tom Lodi, CA

Deb, Is this a sole proprietor? If so, are there any other expenses on that card? If the card has no other charges that are personal to the owner, set it up as a credit card in QB, and just post the payments and interest charges to it . If the card is being used for mixed purposes (business and personal) it will make the interest calculation manual at tax time, but I would still set it up as a business credit card, post all the transactions, and show the personal ones as owner distributions. If it is a corporation and there is personal uses, I would shy away from the credit card showing up on the balance sheet and record a loan from the shareholder and document it. Have the corp pay the shareholder and the shareholder pay the credit card. My 2 cents. Tom Lodi, CA

Bonnie, Good for you. Nobody likes insurance companies, so laying the blame at their feet is a good move. I too am sick of the government bailing out people who make stupid mistakes. And then you see the President going out and proposing to bail these people out at taxpayer expense. 2 years ago, I could have "qualified" for and gotten a loan on a 600,000 home. I could have put no money down and made teaser interest only payments for 2 years. If I had known the government was going to bail me out when the rates reset and I was over my head, I would have done it. Instead, stupid me, I bought what I could afford with 20% down and a traditional mortgage. Now the guy down the street in the better home with a reckless streak is going to get ahead. Makes you want to just take all the cash from all the credit card offers you get in the mail every day and head to Mexico for a margarita. Responsibility is not paying off in America today. Tom Lodi, CA

I feel for you. I have a client that I went down this road with. My advice is DON'T DO IT. You will get request after request to rewrite the letter to the broker's standards. I may now have lost my client because the last time the broker called and asked for a letter, I would not change the wording and she hung up on me. They will try to tell you that it is just a formality that the lender is asking for verification that the return was processed by you. Then they will try to get you to make statements about items in the return, especially income, assets, and confirmation of business ownership. They will try to dictate the letter for you. BTW, the letter I have given this client's broker says 2 things very clearly: 1. I make no representations about the information in the return(s), as it is the taxpayers representation to me and I do not have any knowledge of the accuracy of the information the client gives me. 2. The letter is not intended to be used as a factor in denying or granting of credit, and I expressly forbid it use in that manner. These two items usually get the second call from the broker, trying to get them changed. It is hard when you need clients, but they put you in this position to help them out. I have resigned myself to losing this client (he has not called after the broker hung up), but I am not going to get sucked into his problems with his mortgages. It ain't my risk, and I ain't taking it on. Good Luck Tom Lodi, CA

I am looking forward to that game tonight. Sorry, I am rooting for the upset. I want to see if LSU is really that good. They lost a lot of talent. I never bet on a highly ranked team with a new starting quarterback. Enjoy the game. Tom Lodi, CA

Not playing the "KittyKats" again. That was a once in a lifetime thing. No way LSU travels to the DogHouse. However, we do get Kansas State at home this year. Playing on the road at Texas A&M and Oregon. It is only 3 days till kickoff. Hope springs eternal in Bulldog Land. Good luck to your Tigers. Tom Lodi, CA

Assuming the 2003 return was timely filed (april 15th or whatever the date was in 2004), taxes were paid, and there was no fraud or gross understatement of income, the statute would have run on April 15, 2007. You should see the same result as the 2002 1040X. But then, this is the IRS we are talking about, and they just might go tilt on this one. ;0) BTW, this is why I don't normally go beyond 3 years back with a new client. I know it is not right, but I ask very vauge questions about anything prior to 3 years old. I don't want to get sucked into a multiyear mess. Tom Lodi, CA

It sounds correct to me. 2002 was a closed year when the 1040X was filed in 2007. The IRS is barred by statute from assessing new taxes. The taxpayer's statute is two years to file a claim for refund from the date the "tax" was paid to the IRS. They are inviting the taxpayer to claim the "overpaid tax" on the 2002 that they don't owe. Tom Lodi, CA