Lion EA

One of the AI proponents on TaxTwitter said that AI will not replace tax preparers; however, tax preparers who use AI will replace tax preparers who do not. So far, I've only used AI (ChatGPT, an earlier version) to write to letters at the start of this tax season, one to announce/accept my price increase and one to fire clients. I look forward to having my tax software, tax research, etc., build in AI capabilities that I can use seamlessly. I do NOT want to be nor have the skill or time to be the technical person who creates new AI uses in my business. I guess that means price increases from my vendors. Hopefully in line with productivity increases.

Wow!

Not sure I've got it, yet !! So H was a partner until that last day, so they both get Final K1's with their shares. BS is what BS is on that date, NOT zeroed out? H's ending capital/basis/etc. is now zero on the last day? And W's is now the combo? Or does it even matter now that it'll be a SMLLC on their joint 1040 for the last 4 months of the year?

It is an LLC, H&W only MMLLC for short year, 50/50 so "dissolved" as of the date of the 50% change, Form 1065 for many years, but now a SMLLC. OK, I think I can do this. Thank you, Kathy and CBSLEE. Very helpful. (My only other partnership was my own son/wife who are divorcing, so I told son-to-be-ex-DIL to take the returns elsewhere. I will have no 2023 partnerships. Two S-corporations, but they both have bookkeepers. And, a few trusts, but they are dwindling, also.)

H&W 1065. H is slipping into early dementia. Lawyer has him sign over his 50% partnership interest to W while he's still lucid enough to make financial decisions. Gift. No money changes hands. Last day of August 2022. Filed extension to 15 May 2023. Final 1065. Schedules L & M are my weak points anyway, but wife keeps good records. Balance sheet goes to zeros, right? Distribute to H&W 50/50? Or 50% goes from H to W within 1065 and distribution is 100% to W? Or, something else entirely? Does it matter, since they file MFJ anyway? Never dissolved a partnership before. (Trying to get my few biz returns to go elsewhere, but I do this whole family's personal returns, so need to get this done.) What do I need to know? Service biz, ran a job fair (performers & tech staff to meet summer stock theater casting directors) -- which died out during Covid -- with a "subscription" part that continued. Owned a portable keyboard that's depreciated and some cash in bank. CT-based, so PTET mandatory. All help gratefully appreciated.

The IRS's Audit Techniques Guide states on page 14: https://www.irs.gov/pub/irs-utl/ministers.pdf "Ministers often pay a small annual renewal fee to maintain their credentials, which constitutes a deductible expense. However, ministers' contributions to the church are not deductible as business expenses. They may argue that they are expected to donate generously to the church as part of their employment. This is not sufficient to convert charitable contributions to business expenses. The distinction is that charitable contributions are given to a qualifying organization (such as a church) for the furtherance of its charitable activities. Dues, on the other hand, are usually paid with the expectation that a financial benefit will result to the individual, as in a realtor's multi-list dues or an electrician's union dues. A minister's salary and benefits are not likely to directly depend on the donations made to the church. They may still be deducted as contributions on Schedule A but may not be used as a business expense to reduce self employment tax."

https://www.clergyfinancial.com/are-mandatory-tithes-a-deductible-business-expense/

I don't form companies for clients. I do see preparers talk about doing that on message boards. I also do NOT want to do this filing, so hope the publicity from now through 01/01/2024 talks about "company owners" filing. Clients will still come to us (if they even know about this) with their tax information. I think I'll give them the FinCEN link. What we won't know about until the following tax season are the new companies that form and have a 30-day deadline to register their owners, etc., on FinCEN. Well, more of my clients call me before/when they make financial moves each year, so one more thing to advise them about. This was in my update classes in December 2022/January 2023. I hope to hear a lot more this year, best practices stuff like "give then the FinCEN link" or whatever. I don't expect the nitty gritty of registering to be final until it actually opens 01/01/2024. I'm seeing a larger price increase for my businesses. Does this include Schedules C, E, and F? Form 4835?

