JohnH

At the risk of stoking the political fires, let me just say that congresscritters in my neck of the woods must be quite different animals than in other places. I mean, they DO hold public forums, and they DO listen to what their constituents say, and they DO profess compassion for the issues raised. They act the right way, and they say the right things, but when they get back to the seat of power their actions are motivated by a whole different set of priorities... Or, as someone so eloquently said one time: "We invited a politician to our home for dinner. The louder he proclaimed his honesty, the more diligently we counted our silverware."

Complaining to your congresscritter is probably a waste of time unless you bring along a trunk full of campaign contribution money anyhow...

Form 8919 probably won't help in this case. He will wind up reducing the self-employment tax by half, but he will be paying income tax on the $6K overstated income. Plus, it invites further scrutiny, which is the opposite of what he's looking to accomplish. You're not wrong to suggest the Form 8919, but I think he really just wants to get this behind him and move on.

From the limited amount of background info given, I'm guessing either the individual did some things while an employee that were questionable, or else the former employer believes some questionable things were done even if there's no direct evidence. In any event, the former employer wants to use the 1099 as a way to retaliate. It's wrong on a number of levels, but that's the situation the client & tax preparer must deal with. The fact that the employer is tossing this back to the accountant, who is most likely trying to run interference, means it's unlikely they will amend the 1099. Even if they send a corrected copy to the client, there' no guarantee they will follow through with correcting the original filed with IRS, which is already in the system. SO there are plenty of ways for this to get sideways, beginning about 18 months from now when everybody's memory has faded. With $2,400 to $3,000 (at most) in taxes in play, it's an exercise in futility to get things corrected at the source. The path of least resistance is to handle it on the Schedule C with some brief documentation. Paper file it and hope it slowly makes its way through the system. BTW, I'd keep the explanation very simple and short. No sense writing an epistle explaining how and why you think the former employer is being a jerk. Just give enough information to increase the probability the problem will go away. That's what I would most likely do, ASSUMING I agreed to take on this shaky situation in the first place, which is not a given. My response would be quite different if the overstatement is $60,000.

It might be practical to report the full amount of the 1099 on schedule C, back out the convention expenses as T&E, then enter an adjustment to the amount allocated to equipment as an "other" expense with an explanatory note attached. If the total overstatement is $6K, then there's a pretty good chance it will sail through with no questions asked. That way you've disclosed everything and the chances of a CP 2000 are minimized.

Thankfully, NC changed its rules to allow taxpayers who claim the standard deduction on the Federal to switch to itemized on the state if it works to their advantage. There are still some adjustments to be made on the state return, but it's worth evaluating.

While reviewing a client's return yesterday, I noticed that my software (Drake) had switched him to using the sales tax deduction, even though he had significant income withholding. It took me a while to figure this out, but I finally noticed that it was related to the fact that he had paid about $ 8,500 in property tax. His sales tax table deduction was slightly higher than the remaining space between his property taxes and the $10K SALT limitation, so Drake switched him over without any input from me. That eliminates jumping through any hoops to calculate the taxable portion of the state income tax deduction next year. I suppose most tax software would take that same approach. Nice touch.

A man finds it very easy to misunderstand something when he senses that understanding it is going to cost him money.

Ron: Good to see you back on the forum, and will be praying for a speedy resolution to your health issues.

Max: Here's an eye-opening article. It's from 2014 and some of the interesting data from IRS dates back to 2010. But a 50% failure rate should make anyone think twice. PLUS, it seems that IRS considers these arrangements low-hanging fruit because there are so many ways to blow the plan up. https://www.newsweek.com/2014/08/15/rollovers-business-startups-401k-cashing-your-401k-using-401k-start-business-262633.html

Sorry for being obtuse. If someone made a request like this, I'd tell him "I'm not touching it."

I wouldn't think twice about doing this return for him. My first thought is "I'm not touching it." So no need to keep thinking...

For many, if not most, situations, the acronym says it all. More seriously, I've evaluated several of them over the years for clients contemplating doing this for franchises and rental property. Every situation was filled with landmines and my recommendation was "if you do it, you'll need to find another tax preparer."

One of my clients said her son formed an LLC for his painting business because it limited his liability for taxes. All he had to do was file a piece of paper with the Secretary of State. He told her once the LLC was formed, he didn't have to pay tax on any of his income. After an embarrassing period of silence accompanied by my "deer in the headlights" look, I changed the subject.

I saw a Facebook post where someone who SAID they were a government employees complained they were going to lose their home because of the 35-day shutdown. Someone immediately replied :"You don't lose your home for making one mortgage payment late !"

No. The recipient did not perform services in the course of a business activity.

Bart: As you well know, a sense of humor and not taking ourselves too seriously can get us through a lot of tough situations. Although I have to say a client took it real personal one time when I told him I'm not a caring person, but I am feeling person. (We were talking about a tax problem he had which was of his own making.) After staring in awkward silence, he replied he didn't understand. So I explained, "I really don't care, but sometimes I feel bad about not caring." You know, that guy left and never did come back.

Yep, clients come and clients go.

As a practical matter and aside from the attempt at humor in this post, I often answer simple questions for people who are not my clients. If the question is uncomplicated, the person is known to me, and we have a cordial relationship, I will often provide an answer with the proper qualifiers.

Given that there may be more non-clients than usual calling with questions this year, what's your plan? Here's a possible script: Caller: "I just need a little bit of info about the new tax law so I can finish my return. Do you answer questions?" Preparer: "Yes, I answer one question for free and then there's a charge for each additional question." Caller: "How much do you charge for each question?" Preparer: "My fee is $200 per question. What's your next question?"

So Bart, did you have multiple letters for him so he could choose which one to sign?

I highly recommend 1099Expess. I filed 260+ forms with them in early Jan after also running eVerify through them.. Cost was the most reasonable of anything I've seen (after the initial fee). Program is nimble and offers lots of options. Their Excel import can't be beat. Customer service is exceptional. http://www.1099express.com

Some of us will try to bait you into saying something inappropriate, just so you can join us in the doghouse. But if we don't succeed, we have confidence in the ability of our government to do the job.

Great news! They finally relented and are now allowing paper filing of the NC3/W2 Copy 1. The penalty waiver is in effect for another year. I had already finished filing for my clients through their portal, so I learned a lot about how it works. The process really is as tedious as it first appears, and I don't see how they're ever going to make it user friendly. But at least they have another year to figure it out. This task of turning tax preparers into uncompensated data entry clerks marches forward. If I'm still preparing payroll reports next year, my clients are going to see a large increase just to cover this specific task. For now, you can paper-file as usual for the 2018 forms. The due date is still Jan 31, 2019, though. There's a pretty stiff per-form penalty for missing the deadline. Here's the notice: https://www.ncdor.gov/documents/important-notice-automatic-waiver-penalty-failure-file-form-nc-3-format-prescribed-secretary

Another thing I failed to mention regarding 1099 Express is the reasonableness of their fee for doing the mailing of the 1099 to vendors. They only charge $1.35 per form, which INCLUDES the 50 cents postage. So that's a net rate of 85 cents per form to collate, fold, stuff envelopes, etc. Most prices I've seen are in the range of $3.00 per form and up. That per-form price goes down slightly as volume goes up.