SaraEA

Equifax had an earlier breach in March, and according to the Wall St Journal the top executives sold tons of stock then too. This one was only announced to "customers," i.e., certain financial institutions that use their reports, not to the public. It's beginning to look like the SEC is the one who is going to nail them, and then consumers will get much of the fines. The class action lawyers will have to stand in line. Joining a class action now is premature in my opinion. Equifax still isn't sure (or isn't identifying) the consumers whose data were stolen. Eventually they will have to send letters to all those millions of people. (USPS should have a banner year.) Their website that supposedly informs you if you are among the victims isn't functional--people have gone in three different times and gotten different answers. Some have entered random letters for their name and all zeros for the SS#s and learned they were hacked. As of today none of us really knows if we are among the injured.

I read some comments about the music major news on Marketwatch and the Wall St Journal. Many people chimed in that music majors are adept at IT because the skills required for things like tone sequencing and sound wave lengths translate easily to IT. Several commented that they work in IT and some of their most adept coworkers have music degrees. Go figure. The person at Equifax was actually the head of security, so her job was to manage the department staffed hopefully with security experts, but one would like to think she knew something about security in addition to management. Rumors are that encryption was not in use and that a security patch was not applied. Apparently that was a platform patch so wasn't as easy as downloading. I'm not making excuses for them, and I am shocked out of my mind that there was no encryption. WHAT? You have sensitive financial data on much of the population and didn't want to pay a token amount for encryption software? That's how Blue Cross got hacked--weren't you paying attention? I read today that Equifax didn't have much insurance. Coupled with their assets on hand, there's only enough for each of us to get less than $10, before attorney fees. Some states have laws that they have to pay upwards of $200 per incident, but there is simply not enough to do that. All the executives and the entire board should have to return all the millions they were paid over the years to go into the injury pot. Anyone have any news on how imposing credit freezes is going at all three major credit bureaus? I keep reading about the system overloads and don't want to waste my time if it won't work. By the way, there's a forth one, Innovis, where we should all put a freeze at as well.

Been there, done that. Never again. I did this for a partnership last year because I wanted to avoid the $195 penalty per partner X 3 partners X 6 months= $3500+ fine. (If you miss the extension deadline, penalty applies back to original due date.) A million emails and phone calls later, I finally got most of the data (not all) and amended. By this time the guy had gotten threatening letters from IRS and state because he owed so much on the original, but with the amendments he still owed but not as much. He's on extension again this year. I've contacted him a few times, even talked with his dad who is also a client and used to be a partner, and still have NOTHING. I will not care more than he does, and I will not spend hours writing up the line changes for the amendment. Let him pay the fine. A few years ago I had another partnership that filed a few weeks after the amended deadline. I wrote the penalty waiver request, which I knew wouldn't be accepted because he had been late before, and it wasn't but at least it looked like I was trying to help. He paid the huge penalty and the following year brought his books in a month early for the first time in his life!

Yardley, this is a real PIA to calculate, so charge accordingly. You have to delete all the assets and enter his back in, 1/2 original basis, l/2 depreciation already taken, same acquisition date. For her basis, use FMV at date of death, and start depreciation all over again. Be careful though with any improvements that have been done over the years.. Husband gets half of those and continues depreciating as usual. For the wife's share, these additions are now included in the date of death value, so you don't include her half at all. With appliances and carpeting, the amount of write off is usually minimal so I just continue depreciating as usual or delete them altogether. I'll go back and read that thread to see what others do, but this is the practice I've adopted.

Definitely check the fees in your state. CT allows a $10 fee to impose and to lift a freeze, but both are free to folks age 62 or older. Not that it can do much good because the crooks have the data they need to pretend to be you. Since all the credit reporting agencies have essentially the same data on us, a breach at one of them is as good as hacking all of them. The real scary part is that crooks now have enough data on half of us to become us. They can move to Idaho, use our name, get a job, vote, get a cell phone, rent an apartment, get a bank account and credit cards, rob banks, sell drugs, kill someone--all in your good name. A freeze can't fix it. The world as we know it will have to change. IRS will have to issue everyone an IP PIN; lenders will have to verify applicants' identities in person; no more security questions about prior addresses or mortgage payment amounts--the answers are all out there now. This will be costly for the gov't and businesses that rely on credit scores. This company needs to close. There will never be enough money to pay for the damage done.