The Corporate Transparency Act was in my update classes last December. https://www.fincen.gov/boi Also, if you have been forming companies with the Secretary of State for your clients, you might want to revisit that decision before 2024: 11. Who is a company applicant of a reporting company? There can be up to two individuals who qualify as company applicants — the individual who directly files the document that creates, or first registers, the reporting company; and the individual that is primarily responsible for directing or controlling the filing of the relevant document. No reporting company will have more than two company applicants. If only one person was involved in filing the relevant document, then only that person should be reported as a company applicant. Only reporting companies formed or registered on or after January 1, 2024, will have to report their company applicants. Companies created or registered before January 1, 2024, do not have to report their company applicants. The following examples illustrate how to identify company applicants in common company creation or registration scenarios. Example 1: Individual A is creating a new company. Individual A prepares the necessary documents to create the company and files them with the relevant state or Tribal office, either in person or using a self-service online portal. No one else is involved in preparing, directing, or making the filing. Individual A is a company applicant because Individual A directly filed the document that created the company. Because Individual A is the only person involved in the filing, Individual A is the only company applicant. State or Tribal employees who receive and process the company creation or formation documents should not be reported as company applicants. Example 2: Individual A is creating a company. Individual A prepares the necessary documents to create the company and directs Individual B to file the documents with the relevant state or Tribal office. Individual B then directly files the documents that create the company. Individuals A and B are both company applicants—Individual B directly filed the documents, and Individual A was primarily responsible for directing or controlling the filing. Individual B could, for example, be Individual A’s spouse, business partner, attorney, or accountant; in all cases, Individuals A and B are both company applicants in this scenario.

My tech guy specializes in tax prep offices (and lawyers), so I'm comfortable with my current security. (I have him on a monthly retainer.) The above date is not until October 2025, so I don't feel an urgent need to update my OS or buy a new computer with a new OS in 2023. But, I stay in touch with him.

Really good point about Office. I'm perfectly happy with my old MS Office Home & Business 2019. I'm a sole proprietor and spend money on tax prep, but the peripherals like Office I don't use often enough to renew every year or go to their new subscription/monthly plan. Boo. Well, I'll be talking to my outside tech guy about my OS 10 desktop and how long I can keep it as my primary biz computer, how long it's safe for tax prep, anyway.

Are you giving your confidential information to a company in Asia?

Yes, an accountable expense reimbursement plan has always been useful for employee reimbursements, because even before TCJA unreimbursed employee biz expenses on Sch A were not a help to non-itemizers or to those where AGI limited their other credits/deductions and no help for most states. After TCJA, it's about the only way for an employee/owner of an S- or C-corp to be made whole. The corp gets to deduct reimbursements made to employees per their plan; the employees do NOT have added income. Been using accountable plans for my clients since decades ago at HRB. A snippet from TTB: "Author’s Comment: An S corporation with an accountable plan in place can reimburse shareholder employees for authorized expenses. Under a properly structured plan, the reimbursements will be deductible for the corporation and excluded from the shareholder employee’s income. See Accountable/Nonaccountable Plans, page 8-11, 1040 Edition/Deluxe Edition."

Haven't amended in a while (have one upcoming where a bio parent claimed child that lived with my client all year; placed by a court as a foster child with my client) so don't remember, but I think I've been able to type "freestyle" in ProSystem fx. I've had amendments that changed several lines, but all because of one item, one income change or deduction change, that then changed other lines. So my explanation has been one descriptive item with a list of the lines it changed.

I don't use ATX, but could you type out your full statement in Word, save as a .pdf, and attach to each Form 1040-X?. Even if you will be changing one or two amounts on each statement, it should be faster to edit the .doc then save as .pdf and attach to e-file. But wait for one of the ATX gurus to give you the best work-around...

Have client talk with her bank.

Just prepared a return for a single gal who bought a fraction of a Bitcoin a couple years ago when it was over $43,000. If it'd been a whole Bitcoin and she sold it after two years, she'd have had a loss of $15,500 per your prices and only $27,500 in US$ to put a down payment on a rental property. She wouldn't be able to buy a rental or two, not even one here in Fairfield County. Would you have enough in DC?! If she'd bought a rental property a couple years ago with $43,000 down, would she be in a better or worse situation now two years later? Be very careful with digital assets! If your ultimate goal is to own a couple rental properties, do your planning now. You can probably think of several pathways to ownership.

Corporations also are not good entities to own real estate.

