BulldogTom

Assuming the mutual fund is not covered because it was purchased before the brokerage holding the fund was required to track and report on the 1099B - I have the client get the records from the mutual fund company.   If they can't (won't)  then I get the client to tell me the date they think they made the first purchase, look up the price on that date and use it as basis.   Client loses some basis, but that is the cost of bad record keeping.

However, when it comes to mutual funds, I have never run into this issue.   It is always with inherited stock that I have this problem.

Tom
Longview, TX

When does IRS go down for MeF updates?   Don't they usually do that like the middle of Nov?   Is this extension going to run into it?

Tom
Longview, TX

The never ending tax season keeps on going...   IRS extended and CA complies with the extended due date of Nov 16th for taxpayers in 55 of the state's 58 counties affected by the 2022-2023 winter storms.

You know, my post about my poor client?   They just got a small lifeline.  Today I am not mad about the IRS changing the rules at the last minute (even though it is stupid as hell to wait for the last day of an already extended tax season to announce the change).

Tom
Longview, TX

Judy is going to delete this, but I can't help myself.....

So you don't need anything to prove who you are to vote, but you need to authenticate with ID.me to pay your taxes?  Doesn't requiring people to prove who they are before they exercise their right to pay taxes somehow make the taxpayers disenfranchised?

How screwed up is this?

Tom
Longview, TX

18 minutes ago, cbslee said:

If it was my client I would just show the adjusted CF on the 2022 1040.

I agree with cbslee.   However, if the client is a PITA....extra fee for amending the personal.

Tom
Longview, TX

@mircpa   You are probably correct.   This is what I found. (I was not going to do anymore research for the next 2 weeks, and here I go looking up CA R&T code sections).   The attachment to the business sited in CA seems to change the general rule that Capital Gains from the sale of stock are not taxable to non-residents.   Since an S corp distribution in excess of basis is a return of capital, the Cap Gain would be a CA sourced item of income.  Bolding below is mine.

Tom
Longview, CA

Cal. Code Regs. Tit. 18, § 17952 - * Income from Intangible Personal Property

State Regulations

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(a) Income of nonresidents from rentals or royalties for the use of, or for the privilege of using in this State, patents, copyrights, secret processes and formulas, good will, trade-marks, trade brands, franchises, and other like property is taxable, if such intangible property has a business situs in this State within the meaning of (c) below.

(b) Income of nonresidents from intangible personal property such as shares of stock in corporations, bonds, notes, bank deposits and other indebtedness is taxable as income from sources within this State only if the property has a situs for taxation in this State, except that if a nonresident buys or sells stock, bonds, and other such property in California, or places orders with brokers in California to buy or sell such property, so regularly, systematically and continuously as to constitute doing business in this State, the profit or gain derived from such activity is taxable as income from a business carried on here, irrespective of the situs of the property for taxation.

(c) Intangible personal property has a business situs in this State if it is employed as capital in this State or the possession and control of the property has been localized in connection with a business, trade or profession in this State so that its substantial use and value attach to and become an asset of the business, trade or profession in this State. For example, if a nonresident pledges stocks, bonds or other intangible personal property in California as security for the payment of indebtedness, taxes, etc., incurred in connection with a business in this State, the property has a business situs here. Again, if a nonresident maintains a branch office here and a bank account on which the agent in charge of the branch office may draw for the payment of expenses in connection with the activities in this State, the bank account has a business situs here.

If intangible personal property of a nonresident has acquired a business situs here, the entire income from the property including gains from the sale thereof, regardless of where the sale is consummated, is income from sources within this State, taxable to the nonresident.

2 minutes ago, kathyc2 said:

Healthcare.gov was a disaster the first year.  Since then it runs very smoothly.  

It looks like IRS learned from that and is limiting use to work out the bugs.  

I hope you are right.   That was the website I was thinking of when I posted my comment.

Tom
Longview, TX

32 minutes ago, kathyc2 said:

Why do people think this will be more prone to fraud than the plethora of online software already available??

because the government is running it...their track record on putting up websites that work is not great.

