JohnH

Just had a perennial extender drop in. He said his wife told him to ask how late they can get their info to me and still get the return done by Apr 15. Was it OK for me to tell him to crank up his time machine and get it to me by Mar 10, or was that: 1) unkind ? 2) snarky ? 3) uncalled for ? 4) other...

Clearly the littliest rant I've ever seen.

Here is your reference. It is commonly known as a "SPIFF" - reportable on Line 21 and not subject to SE tax. http://www.irs.gov/pub/irs-pdf/p3204.pdf

I think this is why I got my standing desk...

Sounds like a good use of Apr 1 in my opinion - transmitting extensions. BTW, in an earlier post you mentioned a client who is on an installment agreement and is afraid the IA will be voided if she files an extension. She doesn't need to worry about that insofar as her Federal return is concerned. The extension will be valid and there will be no effect on the IA (unless she files an actual return with a balance due and fails to pay it). I have a charity case who has been on installment agreements for going on 4 years now. Each year we file an extension request showing tax due and only a token payment. The extension is valid. When the return is filed in Oct without full payment, IRS will eventually void the installment agreement. They then have to reset the installment agreement and fold the new balance into the existing balance, but IRS will even do that - they just have to pay the fee. It's an expensive way to borrow money, but in this case it's necessary as they wind down the effects of a financial fraud which was perpetuated against them.

Although there is nothing solid to suggest that at the moment, sadly I would not argue with your assessment.

Well, if you assume his 401k will lose 6% per year in value, he breaks even after about 5 years. So there is a way to rationalize taking the one-time hit.

All excellent responses - I'll have to evaluate them to select the best. Thanks for the replies, and the laughs. Interesting thing is, he's among my higher-earning clients - probably top 10 or 15. He has an impressive job with a high-profile company. He's very smart, but not a finance guy for sure.

Email exchange with a client today: Me: "You have a 1099-R showing an early withdrawal of $35K from your 401(k) because you left your employer and didn't repay it. You're going to owe about $10K-$12K of penalty plus state & Federal tax." Client: "Yes, I was expecting that. But they withheld some tax on the withdrawal so it won't hit me that hard." Me: "No, they didn't withhold any tax. The amount on the 1099-R is only the loan balance." Client: "OK, but I still saved money since I borrowed less to buy my house. I would have paid more in interest on the home loan." ======================= I'm still pondering my reply. So far, I have come up with three: 1) Huh? 2) Well, you're losing the tax free accumulation, your mortgage rate is 4% APR and this is over 30%-- oh never mind... 3) Only if your mortgage lender is run by a couple of guys named Vinnie and Guido... Any other suggestions?

Capital gain is calculated by subtracting the market value on date of death from the selling price. Transaction fees can also be added to market value in calculating basis. Even if sold on the date of death, next day, or whenever, you still use this formula. Capital gain on inherited stock is considered long term, even if the stock is held for less than one year by both the decedent and the heir.

