OldJack

>>this case is just about who gets to make the decision, not what the decision is<< Well... I read it that the IRS cannot require a tax preparer (a non CPA or EA) to be a RTRP.

So the question remains, is there such a legal thing as a "Registered Tax Return Preparer"?

It is obvious that you do not understand taxation of an S-corp and should consult a tax expert for tax return preparation. No joke!!

>>So the first question to the clients is "Do you hold yourselves out as married?" << @KC It appears from the original post that this is the first year a young couple has lived together in this property. I don't know the law in TX but in some states common law marriage is not recognized until a couple have lived together and held themselves out as married for several years. I doubt the couple would testify they intended to be a common law marriage when they signed the mortgage papers. >>The IRS position is that if they use the married form, that equals "holding yourself out as married".<< But they still have to prove it and the IRS might not agree on audit.

A summary from the Texas Family Code: Declaration of Informal Marriage If the parties wish to officially establish the existence of a common law marriage for some reason (e.g., to qualify for Social Security benefits), they can execute and record a sworn "Declaration of Informal Marriage." [§ 1.92] Execution of the declaration is not a requirement for establishing a common law marriage, nor is it a means of marrying as an alternative to a ceremonial marriage. Rather, it is a permissible means of proving a common law marriage. The form contains the same information as is given in a marriage license application, and a statement that "on or about (date) we agreed to be married, and after that date we lived together as husband and wife and in this state we represented to others that we were married. Since the date of marriage to the other party, I have not been married to any other person."

My opinion is they are NOT common law married as they are only sharing expenses and maybe property ownership. Proforma paperwork calling for Husband or Spouse signature is irrelevant to anything. I believe, in this case, they can only file as single taxpayers.

>>I do think there should be some regulations on who can fill out tax returns<< Well... don't you think the individual should know who is qualified to prepare their taxes and should make that decision without a title from the IRS? You know, everyone is a tax expert.

Well... getting and paying for a PTIN looks to me like a "license" which the court said IRS had no authority to do. What do you think?

Well.... that made me feel warm and fuzzy!

The real solution is to do away with personal federal income tax and put tax preparers out of business. Why should citizens have to have hire someone else to prepare and declare their income?

No problem. Such signature is allowed.

Ho Ho Ho! :)

>>Does the value of the balance sheet change? << You got to be kidding! If the money came out of the S-corp (and I am guessing it did) the balance sheet had to change. If it didn't come out of the S-corp, then only the stock record book needs to cancel shareholder 1's stock certificates and reissue stock to the buyer. The accumulated adjustment account or retained earnings do not belong to any 1 shareholder. This is not a partnership with separate accounts. If you are the accountant for the S-corp you have a lot of work that must be done! You should get help form someone that knows S-corp taxation. You need to give us more facts. Did the money come out of the S-corp or from Shareholder #2?

>> I don't even see the logic of fighting this<< I would do it for a client for zero fee (and have) and that client would be my client forever. That is much more valuable than advertising.

Illogical. Taxable on all levels, yes, but not all subject to withholding. If this worker was incorporated with otherwise the same facts what say you?

>>If not, the person should be reported for contracting without<< Maybe they should be reported, but it's not an accountant's job to report unless you have good liability insurance.

I think you all are forgetting who pays your fee. I work for my clients. I am sure that if asked the TP/Client would say (and sign) that he did not intend to hire an employee and the worker would probably sign a statement saying he was an independent contractor. Why would you let a government bureaucrat automatically reclassify without an argument. Make the government employee prove his case. Let us not forget we are professionals.

Just because the state unemployment agency classifies the worker as an employee and collects unemployment tax does not mean the worker is an employee for federal withholding and does not have to issue a W2 verses a 1099. The last I knew federal and state are two different governments.

>> Worker does the work over several months while also doing other jobs for other people and old employer.<< This worker is self-employed working for multiple business as any contractor would do. >> After 2 weeks worker tells TP he has worked 30 hrs.<< This is like an invoice even if it is verbal. The fact that he is billing at an hourly rate is irrelevant as this is a normal contract for "time and material" without the material (probably for safety of payment to avoid liens). Obviously, the property owner is not keeping time and directing the work as he would if an employee. I would argue that this is an independent contractor situation. Tell me the overpowering facts that make him an IRS classified employee.

>>TP provides all the materials per spec sheet.<< I would argue, that based on the facts in this post, that this worker could be classified as an independent contractor. One factor "TP provides all the materials per spec sheet" indicates that the worker was verbally "contracted" to provide a service in accordance with the spec sheet and the Payer did not supervise his work or give him time limits/schedule to perform the work. There must be several factors to make him an employee. Even if the state labor department classifies the worker as an employee does not demand the same classification for federal taxes.

But, there is nothing wrong with preparing someones return as long as you are not paid. So the IRS is not going to be able to assume that every preparer is violating any law. And the IRS doesn't have the man power to check much. Its an IRS scare and not going to change those that want to cheat.

>>I think the IRS is shooting at the wrong target.<< I agree! The target should be to repeal individual federal income tax. Why should ever one in the country go thru this mental masturbation every year.

I Agree with Jainen. I have helped clients incorporate without a lawyer many times. If lawyers will quit preparing taxes I will quit incorporating clients.

Yep... I have decided to retire rather than work for the government.

I would point out that the only time I have ever elected to carry forward was when there was no tax to recover with a carryback.