Here's what CCH emailed me 12 April 2023: CCH Software News - Individual, Partnership, Corporation, S Corporation, Fiduciary, Exempt Organization (990-T) (1040/1065/1120/1120S/1041/990) Rejected Returns/Extensions If the IRS rejects any of your returns or extensions, you are given an additional amount of time to correct and resubmit as follows: Individual - A corrected return or extension must be resubmitted no later than midnight (CDT) on Sunday, April 23, 2023, to be considered timely filed. Fiduciary, Corporation, Exempt Organization 990-T (401(a) and Other Trust) - A corrected extension must be submitted no later than midnight (CDT), five calendar days from the date of the original rejection. A corrected return must be retransmitted no later than midnight (CDT), 10 calendar days from the date of the original rejection to be considered timely filed. For Partnership returns, the following states do not conform to the IRS 10-day perfection period based on information received: Connecticut rejected returns and extensions - Connecticut allows five business days to resubmit rejected returns and extensions and obtain approval. Maryland and North Carolina rejected returns - These states allow five calendar days to resubmit rejected returns and obtain approval. New York rejected returns and extensions - New York allows seven calendar days to resubmit rejected returns and extensions and obtain approval. Pennsylvania Form PA-20S/65 and Virginia rejected returns - These states have no defined perfection period. They must be filed and approved by the due date to be considered timely. Tennessee rejected returns and extensions - Tennessee does not have a defined perfection period. They must be filed and approved by the due date to be considered timely. For Corporation and S Corporation returns, the following states do not conform to the IRS 10-day perfection period based on information received: Alaska and Alaska Consolidated rejected returns - Alaska does not have a defined perfection period for rejected returns. They must be filed and approved by the due date to be considered timely. Connecticut rejected returns and extensions - Connecticut allows five business days to resubmit rejected returns and extensions and obtain approval. Virginia and West Virginia rejected returns - These states do not have a defined perfection period for rejected returns. They must be filed and approved by the due date to be considered timely. Maryland, North Carolina, and Vermont rejected returns - These states allow five calendar days to resubmit rejected returns and obtain approval. New York rejected returns and extensions - New York allows seven calendar days to resubmit rejected returns and extensions and obtain approval. Pennsylvania rejected returns - Pennsylvania Corporation Form RCT-101 and S Corporation Form PA-20S/65 have no perfection period for rejected returns. Returns must be filed and approved by the due date to be considered timely filed. Tennessee rejected returns and extensions - Tennessee does not have a defined perfection period. Returns must be filed and approved by the due date to be considered timely. Paper Returns If the IRS rejects any of your returns or extensions, the return does not fall into an e-file mandate, and you choose to file a paper return or extension, then the deadlines are as follows: Individual and Fiduciary - A paper return or extension must be filed by the latter of the following: the due date of the return or 10 calendar days after the date the electronic portion was rejected. For example, a return rejected on Tuesday, April 18, 2023, would be due Friday, April 28, 2023, if filing by paper. Corporation and Exempt Organization 990-T(401(a) and Other Trust) - The paper return must be postmarked by the latter of the following: the due date of the return (including extensions) or 10 calendar days after the date the IRS last gave notification that the return was rejected. Tools and Resources to Help You During Tax Season Review the My Account FAQs to learn how our self-service portal can handle your account support needs. Watch an on-demand Software Support Office Hours webinar and hear directly from subject matter experts. Check out our library of Tax Talks LIVE webinars, with more topics added throughout the year. Find answers in our Knowledge Base, or visit the Wolters Kluwer Tax & Accounting Community forums to connect with peers. Contact Us online or chat with our virtual agent.

For the federal, your first method. And for states that will accept an e-filed extension with an unpaid balance due, the first method. Some states I file will not accept an e-filed extension with a balance due and no payment. If the client refuses to pay, I have made the extension show a zero balance due and warned the client of potential issues. Usually, for clients with balances due, I give them the links and make them e-file/e-pay or not their own extensions. And, when I have little or no info from the clients yet (and for anyone else this afternoon!) the extensions have all zeros. And the clients have warnings from me. Some will not be clients next season.

I am guessing, but an extension payment is made by 18 April 2023, so an installment agreement that extends beyond that date would NOT be an extension payment. Pay the most you can today. When filing the return, with final amounts, set up an installment agreement. You also can make "return payments" between now and then to keep paying down your expected balance due.

https://www.usps.com/manage/informed-delivery.htm

Most of the ones that owe, I made go to DirectPay and myconneCT and other state websites to pay/file their own extensions. It's faster than collecting signed 8878s. Those that probably owe but refuse to pay now, I put the tax liability I project, any withholding, balance due, and $0 payment on the 4868. However, CT won't accept a balance due extension without a payment, so I zero it out if I can't convince the client to pay, because I also don't have time to get them the forms that they'll end up not filing anyway. I do have a few that I upload the forms, and they DO mail them with payments. Really wish for automatic extensions to file. Even with teaching our clients to pay in April, we'd still save a LOT of time not generating more paperwork and more e-files.

I looked a couple times, didn't think to bookmark it or save it in any way, and have never heard from them. I wished I would hear from them, because I had to really search hard to get back to it. My first time returning, I saw the two letters (price increase, firing) it wrote for me. But the next time, I couldn't get back to that same place! After tax season. Besides, now there's something like ChatGPT4 and our search engines will be using it, and hopefully out tax software...

I've heard that it can come up during an audit, that an extension would be invalidated then if filed with zero owed or an unreasonable number. I don't know if one instance would move an auditor to then open a "preparer project" to look for more zero extensions from that same preparer. I'm filing more than I'd like to this weekend. I think I've heard back from everyone who's going to make a payment. But many more clients have asked for extensions without further response to my queries. Their numbers are not on my ceiling. I figure it's like basis -- if they didn't give me what I need, then it's zero.