imjulier

Marilyn- Is that your license plate? Funny! Julie

Linda and Buddy- Individual taxpayers are generally cash basis so since you don't know if the option to buy will be exercised, I'd think its taxable this year. If they have a business that they operate their rental through and operate on the accrual basis, that would be different. Problem is that this year will show huge profit and taxes due but next year will show huge loss which may or may not be deductible when you think about the loss limitations for rental properties (see 25,000 on form 8582). If sale of property goes through, that would be OK. Bottom line is, I think its taxable this year but it will make both this year and next look screwy. Julie

Thanks Margaret- That makes sense that it is treated like health insurance....for some reason, that didn't cross my mind at all. Julie

Can a self-employed person deduct their own long-term care premiums on Sch C? I know that my client's deductible limt is $3,180 based on age but can this be taken on Sch C? I can't seem to find this anywhere. Thanks, Julie

I, Like Kea, took this to mean that the taxpayer would have to sign before I e-file the extension. While this seems reasonable, it doesn't seem practical and I will take KC's approach. I agree that its odd since the paper form does not require a signature. Julie

Thanks all for your input. I'm going to not claim the child since he doesn't meet the residency requirement and this is not a temporary absence. At this point, its unclear when the child may be released. Julie

I was looking at the rules for Qualifying child because he does qualify as their qualifying child based on relationship, age, support (this rule is different than if he was a qualifying relative), and joint return. The one I think he might not meet is the residency requirement. Julie

Adopted or foster child for which client has custody was incarcerated for all of 2009. Child meets all requirements to be claimed as dependent except for residency. Can incarceration be considered an exception for temporary absences for this requirement? I'm not finding it but wanted to see what this board thought. Thanks for any info. Julie

Yes, 1120S would need to be amended for this correction....not the 1040. Since you didn't prepare the s corp all you can do is tell him to amend the scorp and then amend his 1040 accordingly unless an extension is filed to get the 1040 right on the first try. I wonder why the preparer let this happen? Are you sure its not a solo 401K which would allow more contributions? Julie

Jainen- I did see that part which made me question how I was thinking about filing for this client. Thanks to all who responded with info. Julie

Divorced parents. Mom can't claim child as dependent this year due to divorce decree. Child lived with Mom greater than 1/2 the year. Mom can't claim HOH without claiming child as dependent, can she? Does this mean that she'll be HOH every other year (in the years she can claim child) and Single in the year's she can't? This is how I'm reading the Kleinrock Express Answers guidance or is there something I'm missing? Thanks, Julie

Have clients whose son filed and claimed himself on his return. He qualifies as dependent of parents. When I look at the benefits of parent's claiming him vs. claiming himself, tax savings would be about $1500 due to benefits of parents claiming exemption and getting to take advantage of the refundable portion of Am. Opp. Educ. credit. Question is, can son's return be amended so he doesn't claim himself? I believe so but anyone know anything different? Also, what does timing of this need to be? Amend son's first and get it processed, file extension for parents to wait for processing of son's return, and then file parents by Oct. 15th? Any input is appreciated. Thanks, Julie

I thought I saw a post about this recently on this board but I couldn't find it through the search. If anyone knows, you can just point me to that post. I have a client who received a 1099 misc from public service company because they installed electric lines on the property she owns. I think its just property with no building on it. I'm trying to figure out what to do with it? I thought I saw a post which said either to claim as income or don't claim as income and decrease basis in property. Either way, trying to figure out what shcedule to put it on....Sch E? Sch C? Thanks for input. Julie

Wierd- It was accepted even though last year it was e-filed with the hyphenated last name....the first part totally different from the name I used this year. Indicates to me that the matching isn't working. But, this client can be a little confused, so maybe previous tax preparer adjusted the name just for e-filing purposes after providing hard-copy to the client or maybe I misunderstood and it has been paper filed all along. Thanks for your responses. Julie

Does the IRS match SSN and name when e-filed? I have a client who is panicked becasue she has always filed with a hyphenated last name and I completed the return with her last name only....not the hyphenated name. It was accepted although I told her it would probably be rejected and then I could change it. It was accepted. What gives as I thought this was a matching which occurred upon e-filing? Thanks, Julie

Use the 104PN (part year or non-resident) which feeds the 104. The 104PN is how you allocate income to Colorado. Its super easy so don't over-think it. Julie

I do tax prep, bookkeeping, and some contract work for much larger corporations after tax season is over. I've always been an LLC and stayed that way for many years but last year elected s corp treatment. I just wanted my business and personal to be totally seperate. Good luck! Julie

It doesn't seem right....severance should have been included in the W-2. But getting the company to change it isn't likely either. They were probably trying to avoid paying the employment taxes themselves which will make your client liable for it.

How about advising them not to do the gift at all? That passes on property at zero basis but if it gets inherited, depending on the rules in whatever year, maybe stup up in basis will apply. If they insist though, maybe you can use the "converted to personal use" option which will not show the disposition on the tax return which I think would be accuarte in this situation. Another thought, gifting will also pass on taxable income that may be taxed to the parents at a lower rate....unless you know the property isn't profitable. Julie

Deb- Sounds like they will elect to be treated as an s-corp? Or as a partnership? I would advise them to have an operating agreement drawn up by an attorney since we don't know what "A's" motive is. Also, it may be that your client doesn't have enough information to enter into this kind of arrangement. The 60%, 20%, 20% ownership definitely raises some red flags but it depends on how much money will be earned in the business and will your client be paid less as a contractor than they are as an employee. Also, liability issues could arise from contractor treatment. There are a lot of issues in what you are describing and the best advice to give your client is to have a formal agreement and thorough understanding of what their income will be under this arrangement before deciding if it is something they want to do. My 2 cents. Julie

Hey all- Just looking for some input from other preparers. What do you do with home office of single shareholder S-corps? In the past, I have not reported the home office because this would require claiming the rent expense on the s-corp return and claiming the rental income on the schedule E of the shareholder off-set by some utilities/operations expenses. The only expense which doesn't get deducted if you don't even claim the home office is a portion of the utilities or other operating expenses. Any thoughts as to how this should actually be handled? Julie

That sounds right to me... Julie

I agree.....shortest turn-around I saw was 3 days after federal acceptance but I think that was amtter of timing more than naything. It seems CO must only be a processed once/week. Don't know why. I haven't heard anything. Julie

Good morning- Client made non-deductible contribution to a traditional IRA of $6,000. Client is also taking normal distributions from a couple annuities that are marked as being "IRA/SEP/Simple" on form 1099R. Forms 1099R for these are $6,126. I thought form 8606 would simply say that the $6,000 of non-deductible contribution occurred to establish the basis in the IRA going forward. But, if you actually follow form 8606, because amounts were distributed, a portion of the distributions come up as non-taxable. The distributions were not rolled-over. I can obviously just follow the form and come up with an answer but would like to understand the logic. Is this correct? Why would some of the distribution become non-taxable? What is the basis in the iRA going forward....the $6,000 non-deductible contribtion or the difference between the $6,000 and the amount of the non-taxable distribution of about $3,000 (leaving $3,000 basis)? I just haven't had this happen before because usually people don't contribute to a traditional unless it will be deductible. Thanks for any lightbulbs your responses might produce. Julie

Thanks all for the info. I'm working on the client who lives in a community property state but there is no state income tax (WA). I just have no experience with community property states so didn't know I would have a problem e-filing the return. And the spouse wants nothing to do with me so I can't even tell them if MFJ or MFS is better. I'm going to provide hardcopy for the client to mail return.... Julie