JohnH

II think a very important issue is finding out what type of entity it is. If it's a corp, then it's important to know whether a Form 2553 was ever filed. That will have a HUGE impact on whether there are even any late-filing penalties due, because if the company lost money and it's a C-corp then there won't be any late filing penalties. Has anyone ever seen a home-grown corporation get the S-corp filing done correctly? I haven't. They will say they are an S-corp, but then you generally find out they filed articles of incorporation and never did anything else (oranizational meeting, by-laws, Form 2553, etc). Once they get the charter, they just assume they are an S-cop because they have a small number of shareholders. (I'd think "shareholder" implies a corporation, whereas "member" implies a Limited Liability Company. I'm not familiar with the term "Limited Liability Corporation". ) As jainen said, your first step should be to contact your Sec of State and find out what's in the public record (if anything). In many states, all you have to do is look up the info on the Sec of State's web site - no phone call required. Maybe you'll learn that nothing was ever filed, no entity really exists, and your client can demostrate that some sort of fraud was perpetrated on her.

Mine is ready, but I never file until Oct 14 or 15. I like to do a last-minute review before actually sending it in, and that it best done after everybody else's return is out the door.

Aside from the issue of whether there are K-1's required, I'd file returns in this situaiton even if no tax is due. IRS has the extension requests in their system, so a follow-up letter is likely if no returns are filed. More importantly, filing zero tax due returns will start the SOL running and they will be timely-filed. So if some sort of K-1 shows up in 2 months, 6 months, or several years from now, at the very least you would be amending a return that will not carry any FTF penalties.

Throw in a few W-2G's, a gambling diary, and a couple of cash in/cash out casino reports for extra points.

Let's see now, where did I file that last promotional email from Drake?

This program has all the markings of a shot across the bow.

Great idea. I like it. I don't care so much about the recognition, but if it will serve as a reminder to myself and others to keep contributing, then it will be a good thing. Also, my tax advisor says it is definitely deductible - he told me while he was trimming my hair yesterday. But just to be sure, I'll get a second opinion when I go for an oil change later this week. Can't be too careful in this regulatory environment.

Congratulations eric, on the additions to the family and on being busy at work. Both are blessings. Thank you for all you do for this forum - looking forward to the changes.

Do you have a check from the insurance company yet? If not, then this may play out a little differently than you are thinking. My daughter and her husband just had a reoof repalcement done due to hail damage. They have "full replacement" insurance. Here is how it went (figures are rounded): 1) They obtained a quote from a roofer for $7,000. 2) Adjuster evaluated the damage, agreed that the roof needed to be replaced due to hail damage, and approved the amount of the estimate. 3) Insurance company sent my daughter a check for $2,800 (which was the "depreciated value" of the roof) They were free to either keep the money and do nothing else, try to repair the roof, or continue with the full replacement. However, if they did not replace the roof, then any future claims would be reduced by the $2,800 already paid to them. 4) They gave the roofer the adjuster's report and paid the $2,800 to the roofer, who then replaced the roof with the agreement that the roofer would accept the remaining payment from the insurance company. 5) When the roof was replaced, my daughter signed off on the roofer's invoice and sent it to the insurance company. The insurance company will pay the remaining $4,200 to the roofer, not to my daughter. Apparently, this provision has always been in insurance policies, but insurance companies often just wrote the full check to the homeowners and forgot about it. But with their profits being depressed by claims and lower investment earnings in recent years, plus an increase in fraud & dubious claims, insurance companies are adhering closer to the strict terms of their policies now. This is based on a single experience, and others may be able to shed more light on your specific situation. However, I didn't understand how this all worked at first and I had to do some research to figure out what was happening as this process unfoled. In retrospect, it makes perfect sense.

You're right on all counts. I was simplifying with the 12% - I generally run the actual numbers for any client using this method and then adjust quarterly if needed. The 12% works quite well for many if they have a w/comp rate under 5% and a SUTA rate in the 2% range, which is what I often see with service-type businesses who have a good SUTA experience rating. Technically they are putting in slightly less than enough to cover everything in the early part of the year. However, by the time they reach mid-year and into the 3rd quarter they have maxed out SUTA and then the balance begins building up to cover the w/comp shortage from earlier in the year. The system does need a little hand holding, though. Whatever the case, I'd rather be dealing with a small shortfall when the w/comp bill comes than to be wrestling with the client over Fed Tax Deposits.

