BulldogTom

I was in an Update Webinar yesterday and they discussed FinCen Identifiers. Apparently, you can shift the burden of updating information off of the organization and onto the individual if the individual gets a FinCen Identifier. 2 uses of this Identifier. 1. Person has multiple organizations that they need to be reported for. Individual gets an Identifier from Fincen and only has to give the number to each entity. 2. Entity does not want to keep up with the changes of all individuals. Requires each individual to get an Identifier and the individuals are required to update their personal information when it changes and the entity only reports changes in individuals who are added or removed from the company. The presenter thought that there would be a movement to make all persons agree to get an identifier from FinCen so the responsibility for updates shifts from the entity to the individual (as well as the fines for non-compliance). @JohnH you may want to explore this idea with your HOA. Tom Longview, TX

Is he still rude? I feel like it is never a good idea to ignore a client request, it just feels yukky to me to ghost a former client. Be professional when you decline or accept the engagement. Why is he coming to you and not his current preparer? Ask him. If the answer is something like "I realize I made a mistake in how I treated you and I would like to resume our relationship" you will have a client for life. And he won't be rude anymore. If his answer is rude, politely decline. Tom Longview, TX

I would wait. Watch for a 592B withholding form in the sale documents. CA withholds on out of state sellers of property in CA. If CA withheld and the trustee does not know to to give you that doc, you may be leaving a refund from CA on the table. The 592s are generally given at closing and not mailed the next year. Check the TIN on the 592B because it may be the SS# of the decedent and not the EIN of the trust. Look at the sales docs if you can and see if there was withholding to the state. Tom Longview, TX

If only it was that easy for CA. There will be a 1099S for the sale of the home with $800K on it. CA FTB does not know what the basis is on the property. Most likely you will be talking to them at some point if you don't file a return. I would file the 1041 and 541 with zero tax liability. You start the statute and take the position that there is no tax due. You have given them the details they need to show no cap gain by filing the Sch D with the return. Hopefully it is all done and your client can move on. IMHO, you can do this now, or you can prove that there is no tax due later, but one way or another you are going to have correspondence with the FTB. Tom Longview, TX

I think she was off the hook until she filed the return for him. If I understand the situation, your client filed her own MFS for 2020. He did not. He died sometime after that. "Someone" told her that the trust required her to file the tax return for him for some unknown reason and she did so as the surviving spouse (not the trustee or executor)? Now she does not want to pay the taxes from the return she signed...and I think that signature on the return makes her the responsible party to get the funds from the spouse's estate to pay the bill to the IRS. Correct my understanding if I got the facts wrong please. Tom Longview, TX

My situation is now resolved. Client was in the process of dividing the marital assets when the CP2000 arrived. He fessed up to taking the distribution and agreed that the tax liability was his and agreed to take less money in the marital asset split in exchange for my client paying the tax bills. It works out a whole lot better this way in my opinion. The returns are now corrected, the IRS and CA are paid and my client does not have to worry if he actually paid the tax bill. We don't have to involve the government in their divorce. Tom Longview, TX

Does not have to or should not? Is it a choice or a prohibition? Tom Longview, TX

That is why Home Office is one of the first things auditors go after. They don't care about the office costs (utilities, interest, etc.), they are trying to get rid of the mileage deduction. Because even if you have perfect mileage logs, if you don't have a place of business to start from, the first and last trip of the day is commuting. Tom Longview, TX

The IRS does not care what the divorce decree says, they have Joint & Several Liability for the tax due and a divorce document does not change that from the IRS point of view. Kathyc2 is correct, the spouse needs to go to her lawyer and get the decree terms enforce, it is not an IRS issue. Tom Longview, TX

The State of CA will want their taxes as well. We could wait for the notice from CA, but then the penalties and interest will continue to build. IMHO it is better to amend the CA return and stop the bleeding. Tom Longview, TX

Timely Question. I just got a CP2000 for a client yesterday for 2022 MFJ. Clients are divorcing. TP apparently took 90K from his retirement plan that SP did not know about. They are still married, but separated since late 2022 when this transaction possibly took place. TP tells SP that he did not take the distributions. 1099Rs tell a different story. I need to amend but they are only talking through lawyers. I am waiting for direction as I cannot amend when only the SP is my client moving forward. I have the same question, can my spouse take Innocent Spouse position on a MFJ return where TP made the transaction and kept the funds for himself? I hope they resolve this with the attorneys. SP is taking the info to her lawyer today. Tom Longview, TX

