JohnH

Let's say a taxpayer owes money on his 2007 return. He files & pays by Apr 15 (either paper or electronically). He will be mailed a rebate check sometime between May and August. However, if he enters his routing number and checking account number on his "balance due" tax filing, his rebate check will be direct deposited. Probably means he will get his rebate a little earlier. So whereas we ordinarily would not worry about entering checking account info on a "balance due" return, this year the taxpayer will benefit by our entering that info if we want to take the time to do that. (I didn't dream this up - it's explained on the IRS web site)

The phaseout is a straight percentage - 5% of the excess over $75K/$150K. It's explained under the general info on the Stimulus Rebate on the IRS web site

Dont forget to adust downward for income over $75K / $150K, where applicable.

17: You know the grammatically correct use of "Fixin to" and "momenymns" i.e. "We just left church and we're fixin' to go to momenyms for dinner" 18: You're certain that dinner is the noon meal and supper is the evening meal.

But can we still do the musical notes? I forgot how that's done.

Jack: Happy Anniversary to you & your wife. Hope you enjoy your dinner.

Our church Finance Committe has at various times required dual signatures on checks exceeding a certain limit (usually $1000 or $1,500) issued by staff, but I've always regarded that as an internal control matter for their own proctection. I've never known of any legal requirement for dual signatures for any type of organization.

I actually had a client a couple of years ago to tell me that her son didn't have to pay either Social Security Tax or Self Employment Tax on any of his income any more because he changed his sole proprietorship to an LLC. When I explained that wasn't the way it worked, she said "Well, what does Limited Liabillity mean if it doesn't mean Limited Liability for Taxes?" I told her to talk to the lawyer who set up the LLC since he's the one who collected the fee. I'm just glad the son wasn't my client.

Someone posted on another forum that Drake now has a rebate calculator built into their software. It prints out a sheet as a part of the client letter advising the client of the estimated rebate they will be receiving. Nice foresight - certainly not necessary but a good client services feature. Any bets on when ATX will have this capability? :(

What? Are supposed to actually LOOK at the forms the software generates? I never knew...

I wen back & looked at some CP2000 notices I've seen lately. Every one of them showed the Federal withholding and allowed credit for it in the calculation of tax due. If IRS can figure out he had earnings, they can figure out he had withholding. If there's none showing on the CP2000, I doubt you'll find any on the W-2. I infer from what you orignally posted that the client had W-2 forms from other employment. If so, was there any Fed tax withheld on those jobs? If there was none or very little, then chances are you have the same situation on this job. Also, if it was part-time employment, there's a good chance there was no withholding regardless of what is showing on the other forms. You may be able to get some useful guidance form the info you have on hand. As for overall practice, I'm on board with Pacun. As far as I'm concerned, a missing W-2 means filing an extension. That's about the only thing that will build a fire under the client to get their info together. If Oct 15 rolls around and they still don't have the W-2, then it's time to file the return with a 4852. This helps head off the type of problems you're having now. Once he got a notice regarding a return you filed, his problem becomes your problem regardless of what was discussed when the return was filed.

Are you sure the taxpayer had any taxes withheld? I handled a couple of CP2000 notices recently from the 2005 year. Both gave the taxpayer credit for withholding taxes. (However, both were for 1099-R's with a Code 1, which may mean they are handled differently than W-2 forms).

My brain is fried as well, but I think you just follow the money and ignore the FMV on both vehicles.

Here's a link to the NCDR's explanation of how to deduct severance wages. http://www.dornc.com/practitioner/individu...es/pd-98-1.html Scroll down to the section that begins "Tax Years 1998 and Later" The deduction is taken on page 2 of the D-400, line 44. Keep in mind that not all severance payments are deductible - only those attributable to an involuntary separation from service. Voluntary separations as a part of a general downsizing don't meet the standard. Often this happens - there is a first wave of voluntary separations folloowed by a second wave of involuntary separations. The first group would not be entitled to the deduction but the second group would be. The employer will amost never state in the agreement whether the payment qualifies for the deduction - they simply say "consult your tax advisor". That's why we get paid to read the thing. It's very important that you read the separation agreement that the employer provides - I would not take the deduction without having read the agreement completely, even if it it noted on the W-2. Speaking of the W-2, it is nice if the severance payment is noted on the W-2, but it it not necessary. You can attach a simple statement to the return explaining why the deduction was taken. Most of your info will come from the explanatoin the employer provides to the employee, but I never attach the employer document - only a one-page summary of the amount paid, the amount deducted, and the reason for the severance payment. I include in the statement that this was an involuntary separation because that is the main requirement. I think it is possible for the deduction to span 2 years if it was paid in that manner, but I'm not positive. You might want to call or write NCDR to verify that fact if your client's circumstances warrant. I have written them on at least 2 occasions in the past to get clarifications in unusual situations. It's worth having their written reply in your files if the circumstances are unusual, since the tax savings can be $2,000 or more.

