Lion EA

A too-young client died suddenly in CT. Her brother/sister-in-law are up from FL for a few days for the funeral and to deal with paperwork; they are working with a local lawyer. They will be appointed co-administrators of the estate, per the lawyer, but the court appointment is at least 30 days away. They/lawyer would like a copy of my client's last tax return. What do I need from them to release a copy? They hope to get a copy sooner rather than later, so they can search her house and contact her employer, CU, etc., for 2022 and earlier tax documents before they return to FL. They want to know what to look for. Unfortunately, my client hadn't filed since 2015. She'd call me each year for an extension and promise to drop off her information. She was a school teacher and well over-withheld, so no IRS nor CT letters demanding she file, and I wasn't successful in getting her to give me her tax information, even though we'd have nice chats each year. I only talked on the phone with the SIL. Assuming I get whatever document or assurance from the lawyer or whatever, then what do I need to do to actually identify that the person I'm going to release returns to is who they say they are? I'll be uploading to my portal or to the lawyer's portal, so again not face-to-face.

I don't think he'll get SS credit for returns overdue by 3 (?) years or some amount of time, so if he expects the missing years to help his SS calculation it would be better to file them sooner rather than later. Why do our clients think we are SS experts?!

Yes, we never got an answer for if the daughter was a full-time student for any part of 5 months. OP will have to decide if daughter can be a QC or a QR. But HOH is still a separate issue.

Chrome is up to date Version 109.0.5414.75 (Official Build) (64-bit)

A client could owe back child support which the state would capture from an IRS or state refund, also. I'm sure there are other things.

Going forward, suggest they use a joint account for potential deductions, such as mortgage interest, property taxes, donations, etc., to make their options easier. Not substantial authority, but a starting point with other links: https://www.irs.gov/faqs/itemized-deductions-standard-deduction/other-deduction-questions/other-deduction-questions Then you'll want to dive deeper into your research, such as AnswerConnect with source material, Master Tax Guide, and the IRC.

[Note: I luckily had no client do this.] I would amend the years for which they received ERC now, so they know how much they owe. If they received the ERC monies, I'd e-file immediately, with direct debit or other payment arrangement. Otherwise, I'd hold the returns until the client receives the ERC monies and have them sign then, and I'd e-file. If they have both 2020 and 2021 ERC, those monies probably will arrive at two different times, so I'd e-file each amended return on its own schedule.

Who is legally required to pay them? Who actually paid them? Pacun's question is key.

Do the support worksheets with each of them and keep them in your files: https://apps.irs.gov/app/vita/content/globalmedia/teacher/worksheet_for_determining_support_4012.pdf Is the daughter taking only one course? Or is she (was she for 2022) a full-time student for any part of five months? Many community college students do NOT earn an associates degree but transfer their credits to a 4-year college to earn a bachelor's degree. https://answerconnect.cch.com/topic/48ab0c587cad10009d32d8d385ad169401/support-test-for-dependent Do you prepare the daughter's tax returns, as well as the mother's? If not, you do need to see the whole picture for the household to advise them. Try this out: https://cotaxaide.org/tools/Dependent Qualification Calculator.html

LLC is a state-by-state entity and not a federal entity. I'm a CT SMLLC. Will I fall under the rules for a CA LLC with the minimum tax of $800 and whatever the CA state LLC filing form is? Not only might I revert to a sole proprietor, I might send my CA clients elsewhere. I'll still get those CT residents who work for a large bank or Fortune 500 firm in NY and spend a couple weeks at their CA headquarters so have Form W-2 with CA, NY and CT, unexpectedly. NY and CA seems to be a common duo for nonresident returns due to work locations or part-year returns due to a move. I don't think I can get rid of all CA-sourced income under current CA law; too many surprises at tax time about training in CA, for example.

I already e-file returns for CA resident clients, so I already have CA-sourced income. Someone who emails me from CA but doesn't hire me, won't add to my CA-sourced income.

Let the mother claim her children for any available credits. If mother gets a refund, she can repay grandmother.

