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Regarding this entire issue of deducting frills, back when I was a young accountant and knew everything, I challenged a client about his wanting to claim a deduction for a boat, a 4-wheeler, and 2 trailers on his business return. I explained in great detail how "ordinary and necessary" expenses worked, putting his logo on them doesn't make them business expenses, how this would be a red flag in an audit, and how his mechanic and barber didn't know as much as I do about these things. When I finally stopped to take a breath, he calmly replied to me, "John, how do you think my crews get around when we are surveying heavily wooded property and undeveloped land?" (Did I mention he was a land surveyor?)

Yes, I've concluded about that case after several great comments. However, I'll bet almost ALL of you have men (mostly) who have spent huge money on a Honking new truck, and then drag into your office expecting the IRS to pay for the thing. They are crestfallen when told they can take only minimal depreciation and even then have to support the deduction with mileage records. What's worse, if they choose "actual" expenses, they are stuck with it for the life of the truck. They cannot switch to the mileage method in future years, when "actual" expenses will be less.

Neighboring states want to maximize their revenue by whatever means are necessary. Some are downright ugly - NY doesn't like NJ, dating back to the Giants playing in the Meadowlands. Rhode Island refers to their neighbor as "Taxachusetts", but the folks in Boston says Rhode Island taxes are even worse. Three states are on the DelMarva so I dunno what they do. Where I live has no income tax, but all 8 of our neighbors have them, so I have occasion to do many states from time to time. Assume Megamanufacturing is headquartered in California, and one of their factories is in Missouri. The factory workers in Missouri don't have California taxes. However one of the employees in MO is working from home. This could be "California Source Income" thus is subject to California taxes. But neither this work-from-home person nor the factory workers have an office in California, other than the home office. So what's the difference?? [For these purposes, ignore "credit for taxes paid to another state" or "states with no income tax". This is another discussion]. Is there any consistence between these states? For example, Michigan has no reciprocity with Indiana, but has reciprocity with Kentucky, which doesn't even border Michigan. Has the Supreme Court ever got involved to assure consistent treatment? Probably not, although they did reverse themselves on sales tax charged out-of-state. Do any of the board members have feelings on this, or are any of you aware of any legislation anywhere that can break the Gordian Knot?

Now that the convo seems to have exhausted and concluded, I found this funny clip about those farm trucks. It is a Facebook clip, so I'm sorry that those of you not on that platform won't be able to see it. https://www.facebook.com/share/r/16AqLmzUXp/?mibextid=D5vuiz

With second homes stuff happens and plans often change so just because you can doesn't always mean you should

I had one similar, not as bad on furnishing, but constantly traveling to their condo even when they had a management company. But they vehemently insisted that every trip was to work on the condo and all I could really do is say that they might be required to document what they actually did on every trip if they were audited (I also "culled" them from my client list after that return). I would try to avoid judging them based on "taking advantage" of the law, but it's still your choice whether or not to prepare their taxes. One factor is if part or all of the loss is not allowed, special depreciation is not really doing much for them.

Direct Pay is pretty easy.

All expenses you referenced should be reported as part of inventory on Sch C. Your client is operating a business, so things like business insurance, cell phone, internet, office supplies, tools, etc may be deductible, even when no income is generated for the year. I would also include business mileage within the inventory.

Conflicted! Client purchased a condo in January 2024. He made multiple trips to the condo in 2024 for the sole purpose of making improvements and repairs, and furnishing the condo. The renovations were completed, and my client rented out the property for 2 months in 2024. His intention when he bought the condo was to rent it out 3 months of the year, and have it available for personal use the other 9 months. It's my understanding that days spent at the condo solely for the purposes of making repairs and renovations are not considered personal use days. So, technically there are 0 personal use days, and 61 rental days. Client spent $75,000 on furnishings in 2024, and it just does not feel right that he should be eligible for bonus depreciation on such. As a taxpayer, I don't think it's right that I have to foot the bill for what is mostly for his personal benefit, and I'm sure the IRS doesn't like this either. But if these are truly the facts, does he get these deductions? Since it is not listed property, there would be no recapture requirements in 2025 either.

