Unread Content 30 Days

That just takes you to the Tax Summary form, which, unless it's been seriously updated, does not have anywhere near all of the carryover amounts. I don't have any complex returns so I can't see what is and what is not included.

The business itself.

My client is not using a property management company. He is doing all of the work himself. I have literally hundreds of receipts to prove that. So, I don't doubt that every trip there in 2024 was solely to work on the property. And yes, $1,000 a month seemed low to me as well. Purchase price of the condo (in Florida) was just over $300K. Condo doesn't allow short-term rental. It must be more than 30 days.

thanks Judy for pointing that out--If $2,000 is gross income on 61 rental days...any days where below market rent was charged counts as personal use. If it was available for rent for 61 days, then I'd want to hear a break down of how many nights it was actually rented.

It's starting to sound like your client is trying to bend the rules in his favor, which means that you need to ask more questions and ask for more documentation, just like Judy suggested.

Deductibility depends on the ownership of what?

Is this client using a management/rental agent? If so, those companies usually have a report that shows the actual days rented and the days it was owner occupied. If you can get that, you may be able to see if receipts for fixing up and repair costs match up to any of those dates after it was put in service. If there are no receipts for repair supplies but the report shows owner usage, then what exactly were they doing there? Even something as simple as painting requires materials, but if it is a nice enough property to be rented as a vacation spot that the owners choose to stay themselves, then what would be needed at that point other than routine cleaning or fixing something minor that was broken by a tenant? Are you sure that all of the $75K is furnishings that would allow the bonus depreciation? Is it available for rental this year, or is it already out of service? I also wonder about the $2,000 of income for 61 days of rental. That seems really low to me, but maybe it is your location compared to mine. What kind of property are we talking about here? Are these short-term rentals in a nice vacation area or a more rustic site like a cabin in the woods?

It would have been helpful, if you had included this information in your original post

I have a corporate client that was involved in a lawsuit over ownership. The legal bills were substantial, and the law firm that most of the money was paid to is in Boston. When I told them they needed to do a 1099 for the legal fees, they called the law firm to get the information. The law firm said they had never gotten a 1099. In Virginia, almost all law firms are partnerships so I would think they would be used to getting 1099s from businesses. But maybe it is different in Massachusetts? Or am I missing something about 1099s? Also, when I question this for the 1099s I found out that a substantial portion of the amount they paid the law firm was part of the settlement - they had to pay the other party's legal fees. Should that be included on the 1099? Is it even deductible? Any opinions or references would be appreciated.

Delaware doesn't have reciprocity with any state, and we are so small that I can be in PA in 5 minutes, NJ and MD in about 15-20 minutes. Especially where I live in the northernmost county, we have many out of state people working here for the big banks, chemical companies, oil refineries, etc. We also have a lot of residents with out of state wages in neighboring states, and that means many of my returns are multi state with the credit for taxes paid to nonres states. Doctors and other professional medical staff that work at our largest hospital frequently have W-2s for DE, PA and now MD as our main hospital is expanding by buying the smaller ones including in our neighboring states.

It can be hard for legit farmers to show a profit. A lot of the hobby farms have a few acres and "someone" told them they can take the loss. Maybe they raise five cattle for beef in a year, butchering one for themselves. When I tell them I'm going to decrease feed, vet, etc by 20% they aren't happy.

Thanks for the replies. The client has two other rental properties that generate decent income, so they can take full advantage of the bonus depreciation. And I wouldn't doubt if the client knew about this loophole, and I also wouldn't doubt that the property will never be rented again. Very hard for me to claim a rental property with $2,000 of income and $60,000 in expenses. But I feel I have to claim all of these deductions or I wouldn't be doing my job. Grrr. As for letting the client go, it's really not an option.

MI and IN have reciprocity for wages for state income tax. However, IN also has a county tax that is not included in agreement. MI residents working in IN pay the county tax to IN and can then take a credit on MI return. I've yet to see DIY software handle this correctly. Even on professional software I need to manually enter it on MI return rather than having it flow from W2. IN and IL do not have an agreement. This is due to a large difference of IN residents working in IL (Chicago) than vice versa. I'm guessing the east coast states without reciprocity has to do with similar differences rather than where a football team plays. Craziest one I've seen without reciprocity is KS and MO. TP works for company that has locations in both KS and MO portions of Kansas City. W2 has wages and w/h for both states depending on which location she works at.

Client filed original 2021 return on time without extension. Recently we discovered an error, made changes resulting in an additional refund, and they signed and mailed a Form 1040X for the 2021 year on Apr 14, 2025 via Certified Mail with R/R. So far the post office tracking system doesn't show it moving from the first location. Could just be a tracking USPS glitch or extra slow delivery, but I'm assuming the worst for the moment - that it never arrives. Ordinarily I'd say it's probably a lost cause. However, in NC, hurricane Helene and flooding in 2024 caused dues dates for filing to be extended repeatedly, most recently to Sept 25, 2025. The IRS wording doesn't specifically mention amended returns, but it does mention "various Federal individual filings", which clearly means the extended due date isn't limited only to the various returns actually named in the release. If I'm correct, the taxpayer may actually have until Sept 25, 2025 to submit a duplicate filing if the Return Receipt doesn't come back to us in by July or August. Any thoughts on this scenario?

Exactly why I wish ATX would create a one-stop-shop location for all CF/CO -- Wolters Kluwer, if you're listening, this would be a really great addition and help alittle in justifying the large increase in software costs we get every year!

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.