JohnH

The #2 situation is the most interesting. Wonder what his reaction would have been if you entered the 1099-R first, and then he saw the balance due coming down as you entered the withholding, W-2, etc. I'm not advocating the following approach, but here's the practical result of what he's most likely to do next. If he files the return without the 1099-R, he's basically doing the same thing as filing the return with the 1099-R included and then requesting an installment agreement to begin 2 years from now, along with accrued FTP penalties and interest (plus whatever refund he received this year being added to the balance due). If he would stick around long enough to listen, it might make sense to him to file and request an installment arrangement right now. But in this case he's only interested in whatever current refund he can get because he's probably in financial trouble anyhow. The biggest problem occurs if he gets discouraged, doesn't file at all, and then when it finally catches up with him he's also dealing with a 25% FTF penalty. Or what's even worse, he skps filing this year and then drops out of the system altogether for a few years. That's sad. I understand the necessity for rules making it painful to cash in one's retirement funds, but I also believe there should be more lenient rules regarding penalty forgiveness when someone loses their job. Or in the current situation, there should be more restrictive rules regading mandatory withholding on 401(k) distribtuions. Maybe a 30%-35% withholding on a Code 1 distribution unless the receipient can provide documentation showing why it should be lower. Once the money's in their hands, 3/4 of them are facing a tax problem at filing time.

And Bees says John "don't get no respect"...

Since this discussion has already gone down a rabbit trail of sorts, what would our answer be if a cash-basis client receives a $50K check on Dec 29, 2010 deposits it in his company bank account, and the bank places a 3 business-day teller hold on the funds. Does that $50K properly get reported in 2010 gross receipts or 2011 gross receipts? (I've seen this before, as have many of you, although you wouldn't necessarily know it unless you actually looked at the receipted bank deposit tickets.)

I can't see where it matters very much. If he gets the refund he can just be thankful it happened. But if he's unhappy when he receives the refund, he's free to write a check to IRS to apply to the balance. In the end, it's the same net result (other than a week or two of interest+FTP penalty - about $25 on a $7K balance at current rates). Of course, it's always possible that the system will catch it before he actually gets the money.

It will work. I've done it with clients before. It isn't sneaky and it isn't against their rules. As long as you stay within their guidelines and remain cooperative, I've found IRS to be amazingly easy to deal with when it comes to unpaid taxes. Don't fall into the trap of under-estimating the amount you think he will owe on the extension form, because that could potentially invalidate the extension retroactively if the return were ever audited. You should show the amount he actually expects to owe on line 4 of the extension form, then show what he is actually paying on line 7. One would think that this is revealing that he is not current on his taxes and thus would invalidate the installment agreement, but that is not the case. IRS works off the return when it is filed for the purpose of invalidating the installment agreement, so the info on the extension has no effect on the existing installment agreeement. Their policies and procedures are clearly designed to keep people in the system and to give them adequate time to get their financial affairs in order, if it's posisble to do so. Now if he can't pay when he files the actual return, he can expect the installment agreement to be invalidated. However, even then he can request a new installment agreement rolling the two balances into one. This is as easy as getting the original installment agreement approved if he owes less than $25K in total. I've seen situations where the total was slightly higher than $25K, so I urged the client to pay enough on the new liablility to stay under $25K, then request the rollup. Even told the collections person what we had done when we spoke with them about the new installment agreement - no problems there either. In your case, you said the original installment agreement is over $25K, so there are more hoops to jump through if he can't pay by Oct. However, I was told last fall by a collections person that even the $25K / 60 months isn't a hard & fast rule - in some cases they have flexiblity even when it doesn't meet their guidelines. This is accomplished easier over the phone than by using the form -as a matter of fact I suspect it's the only way to accomplish it.

As our industry moves another big step towards becoming unpaid extensions of the IRS audit divisions.

No it won't. Nothing will stop the bleeding but the return. After the fact, you may be able to remove the scar with a letter, provided it's moving enough to make someone at IRS cry.

Thanks samingeorgia. I was beginning to think I was the lone ranger here. I'll grant that it isn't a slam dunk, but based on the info as I understand it, I'm taking the deduction for my client in 2010. (But I will let him know it's potentially swappable year-to-year in the event of an audit).

So it may be that the reason the brother's check bounced is because he deposited the client's check in his account and then wrote a check in good faith to pay the taxes, not knowing that a teller hold had been placed on the deposit. Therefore the brother has a deposit ticket showing the funds deposited to his account prior to 12/31/2010 to cover the check issued to the county. The deposit ticket probably has a notation that funds are being held for x number of days, which he may or may not have noticed or understood. From the client's perspective, he forefeited the "use" of the funds prior to 12/31/2010 and the only reason the check bounced is because the bank gummed up the works by their internal procedures. He arranged to pay the taxes in good faith and has two transactions to prove it. Under these circumstances, I'm still in favor of taking the deduction in 2010.

Charlotte, NC - 3.51/gal yesterday

I'd take the deduction in 2010. There's some ambiguity here, and the worst case in an audit would be reclassifying from one year to another - basically a wash unless there are drastically different income amounts in the two years. So there might be some interest to pay in that situation. On the other hand, if the 2011 year were audited and it happened that 2010 were closed, then the deduction could be lost if an auditor decided the earlier year is the correct one. if that were the only issue, it would probably be cost- prohibitive to fight it.