I advise anyone to set up a separate payroll account if they have more than one employee. Then, each payroll period they transfer the gross payroll, plus matching FICA/med, unemployment tax, and workers comp into the payroll account. I usually give them a "gross up" figure to apply to the gross payroll (generally around 12%) and we recheck it periodically during the year. This makes sure they always have funds on hand to pay all payroll- related expenses. It helps to isolate those funds from operating accounts and provides a better snapshot of available cash at any given time nice there aren't residual unpaid taxes inflating the balance in the operating account. I've never seen tone who used this method have any rot of problem with payroll taxes.

Most lenders will work with the prior-year's return if it can be shown that there's a valid extension in place. Of course, that won't help if there's a big difference in year-over-year income or something present on the most recent return which tips the scales regarding loan approval. I have my 2010 return on extension, and we recently processed a home loan. The lender had asked for our 2009 & 2010 returns. When I told the lender 2010 is on extension, they just told me to give them my 2008 and 2009. No further questions asked.

Has there been an attempt to get it forgiven? I've heard lots of stories of penalty forgiveness with just a simple letter, especially if the income was reported properly on the taxpayer's personal return and that was pointed out in the letter.

It may not be possible to resurrect the clients, but after years of listening to the same old recycled excuses & arguments from some new ones, I sometimes think reincarnation may be valid.

Sounds like a case could be made for Schedule C, depending upon who actually paid the Schedule C expenses. But what about potential loss of the dependent exemption on the parents' tax return? (or maybe he saved most of the money)

The roofer isn't paying for advertising - he's just adjusting his price to what the competition is doing and using the "advertising" gimmick as his excuse to the homeowner to make it look like an exchange of value. From a practical standpoint, I recommend that the roofer just discount the bill and forget about all the extra accounting. People are a lot more savvy about this nonsense than most businesspersons realize. (some are even insulted by it). If I'm wrong about this, let me know because the nxt time I have a plumbing repair done I'm going the tell the guy he has to reduce his bill to allow for the "advertising" he's getting while his truck is parked in my driveway. If he wants to know how much he "spent" during the year on these phony discounts, he should just write it on a yellow legal pad and add it up in December. Much less complicated, especially since it was money he was never going to see in the first place.

Seems like our experiences are all different. As I said, I never send in anything not required on an original or an amended return, and although I've filed lots of amended returns over the years I've never had any correspondence to come back asking for more info on a "normal" amended return of any kind. . (see exception below). In many cases, I've filed amended returns EXPECTING them to be questioned and was actually surprised we didn't receive additional info requests. My experience has been that they pretty much process them as filed. Maybe it has something to do with the nature of the amendement and the reasons for filing them. I do spend a fair amount of time writing a careful description of the reason for amending and tying it back to specific lines on the 1040X. I figure that the description is where problems can start anyhow. The only exception involved two claims last year for the FTHB credit, but it seems everyone was getting push-back on those filings. Both of my situations resulted in unanticipated questions in spite of the fact that we provided exactly the documentation called for in the instructions. In any event, I see those amended returns as aberrations at all levels. I do always tell clients I can't make any predictions of how long it will take for an amended return to be processed, and I caution them them that IRS may ask for more info. I like to set expectations as low as possible so all surprises are either neutral or positive.

Do tax preparers who give referral discounts send 1099 forms to their referring clients?

I don't attach anything to returns or amended returns not specifically required. But if you feel you must attach something, I'd recommend attaching the transcript. It's the only thing you know for sure since that's what's in their system. Besides, if they can't understand IT, then you have other problems.

So I was sitting in the stands yesterday watching my 9-year-old and 11-year-old grandsons play baseball. A batter hit the ball to the fence, it bounced off the top of the fence and landed out of play. My 6-year old grandson who was sitting to my right turned and informed me that on this field it was a home run, but if the ball had landed back on the playing field it would have been a "Ground-Fool Double". Just wanted anyone who wasn't aware of that terminology to get their rules straight.

I dont know who took it. I borrowed it from a an email I received whach contained lots of other odd pictures. This one just struck me as exceptionally humorous.

It's almost certainly photoshopped, but still good for a chuckle.

Don't know why I found this so amusing, but I just had to post it.

I think you handled it correctly, but IRS computers for some reason are not set up to handle this situation. They are looking to make a S/E tax adjustment any time there's an entry on Line 29 of the 1040 when a Schedule C is also attached. I'd tell the client to cash the check, and at the same time send IRS a letter explaining the Line 29 entry, with a copy of the W-2, highlighting the entry in Box 12a of the W-2. Then wait and see if they send a bill for the $168. If they never respond, I'd forget about it. I think it's quite likely that nothing will ever come of it.

Yes, you got it right. Jerry was always pretty good at painting the ring around the racoon's tail. (And I'll stick by that statement even if I never see the back of my head again.)