Lion EA

Thanks, Dennis. I should ask my insurer before I make a move.

She had a new house built, sold her old house, so was displaced for awhile with some things in storage. The CPA is a very new neighbor. Of course, he could be a corporate CFO or something not related to personal income taxes at all.

Good point. This is why I have insurance.

Should I mail her back the 2022 info that I will not use with a cover letter to fire her? (I've had the letter ready since she refused to continue to use my portal and eSign while preparing her 2021, finally, after she got me her missing 2021 info in 2023.) I have the USPS flat rate w/tracking envelopes. Or, should I use registered mail? Or, certified mail? Return receipt requested? Or, ask her to pick up her materials, since she dropped them off each year. If I do that, do I need her to sign a list of what she's picking up, because missing documents were the 2021 issue. Then I have a confrontation with her if she won't sign, and I can't keep her tax info. That's what I hope to avoid by waiting her out...

I'm afraid that an immediate firing will lead her, especially if she has that CPA's written or recorded opinion, to filing in small claims court or turning it over to her lawyer (she has a biz so has had legal issues and doesn't hesitate to engage her lawyer). I don't expect to get paid for 2021, but do hope she calms down or is mad at someone else about something else now.

Because she dropped off 2022 when she picked up 2021, I do need to fire her, what, in August to give her a couple months before her extension ends? Or, July? Now?

I have one like that now. Retired teacher who neglected to give me her NY and CT 2021 Forms 1099-R. I knew she needed them (long-time client) but she claimed she gave them to me with her 2021 tax info in October 2022. She finally obtained duplicates from NY and CT in February 2023. Now she says her neighbor the CPA tells her that I should pay all her penalties and interest because I filed her returns so late!! She is threatening further action if I don't "do the ethical thing." I've contacted my E&O provider who wants me to file a claim. Very time-consuming. In the meantime, she dropped off her 2022 tax info; I filed 2022 extensions for her. And, of course, she did NOT pay my 2021 fee. (She said she was leaving me a check when she picked up her 2021 tax return folder, but she did not.)

By the way, this woman has been communicating electronically and was one of my first to use CCH's eSign to sign her returns and receive her review copy a few years ago. But for some reason this year she said she cannot use FileShare that she's used for years nor eSign, not even email except when she chooses to email me. She has been mailing things like the missing Forms 1099-R and Form 8879, adding weeks to our 2021 preparation time.

Make sure you charge enough for all the 2018-2022 amendments and prepare them on your own schedule to give you higher annual income this year and next. And, your 2023 prices will be higher, also, to take into account NE's new rules! Get those prices up over the next year before you sell your biz or your client list.

And, charge for tax planning as you look at the QBID on each biz return going forward to use the 2/7 rule. Charge a bunch to save your clients a bunch. Here's one article with an example: https://craykaiser.com/the-2-7-rule-for-wages-and-maximizing-qbi-deduction/

One Form 3115 expert is Lisa Ihm and Brass Tax Presentations. They have a $20 booklet with line-by-line instructions and spreadsheet attachments and...

https://brasstax.com/shop/ols/products/form-3115-line-by-line-correcting-depreciation

Look around their website.

He can issue a 1099 if he wants to, and he might want to -- to document all the funds that went our to that contractor.

And, think of the realistic IRS bills it could create! (Maybe already has.) All types of spam will be more believable, and we have to be more careful than ever. Right now we can prompt ChatGPT with writing samples of who we want it to imitate, and then prompt it to write certain emails, whatever.

20 hours ago, schirallicpa said:

Of course NYS is considering it.  NY would hate to miss out on another opportunity to tax us.  

If you caught the NBC evening news last night NYS was #2 (California #1) in most people exiting their state.  Wonder why.  

10,000 NYS families bought Fairfield County, CT, homes in 2020. Prices soared in CT. (Probably dropped in NY.)

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.