I think you can take the DOD basis since that is the day the SP acquired the home. I am having an issue with the additional 20K unless it gets reimbursed. Based on the position above, I don't see any chance for §121 exclusion applying. Not commenting on the reimbursement - that is a legal issue. Tom Longview, TX

It would be a whole lot easier if the client swapped checks with the employer in 3 years and "paid off" the loan and the employer "bonused" the employee the same day for the same amount (less PR taxes). Not as tax efficient but cleaner. I assume the desire of both parties is to get this through without PR tax being paid by either party. Just an assumption. If I am right, then the IRS ***could*** reclassify as wages and apply penalties and interest by contending that it is nothing but payment for services rendered by the employee. I wonder what the interest rate is and if the employee is paying interest at a market rate and on a schedule? If so, that makes it more palatable as a real loan. Tom Longview, TX

My knee went to the same school as your knee. Portfolio accounts are different than retirement accounts. I have no issues with annuities as long as they fit the clients situation, but I feel they should stay in the portfolio and out of the IRAs. Tom Longview, TX

I do just the opposite. I find it harder to type in all caps. I think it goes back to my typing class. I can't stop hitting the shift key when I start a sentence or go to the next field, so I get a lower case letter with all caps behind it and it looks really funky and I have to go back and correct. It is a muscle memory thing with me. I don't mind all caps in returns...it is not a big deal for me, I just don't do it for the reason above. Tom Longview, TX

Hope you all had a good season. Tom Longview, TX

I think I would call it start up costs (if the amount is not material) and expense it. If it is a material amount, I would still call it start up costs and amortize them. I think the most conservative approach would be to call those costs part of the purchase price of the business and increase the basis of the fixed asset items that the cost most closely are tied to (Land, Building, Machinery & Equipment, F&F, Goodwill). A CPA will probably correct me, I tend to make entries in the balance sheet that make sense for the business owners and sometimes I don't read up on the FASB pronouncements on how to handle some of these items the way the large firms do. Tom Longview, TX

Very slim details in the OP. I would have a dozen questions before I even thought about an answer. CA has a lot of quirks. There are a lot of things to look out for..... Is the TP a resident or non-resident? Are the LLCs SMLLCs? Tax election of the LLCs if not disregarded? PTE elections? Industry of the businesses? Other Income outside the LLCs from work, investments, rentals? Marital Status? Children or other dependents (CA Child Care Credit)? Income level (CA EITC)? Health Insurance status (CA still has the mandate)? Own or Rent primary residence (renters credit)? Itemized deductions (CA never conformed to 2017 TCJA)? You have asked a big question and with so few details, I don't even know where to start.... Tom Longview, TX

The details are sketchy in the OP, but my question is if Innocent Spouse is the better route. I may be wrong, but I think that if the DR was doing "creative" things with the return and the spouse had no knowledge of that part of the return, the correct relief to request is Innocent. I thought if the debt came before the marriage, you use injured when the IRS tries to take the money from the Joint return. If the debt came during the marriage and is the result of "creative bookkeeping" on the part of one spouse and the other spouse is in the dark, then you use innocent. Am I correct or wrong. Tom Longview, TX

As usual, Judy hit the most important question... Tom Longview, TX

Moss Adams website says 1MM. Another site said 400K. Both stress that it is the building less the land to come up with those numbers. Tom Longview, TX

Does the company have employee theft insurance? If so, the insurance company may have a relationship with a preferred vendor that they can bring in. Tom Longview, TX

Sorry @jklcpa, I got that backwards. I thought you had it all set up in the outside software and were asking about the depreciation setup in the tax software. Assuming that your client is going to tell you by unit what appliances are replaced, which carpets are replaced by unit, etc. I would have Land and Buildings as my first level categories, then the units as sub-categories under each building (building A, unit 1). Then all the components, F&F and improvements listed under each unit entered as the lowest level sub-categories in such a way that I could sort on MACRS Class and Life to get summary totals. Once you have it set up, it should be pretty easy to maintain. I envy you getting to set up the depreciation schedule. I have had many instances where I had to go into a musty spreadsheet and try and figure out how that came out as something else on the tax return. Tom Longview, TX

If you have an outside depreciation schedule in detail, I think I would suggest keeping the tax return as consolidated as possible. I would not list the F&F by unit on the tax return. I would summarize my tax return by MACRS Class & Life, so any of your F&F that are 5 year would be 1 line item, 7 year 1 line item, etc. Same with buildings if there are more than 1. Just one line item summarizing all buildings. Tom Longview, TX

Did not think of that one. It may or may not be feasible but it is worth exploring the idea. Tom Longview, TX