Tom
Longview, TX

The client is a couple.   He had a stroke 5 years ago.   She had to stay at home to care for him.   They have been living off savings and government support.   The amount they have been living on is very little.   She had to take money from her retirement account early to cover living expenses as her last resort.  He is recovering but she is struggling to find work after a 5 year layoff from the workforce.   These are not people who have made bad decisions, they have hit hard times.   I know when I see clients feeding me BS about their spending habits.  This couple is not that.  I have known them for nearly 2 decades.   Poverty sucks, especially when you live in a very high cost state.

Tom
Longview, TX

13 hours ago, mircpa said:

If this business is based in CA then it CA source K1 income & capital gain regardless of where shareholder lives.

I respectfully disagree.   If I buy stock in a company that only does business in CA, and after a couple years I sell that stock for a gain, and I am not a resident of CA when I sell the stock, I put that gain on my home state return.   I don't think the stock is held in CA, I think it is held in OK by the owner of the stock and the gain goes to the OK return.  

Tom
Longview, TX

My biggest question is "Will this system process EITC?"   If so, what proof of eligibility will the site require?   I can just see this as a scam in the making, just like the ERC debacle.  

I am not mad at the concept, I think there is merit to what they are trying to accomplish.   For a single W2 earner with a standard deduction I think this is a good solution.   But, if the site will process refundable credits, I worry that the IRS will not be able to handle the volume of claims.

Count me as skeptical.   I just see politicians making it easier and easier for EITC fraud on this site over time.

Tom
Longview, TX 

Long time client, hit some tough times.   Pulled some money out of IRA to make ends meet.   Did not have the money to pay me for the return and does not have the money to pay the taxes.   We waived our fee to help them out, but they still don't want to file because they can't pay.  We did not get their 8879s last night.

What do you do with a client like this?   You can only suggest....they have to sign the return to file.   Breaks my heart but I don't know how to handle.   I feel for them, but I think I did all I can do (short of paying their taxes.

Tom

I think you are overthinking it Deb.   It is just a Cap Gain.   If the TP sold shares of his stock in his S Corp for a Gain, would you put it on his CA NR?   I don't think so, so I think Drake is doing this correctly.

Just thinking out loud....I did not research this (and I am not doing any research for a couple weeks, I am taking a break).

Tom
Longview, TX

17 hours ago, Max W said:

CPWROS (Community Property With Right Of Survivorship) is what is required in CA for for full stepped up basis.

Prior to 2001, it was Joint Tenancy WROS.

Max makes an important point.   Even if they were Domiciled in CA, they needed to title the property purchase properly.   I just assumed that everyone who is domiciled in CA would title their joint property as CPWROS.

Tom
Longview, TX

I don't think so.   But it is possible.   

Domicile at the time of purchase is the controlling factor (at least that is how I understand it).  If your couple were both domiciled in CA at the time they made the purchase of the property, then the property would be community property and carry that designation even if they subsequently moved to a separate property state.   If they were domiciled in NY (not a community property state) when the purchase was made, then the step up would only be for the half of the property owned by the decedent spouse and the living spouse would continue with their own basis.

Double check this because I am commenting from memory and not research.

Tom
Longview, TX

We have had this client for many years.  They are friends so I don't fire them...but I should...but my wife won't let me...so it is not going to happen.   Never listen to my advice and warnings.   Whatever....their personal problems become their tax problems, I can only tell them what they should do.   

We did their bookkeeping for several years for their SP business plus their personal tax return.  At the beginning of 2022 they stopped sending their info and stopped answering our texts and emails.   OK, so maybe they found someone local?   Kinda happy about that because their issues put a strain on our relationship.   

Last night, my wife gets a text "We put everything in the mail today.   Let us know if you have any questions."  On Oct 3rd they sent via US Postal Service a full year of bookkeeping records to get done so the tax return can be completed by the 15th....

Not gonna happen.  I can't fire them (because my wife...see above) but I can raise the price!