I'm in NY. NYS likes to do more auditing than the IRS here. But I have successfully argued my way thru a handful of farm/ag audits. The first issue in NY is the ridiculous property taxes. Try to have a farm without property. Try to have profitable farm when you have to pay property taxes here. (yes - there are some credits available.) Second is interest. Farmers are always indebted. Interest is a fact of life eroding the profit. And third is depreciation. Most farmers are turning around equipment and taking advantage of bonus or Sec 179. After taking these things out of the picture, the hobby argument tightens up. Now we can talk about hours. And we can talk about why someone would do all the stuff as a hobby. And then I can start my rant about how the farmer can't seem to raise his price on milk as he needs. He can't recover the increasing costs of trucks or equipment or electric by raising the price of milk, or soy, or any other product Uncle Sam has his hands in. Any time the government subsidizes the price of the ag product, you will have a farm loss. So most of the time, the IRS or NYS ultimately have to back off.

For a business devoted to buying and selling houses, I'd say it's listed under inventory costs, to be used when the house is sold.

MD and Marilyn, I really feel for y'all, what a nightmare. Certainly sounds like an ATX glitch; fortunately here in my last year I had no extensions. And the IRS seems better acquainted with Federal disaster areas than ATX--two of my clients had most of the underpayment penalties calculated by the software returned to them.

Correct, but for a continuing client, the losses roll over on the Personal tax return.

Not sure how to handle this for 2024. In late 2023 T/P forms single member LLC with the intent of buying and flipping houses and shortly thereafter buys first house. He doesn't start work on the house until mid 2024 and incurs approx. $30K in expenses which he has broken between materials, labor, utilities, etc. Work was not completed and thus house not sold as of yet. What, if anything needs to be reported for 2024? Thanks very much.

If the losses are handled by the 8582, then these are regular partnerships and not PTP partnerships. But in either case, if this is a new client, you enter the losses on the K1 input screens.

Doesn't the K-1 input sheet have a place for this? That is, prior year info if this is your first year for the client. If this client is a continuing client, doesn't that info rollover?

I am aware that I am doing way too much work. This has never happened to me before. I am doing what I have to in order to make it work and get this tax year over with. I know that you are all correct, but I cannot handle any more frustration with my assistant and getting this to work correctly. I filed several (including my own) yesterday and have no outstanding issues. Thank you all for your attempts to help me. We had way too many extensions and my resolve is to cut back next year barring another health crisis. Thanks again.

Thanks Lion. I have provided him with the Direct Pay website. I hope he knows how to use it.

Send him to IRS's Direct Pay immediately. He gets an instant confirmation of payment. You can calculate his P&I to pay, or he can wait for the IRS letter with P&I.

I arranged for "Bob" to pay his tax liability ($3000) with a bank draft to occur on 04/15. Didn't happen. Bob says all that happened was a $30 charge from the credit union for a disallowed check. Here's why (I think). On such planned withdrawals, Drakes asks us to designate "checking" or "savings." I indicated checking, as the taxpayer did not indicate any other preference. "Bob" says he put $3000 in savings for the IRS to take. When confronted with a draft, most banks/creditunions will transfer the money to checking so long as there are funds in savings to cover. This credit union did not. These are the facts. My question now is "What should the taxpayer do to pay the IRS?" Will there be a collection letter forthcoming? Will the IRS try again? If so, when?? "Bob" is waiting for me to tell him what to do. To be honest, I don't know.

@mcb39I am with @Abby Normal on this. You are doing way too much work. I have extensions every year and I have no issue with efiling the extension and then working on the return and when I have everything, efiling the return. Something is not working for you the way ATX works for me...... Tom Longview, TX

That should not be necessary.

Partnership losses are carried forward on the Individual Partner's 1040 return on Page 2 of the Schedule E. You always have to keep in mind that Partnerships do not pay taxes; profits or losses are passed through to the individual partners. My husband has carry forward Partnership losses for the second year in a row. His loss wipes out my tax liability but, unfortunately, does not wipe out my SE Tax.

When I filed, I did not click on the 1040 or the State return; only the 4868. I have found, as I stated before, that I now import the finished return as a copy; rename it "Client Name 2" and then file it separately from the previously filed 4868. These are working out and all going through. My belief is that no work should be done on the return before the 4868 is filed. That seems to be where we made our mistake. I am taking all of your suggestions to heart and using my workaround and hope that I survive this tax season; which is the worst that I have ever experienced.

Because they are separate efiles that can both be filed. You can file 4868 and then 1040, or vice versa. You can't amend a 4868.