I think it's better to file with a partial payment, let IRS send an assessment, and then file the 9465 when the assessment arrives. If he owes less than $25k, and is otherwise in compliance, IRS will automatically approve any payment plan that pays off the balance in 5 years or less. No 433-D needed in that case. The minimum payment can be approximated by dividing the balance due by 50 ( using this divisor will get you a result that will pay off in 60 months after taking interest and FTP penalty into account). Setting up the plan for the minimum payment means less chance of a default, and does not prohibit the client from paying more each month or making larger payments sporadically if they have the funds from time to time, thus lowering the net borrowing cost. Right now I think the total cost of interest plus FTP penalty equates to an effective interest rateof about 10% APR. An even less stressful approaches to just have the client call IRS when the assessment arrives and set up the payment plan over the phone. Or else do a conference call with the client on the line. That's much simpler than fussing around with POA's.

Don't underestimate the value of a mouse with a ball. It's much more basic and thus a valuable troubleshooting tool. When I have mouse or keyboard problems, I always revert to an old standby - a hard-wired mouse and keyboard that I keep on hand. This allows me to test the system under otherwise identical conditions. If they work, then I'm pretty sure my problem is somewhere in the communications link between the mouse/keyboard and its transmitter/receiver. Back when I was a radar tech in the Air Force, we always sought ways to swap out modular components to isolate problems - it was faster, chaper, and more reliable than oscilliscopes, tech manuals, and wiring diagrams. (And we never had a tech support line we could call). I think you can probably have wireless mouse or keyboard software that doesn't play well with other system components & software. I'm guessing that once Rita verifies the hardware's integrity, she might find out the software for the printer and the mouse are in some sort of electronic tug-of-war. One thing I'd try is to start moving the mouse around just before starting the print function and then initiate the print command from the keyboard while still keeping the mouse in motion. That might give you another clue concerning exactly when the problem starts. Of course, it might also crash the system... The tech gurus on this forum can probably explain all this much better than I'm doing.

I guess we know who is getting their bribes (er, I mean "campaign contributions") from the paper industry lobbyists.

Sorry to hear about that turn of event, NECPA. You're in my prayers as well. I have a close friend who's about to be in a similar situation and I can see what burden it is on him and his wife. As for vacation, I'm looking forward to two in the coming months. First is a trip to Surfside Beach (near Myrtle Beach) with the wife, daughter, son in law, and 3 grandsons in July. The second is a return 2-week mission trip to India in August. I view both as vacations, and each equally important in its own way. One is for relaxing with the family I love, while the other is getting away from the self-focused routine and getting my priorities reordered representing The One who loves all of us the most.

I also say deduct the Subway uniforms purchased by the owner.

Nothing quite like a fanatic to make your day...

This isn't authoritative, but I did run across this info from NAC. Scroll down to the paragraph under "Reimbursement Policy" http://www.nacrescue.org/programs/foster-parent-program/guidlines/

Some tax seasons not everything goes as a planned. If I were in your situation I'd tell every one of them that the LAST thing they want is a tired, stressed out, sleep deprived person preparing their returns. THEIR once-a-year tasks just too important for that type of treatment. Sounds like you need to do a little triage. Even getting extensions in place takes a little time. If you devote some quality time to getting extensions in now on everything you have in house, coupled with an insistence that anything yet to come in automatically goes on extension, you will then be free to complete whichever of the returns most need to be filed by Apr 18. The more relaxed state of mind will free you from the pressures that build up between now and the filing date, and will make you more efficient overall. you may even get more work done than you would have completed just working in reactive mode. IMO, the objective is to do everything you can to insure that Apr 15 ( or 18) is just another workday around your office. I've followed this pattern for years, and I measure the success of my planning based on whether I'm able to come into the office mid-morning on the 15th, review all my extensions, make a few phone calls to verify that people paid their extension payments, and take my wife out to dinner that evening. Incidentally, that also leaves me free to help out some panicky late comer who had a death in THEIR family or for some other reason hadn't gotten around to getting their return done. (putting them on extension, of course)

I did have one last year who made a contribution to an IRA before Apr 15 and then immediately converted it to a Roth. Don't remember the details, but there was a reason for doing it that way at the time. Maybe because they got the IRA deduction for 2009, which they needed due to it being a high income year, but income was expected to be much lower in 2010 I think. Guess I'll be seeing it all again in the next few days.

Isn't it great how people let their financial advisors talk them into this stuff and then want us to explain it to them because neither they nor the advisor have a clue about what's happening with the "investment"? (Well, the advisor does know enough to understand that it pays a generous commission, but that isn't going to enter the conversation. I always mention that to the client and suggest that they make him earn it.)

The safest route would be two separate payments. Then if their return is ready before June 15, you can have them reduce the 2nd est tax payment by the amount of the refund on the 2010 return. It's only 2 more months, and if they're filing an extension they're probably not nearly as concerned about all this as you are anyhow. Best to have them overpaid/paid ahead in the short run rather than trying to explain why they incurred an estimated tax penalty next year, because at that time it will be all your fault as far as they are concerned.

Thanks KC. Just added it to my iPhone as well. This will come in handy. Just an added note - as a long-time Blackberry devotee, I hesitated getting an iPhone for way too long. After only a week with the iPhone, I can't imagine going back to Blackberry as things currently stand.

Have you checked your printer cable and made sure that all connections are tight?

I still insist that filling out an extension when you get the info solves the problem, especially after mid-March. That sets the expectation - we may get your return prepared by Apr 15 and then again we may not. Either way, no need to fret about it.