Tom
Longview, TX

I don't like divorcing couples.   I try to run them off by telling them that I will not do their returns unless they can work together to get the best result for their overall tax situation.   I tell them they need to agree which checking account the refund will go to (if there is one) and who is writing the check to pay the taxes if there is a balance due.   I promise them that if they fight in my office I will hand all their documents back to them and not complete the return.   So far it has worked.   But I may just have been lucky.  It is a conflict of interest trap to do MFJ for divorcing couples.  It just can't turn out right.

@GraceNY My first blush take is the estranged spouse is angling for an argument in court that the other spouse makes more and therefore the halves should be bigger.   I would run from it.   Hand them back their docs and say "sorry, I cannot help at this time".  Send back a certified letter the the estranged spouse terminating the engagement, and CC the attorney.

Tom
Longview, TX

3 hours ago, DANRVAN said:

I thing an abatement is possible and they should be informed of that.

@DANRVANIs first time abatement possible for Corps?   For some reason I thought it was for 1040 returns only.   Don't know why that is stuck in my brain that way.   Something about businesses being held to a higher standard....

Tom 
Longview, TX

A lot of the stories are biased one way or another, so I am not going to post a link.   But you can google the story.   It is all over the web.

IRS Consultant illegally downloaded decades of tax returns of the nations wealthiest taxpayers, including a "public official" widely believed to be former President Trump, and leaked the information to news outlets, most notably the New York Times.

He faces up to five years in prison if convicted.

***warning - rant coming***  I HOPE THEY CONVICT THE JERK AND MAKE HIM SERVE THE WHOLE 5 YEARS WITHOUT A CHANCE OF PAROLE.  I wish Congress would pass a law that says anyone who distributes taxpayer information without written (not click through T&Cs on a website) agreement of the taxpayer should face the same 5 years.   ***rant over***

Tom
Longview, TX 

28 minutes ago, Gail in Virginia said:

I don't know, Tom.  I thought that had to be done on a timely filed return which this is not.  It should have been filed by September 15.  

Also, I thought that the automatic forgiveness was if the return was filed in time for the partners to file on time.  Neither partner got an extension because they both filed based on their W2 rather than after the partnership return.  I did point out that if they ever start another business, they might was to talk to a tax advisor before they begin instead of after they mess it up.  

@Gail in VirginiaTake a look at Rev Proc 2013-30 for the late filing of the 8832 and the late S election.   I think you have 3 years to file this...but check it out yourself, I only skimmed it.  It may be your "magic bullet" to pull dumb and dumber out of this mess.

There will most likely be a late filing penalty, and I don't think you can get them out of that (and frankly, I wouldn't try, they need to pay the price for their actions)

Tom
Longview, TX

Can they file a late 8832 to claim the Corp status and then make a late S election?   Normally an automatic approval from the IRS from what I understand.  And since the IRS does not have a 1065 on file, since this is the first year filing, they should be good to go if the 8832 is included with the 1120S.

Just a thought.

Tom
Longview, TX

She can be a dependent qualifying as a full time student until she turns 24, provided the rest of the dependency requirements are met.   The mom can get AOC for 4 years if daughter is he dependent.   LLC is available for any years in which AOC is not claimed.

Tom
Longview, CA

@kathyc2 CA uses the phase "CA Adjusted Gross Income" and it throws a lot of people off.  What they should say is "Federal AGI recalculated under CA laws as if you were a CA resident."  But CA being CA, they do their own thing...

Tom
Longview, TX 

CA NR filing requirements look at your AGI from all sources within and without the state to determine the income threshold.   Take a look at the 540NR booklet on FTB website for detailed information.

Tom
Longview, CA

14 hours ago, DANRVAN said:

I think you are referring to a crop share lease which is not a partnership.

I have heard of sharecropping, but I thought that was (and I don't mean this to be political but historical) how landowners after the civil war pretty much kept former slaves impoverished.   Is this still a practice?   Excuse my ignorance and please don't take offense.

Tom
Longview, TX