The rebate is a true rebate. Not a loan, advance, or any other such definition having to do with any sort of future repayment. It's actually more than a rebate, because someone who doesn't qualify for the rebate based on their 2007 return, or anyone who qualfies for a higher rebate than they receive in 2007, will have a second chance to get the additional amount they are due when they file their 2008 return by completing a simple reconciliation worksheet. Everybody gets two trips to the well.

Are you preparing a North Carolina return by any chance?

You know, after I posted that comment I began to have some remorse - your follow-up comment pushed me over the edge. Thanks for the suggestion, and you're exactly right. I think I am going to amended the returns at no charge after all, especially since I had the info on the W-2 and failed to ask him for back-up info in the first place.

Thanks for all the responses. I didn't get into the fact that he does have a small loss due to transaction costs (a couple of hundred $), but I told him it would cost more for me to amend than he would save in taxes. He did the math and ageed with me. I'm just sending him a Schedule D showing the loss and we'll see what IRS does with it. I appreciate the quick replies and the discussion of the other issues that may be involved.

I received a CP2501 from a client who lives in CA in which IRS is asking him to report the proceeds from exercising some Non-Qualified Stock Options in 2006. He forgot to give me the transaction info last year (I know, I should have noticed the "Code V" entry on the W-2 & asked him, but I didn't). The Schedule D washes out the income on the 1040, but I noticed ATX opened a CA SchD/3885A when I made the entries. It appears that this is only a formality, but I thought I'd ask you CA preparers if NQ options are treated any differently by CA? Also, if there's no difference is there any reason to amend the CA return to add the CA SchD/3885A? I don't mind reading up on it but thought I'd first appeal to the wisdom on this forum. Thanks for any advice on this.

There has actually been quite a bit of discussion about this on another forum. On the one hand, there is the thought that when you sign the jurat, you are saying that all income has been reported. On the other hand, there are questions about whether this is even a "real" tax return, since the instructions on the IRS web site call it a "Stimulus Return" and also instruct that it be filled out in an odd manner - i.e. they don't even require that a filing status be selected. There's also the question of electronic filing which has been discussed on this forum. IRS has said they're going to try and make it available for stimulus returns, but they haven't done so yet. So I'd say there is more than a little confusion about exactly what info needs to be on the form. Hopefully IRS will be clearing some of this up in the next few weeks. Has anybody seen an increase in quesitons about the rebate? I've noticed more client questions in the past 3-4 days as the word has begun to circulate in the media and (most importantly) at the hair salons & garages. I'm thinking that once the cosmetics & kitchenware party plan promoters begin to publicize that their consultants can use the rebate to buy more product, the inquiries will skyrocket.

What a coincidence. I was also thinking it was your fault.

Jack: Thanks for making my day. Any more depressing thoughts?

Joel: In this scenario, in my original post I was advocating filing the return because of the special circumstances with the rebate. However, given the same situation in the absence of the rebate I would certainly advise them to file the extension. So let's clarify one other important point with respect to filing an extension and then I'll leave this alone. For a client who files an extension, I would never advocate filing the 4868 with a low-ball estimate of the TAX DUE. However, there is a separate line for the AMOUNT PAID precisely for this reason. It is perfectly OK to enter $1,000 on the "Tax Due" line and $25 on the "Amount Paid" line. The extension is completely valid, there will be no FTF penalty, and the IRS cannot invalidate the extension retroactively because the estimate of "tax due" was correct. There is zero risk to the client by filing an extension in this manner. Furthermore, if they owe and can't pay by April 15, there is going to be follow-up paperwork no matter what one does. Finally, the IRS contradicts itself by stating that "an extension of time to file is not an extension of time to pay", but I think they do that intentionally. Allowing the extension to be filed without full payment is effectively granting the taxpayer an extension of time to pay - at a cost that is higher than second mortgage rates but lower than credit card rates. I think it's a brilliant collections practice on behalf of the IRS to have it both ways. They get the taxpayer into the system so they can know he is out there, they start the clock running on the disclosure of the liability, they collect interest on the unpaid balance at an effective APR of about 13 -14%, and they spook taxpayers and preparers into thinking there is no extension of time to pay.

Don't forget that if you have a broken ballcock, your flapper valve won't work right either.

Well said Marilyn. I try not to be their best friend, counselor, etc, but (as you said) the ones who use the mail presumably make it possible to spend a little more time with the ones who seem to need that. I'll say one more thing about the ancillary charges. Some people accept them, but others will want to come by and pick up the return "to save the postage", or worse yet they will form a negative opinion over being nickeld and dimed . They may not compalin, but the attitude will be there. My own story - I normally take my car to a client's shop for routine maintenance, but once a year I take it to the dealer just to keep on track in case there's a warranty issue. I took the car to the dealer last week for an oil change, wiper blades, etc. I expect to pay more at the dealer and wasn't surprised at the $80+ bill for a job that my mechanic will charge $40 - $50 to do. But what really got under my skin was the 49 cent "Document/Forms" fee. The cheapskates are charging me a separate fee to prepare my invoice! I can afford the 49 cents and I paid it without complaining, but I walked away with a higher level of distrust and disdain for car dealers. And next time I buy a car I'll walk into their office with that same attitude still intact. I don't want my clients thinking of me in the same manner that I think of the car dealer.