My understanding, in very simple so not all-inclusive terms, is that if I prepare a tax return for a person/entity in CA, then I have delivered that product/service into CA and, therefore, have CA-sourced income. I think that means that even though I prepare in CT, e-file from here, and upload the client copy to my portal, that if the person who benefits is a CA resident, I have CA-sourced income. Many states look at where the work is performed. CA looks at where the work is delivered or the location of who/what benefits from my work. I would like to be wrong. I've had two clients move to CA and inherited a couple more from a retired preparer. I'm raising my rates more than usual this year. I don't know if I want to keep my CA clients' rates low or raise them a whole lot more to, as Gail said, cover my additional registration, documentation, and CA taxes.

Bummer. Do I have to pay, like NY? Of course, with the highest state tax rates in the nation, I'll be paying! Anyone want a couple of CA clients that I inherited?

Is that also the case for us (CT or where ever) tax preparers with remote CA clients?

Tax software is no substitute for tax knowledge. You can replace the words "tax" with any profession.

And, that is an age reference that I can identify with.

Because they are already a state entity, and LLC, they do NOT file Form 8832. They file Form 2553 to elect S-corporation taxation.

The IRS notes at the bottom of notices if they've been replaced by a later notice or if this is replacing an earlier notice. Otherwise, the IRS just keeps piling on regulations for us tax preparers to follow. Remember that some documentation actually belongs to the IRS; we're just the IRS's filing cabinets. So, the IRS has the legal ability to drop in unannounced to view certain things, such as Forms 8879.

I think we have specific steps to take in the case of theft, physical or electronic. We have newer IRS projects, such as Security Six and WISP. We need to document our own record retention policies, as allowed, and follow them. https://www.irs.gov/pub/irs-pdf/p5708.pdf

I they are trying to be an S-corp during the time it was a SP, then they have 2 steps. If they want to be an S-corp when they were a SMLLC, then it's 1 step. IF they meet the qualifications for late election. As someone already asked, did they act like an S-corp and just fail to file the 2553?

From IRS Pub 1345: Record Keeping and Documentation Requirements EROs must retain the following material/documents listed below until the end of the calendar year at the business address from which it originated the return or at a location that allows the ERO to readily access the material as it must be available at the time of IRS request. An ERO may retain the required records at the business address of the Responsible Official or at a location that allows the Responsible Official to readily access the material during any period of time the office is closed, as it must be available at the time of IRS request through the end of the calendar year. A copy of Form 8453, U.S. Individual Income Tax Transmittal for an IRS e-file Return, and supporting documents that are not included in the electronic records submitted to the IRS; Copies of Forms W-2, W-2G and 1099-R; A copy of signed IRS e-file consent to disclosure forms; A complete copy of the electronic portion of the return that can be readily and accurately converted into an electronic transmission that the IRS can process; and The acknowledgement file for IRS accepted returns. Forms 8878 and 8879 must be available to the IRS in the same manner described above for three years from the due date of the return or the IRS received date, whichever is later. The Submission ID must be associated with Form 8878 and 8879: The Submission ID can be added to the Form 8878 and 8879 or the acknowledgment containing the Submission ID can be associated with Forms 8878 and 8879. Forms 8878 and 8879 must be available to the IRS for three years from the due date of the return or the IRS received date, whichever is later. If the acknowledgement is used to identify the Submission ID, the acknowledgement must be kept in accordance with published retention requirements for Forms 8878 and 8879. The acknowledgement is not required to be physically attached to Form 8878 and 8879; it can be electronically stored. EROs may electronically image and store all paper records they are required to retain for IRS e-file. This includes Forms 8453 and paper copies of Forms W-2, W-2G and 1099 R as well as any supporting documents not included in the electronic record and Forms 8878 and 8879. The storage system must satisfy the requirements of Revenue Procedure 97-22, 1997-1 C.C. 652, Retention of Books and Records. In brief, the electronic storage system must ensure an accurate and complete transfer of the hard copy to the electronic storage media. The ERO must be able to reproduce all records with a high degree of legibility and readability (including the taxpayers’ signatures) when displayed on a video terminal and when reproduced in hard copy.