I don't guarantee any completion dates. I don't announce my cutoff date in advance in my client letter. The only thing my client letter says about extensions is that anyone with a brokerage statement can expect to go on extension - no matter when they get their info to me. Some do, while with others I feel comfortable enough with the numbers to go ahead an compete the return. But I put them all on notice as a precaution because I can't predict how flaky their brokerage will be in January of any given year. I set my cutoff date based on how the tax season is progressing. In some cases it is as late as March 20, in other cases it is March 15 or even March 10 Most who get all their info to me before my cutoff date get their returns completed, but in some cases I've doubled back and told some of them we need to extend. Some people whose habits I know get extended well before my cutoff date, because I know they won't have everything to me in time - may as well deal with it at the outset and keep them & me relaxed. I filed my first one this year on March 4. Everyone whose info comes in after the cutoff date automatically goes on extension. By doing that I'm usually very productive in the weeks running up to Apr 15 because I'm not making frantic calls pleading with them to let me extend their return as the date looms. Having the extensions in place allows me to actually keep working, and many of the extended returns are finished by or before Apr 15. (No harm, no foul for an extension which was filed unnecessarily). I don't do anything on the actual date of Apr 15 except review extensions & go home early. (Sometimes I'll prepare one or two just to amuse myself, but that's unpredictable and irrelevant) April 15 is an artificial date which people impose upon themselves because they don't understand how flexible the rules really are. For them, the Apr 15 song & dance is some sort of silly game they like to play, and they want their tax preparer to play it with them. Maybe it makes them feel special and makes the preparer feel especially needed. I'm moving toward retirement and some things I just don't give a hoot about. Clients who don't plan ahead just aren't my problem. This is just how I operate - your mileage may vary if you try it. One thing I have learned over the years is that many clients are kind and considerate, but many more of them will work you till all hours of the day & night and will create all sorts of anxiety if you let them They don't intend to drive you to an early grave or stress-related illness, but that's what they will do if you allow them. So at some point each tax preparer must decide whether they are going to run their practice or are they going to let their clients dictate how they operate. I've found it's much easier on the blood pressure to run my practice myself. For those clients who don't like how I operate, they can find some stressed out, sleep deprived martyr down the street - there seem to be plenty of them.

This situation certainly justifies reporting the preparer to the IRS, but you might want to check with your E&O carrier before taking that action. You may be sticking your own neck out for no good reason. If you feel compelled to do something, give this form to the client. If he is truly innocent of any complicity in this matter, he will file it. http://www.irs.gov/pub/irs-pdf/f14157.pdf

If you mean cutoff date for extensions, mine was over a week ago.

I'm sure he deserves whatever you do to him - I will testify at your trial if necessary.

Riding an elephant is easy. It's the getting on and off that's so difficult. But still a whole lot easier than getting the right numbers for an 8283 from some clients.

What if you told them to take the amount they would PAY for it at a garage sale. Think the number would change? :)

Thanks. That's what I already told him to do.

Speaking of NY and taxes, I have a question. An acquaintance derives his entire income from SocSec and investment income. Presently he lives in FL part of the year and NC the other part. His permanent residence is in FL, so he pays no state tax on the investment income. He is thinking of continuing the living arrangement, but the non-FL months will be spent in NY. Is NY likely to try to tax his investment income for the months he resides in NY, provided he continues to maintain the FL residence?

That's what I'm doing - tell them about the link and let them handle it. There's no way I'm getting anywhere near actually filing the FinCen 114.

Bingo Rita. And I find that the opposite is often true. People who give generously will frequently understate the value of their non-cash contributions. I'm thinking there's an element of perspective there that a stingy giver lacks. I'd like to see the deduction for non- cash contributions somehow capped based on a percentage of cash contributions.

I don't mind charging the client in this situation. I followed the rules by not mentioning it when the original return was prepared, and I'm following the rules when I handle the response if a CP2000 comes. Personally, I've never seen but a couple of CP2000's in this type of situation. Both were a bit unusual and understandable in hindsight. (But maybe I'd handle it differently if I lived in a different state.)

For amounts this large, they should invest in "It's Deductible" or another of the charitable contributions calculators. It will help them follow some discipline in valuing their donated items. For the most part, a $100 shirt and an $25 shirt will have roughly the same price on them when they get sold at Goodwill. People don't like to hear this, but it's true.

I tell them they need to take things up with Congress, AND that they remember their tax returns every time they go to the polls in November.

The banks shouldn't have any sort of preference, other than a preference for the facts. If they spent $27K related to their jobs, the bank should certainly want to know about that. But $27K related to one's job would not be itemized deductions - it would be business expenses. Any banker who doesn't want to know about that is a sorry excuse for a banker. (But I also think we may be combining bankers and loan brokers in the same conversation - they are different animals. The one thing they have in common is they generally know very little about taxes).

Will the banker tell them you are a good preparer, or will the banker tell them their preparer is preventing them from getting the loan? :)