Brownstein January 9, 2023 NEWS The Federal Trade Commission Proposes Ban on Employer-Worker Non-Compete Agreements On Jan. 5, 2023, the Federal Trade Commission (FTC) issued a Notice of Proposed Rulemaking (Proposed Rule) seeking to categorically ban nearly all employer non-competition agreements nationwide. If passed in its draft form, the Proposed Rule would: (1) prohibit employers from entering into virtually all non-compete agreements with all workers, (2) require employers to rescind existing non-compete agreements, and (3) require employers to notify past and current employees that their non-compete obligations are no longer in effect. The Proposed Rule would supersede all less-restrictive state non-compete laws, which in many jurisdictions are common and enforceable if the restriction reasonably protects the employer’s legitimate business interests. The Proposed Rule marks a major shift to the legality and enforceability of non-compete agreements. Employers who have historically included non-competition provisions in employee handbooks, employment agreements and equity grants will need to make significant changes before the Proposed Rule is implemented. The Proposed Rule is in response to July 2021 Executive Order 14036, which directed the FTC to issue rules to limit the use of non-compete clauses “that may unfairly limit worker mobility.” In response, the FTC took a sweeping approach to banning non-competes, deeming such clauses as categorically unfair. The Proposed Rule broadly defines a non-compete agreement to include any “contractual term between an employer and a worker that prevents the worker from seeking or accepting employment with a person, or operating a business, after the conclusion of the worker’s employment with the employer.” The Proposed Rule also forbids any contractual provision that achieves a similar effect, such as an overly broad nondisclosure or non-solicitation agreement that would effectively preclude a worker from working in the same field. The rule applies to all employers nationwide and all “workers,” including an employee, independent contractor, extern, intern, volunteer, apprentice or sole proprietor who provides a service to a client or customer. Further, the Proposed Rule would require employers to rescind existing non-compete clauses no later than the rule’s compliance date. The Proposed Rule places the onus on employers rescinding a non-compete clause to provide notice to current and former employees before the date the rule becomes effective. The Proposed Rule provides model language for such notice and would also establish a safe harbor provision whereby an employer would satisfy the rescission requirement when it provides satisfactory notice to the affected workers. Finally, the Proposed Rule would also prohibit an employer from representing to a worker that the worker is covered by a non-compete clause where the employer has no good faith basis to believe the worker is subject to an enforceable non-compete clause. Under this provision, employers are prohibited from threatening to enforce a non-compete clause against a worker, advising a worker against pursuing a particular job opportunity due to a non-compete clause, or representing to a worker that the worker is covered by a non-compete clause. AUTHORS Sarah Auchterlonie Kayla Dreyer Craig Finger Rosemary Becchi, Strategic Advisor and Counsel Annmarie Conboy-DePasquale, Policy Advisor bhfs.com © 2023 Brownstein Hyatt Farber Schreck, LLP This document is intended to provide you with general information regarding the FTC's non-compete ban. The contents of this document are not intended to provide specific legal advice. If you have any questions about the contents of this document or if you need legal advice as to an issue, please contact the attorneys listed or your regular Brownstein Hyatt Farber Schreck, LLP attorney. This communication may be considered advertising in some jurisdictions. The information in this article is accurate as of the publication date. Because the law in this area is changing rapidly, and insights are not automatically updated, continued accuracy cannot be guaranteed.

With the current Congressional threat to the IRS's funding, I think we'll see a later date, such as the third week or even fourth week of January. But my crystal ball is broken.

+ 2 CEs of Ethics EVERY year for EAs. But I hear that the OPR or whichever department renews our EA designation is understanding about illness (COVID seems to be reasonable cause for most things) and one-time errors -- if you contact them and make-up any shortage immediately. Also, if you're an NAEA member, you need 30 CEs per year, IIRC.