So that explains why so many places have one-ply scratchy toilet paper, and come to think of it crappy paper towels that don't dry anything. I used to think they were just being cheap, which made no sense because one has to use five times as much to do the job. It's really because of the bandits. I'm so glad I work in a "classy" place where instead of stealing the goods, we've been known to bring in a roll or two from home when the supply is low and no one has time to go to Costco. (Their Kirkland brand toilet brand is THE BEST and is still wide enough to fit the dispenser when the name brands chopped the width.)

But Christian, so the entire distribution was used to pay for tuition. If you took an education credit, you have to deduct that $4k from the tuition paid for by the 529. So if tuition was $22k and $4k was used for the credit, you better have at least $18k to account for the distribution. You can use the remaining tuition, room and board and books for the 529 amount. Cancelled checks are useless. They could have been paid to the university for health insurance, gym fees, dorm damage, and other things not allowed for either tax break. You have to have to financial statement from the school and break out the allowable expenses. When the due diligence requirements for the credit took effect this past tax season, we have required these statements from every client. It's amazing how many we discovered weren't eligible for the full credit and/or tax-free treatment of 529 distributions. No wonder the IRS is cracking down.

Lion, you are right--a freeze did no good because the hackers went in behind the scenes and accessed our data. Only legitimate inquirers like mortgage lenders and insurance companies were frozen out. To FDNY, that data is of immense value even with a credit freeze. Criminals can file tax returns for you, get a job under your SS#, get medical care under your name, open bank accounts with your data and launder money in them, etc. From what I've read, the Equifax website is not yet functional enough to let people know if they were victims. Most people are getting an offer of free credit monitoring. It's still unclear if the mandatory arbitration clause applies to Equifax or just to the credit monitoring company (which Equifax owns). I had credit monitoring a few years ago after another breach and did receive a call when I opened a new credit card. I confirmed that I opened it, but at that point it was already open and if thieves had done it they could have charged a lot before I got the call. I think monitoring offers a false sense of security. I was really upset that that it took less than 24 hours after the announcement for Lion's husband to get a scam email that undoubtedly would require him to enter personal info. I read a warning that people should beware phone scams supposedly from Equifax. I feel that we are all under attack. Now my rant: The credit reporting agencies collect all kinds of data on us, without our consent, and make money selling it to whomever pays for it. Those supposed breaches at the IRS IP PIN, transcript, and FAFSA apps were not breaches at all but thieves who had purchased credit reports and had enough info about the victim's prior addresses, loans, etc. (with additional personal info freely available on the internet and social media) to pass as the real person. If I don't want my credit history shared I have to PAY them to freeze it (and unfreeze it if I want to shop my auto insurance or refi). I am helpless to keep my financial info out of Equifax's database, have no control over whom they sell it to, and now it's gotten into the hands of criminals. This breach affected over half of the US adult population, so if you are a couple chances are at least one of you is involved. Thanks to Equifax, we will all have to looking over our shoulders for the rest of our lives. I will not join a class action but may sue them for $10m or more. GRRRRRRRR.

Christian, just about all schools report the amount billed instead of the amount paid. When the Hope credit started in 1998, the schools complained that they couldn't get their systems ready in time to show amount paid. Two or three years ago they were given a one-year deadline to begin reporting in Box 1, but they whined some more and got another extension. Beginning in 2017, they finally have to comply. If it takes our institutions of higher learning almost 20 YEARS to figure out how to do a simple programming change, I have to question whether they are capable of teaching their students anything. At any rate, our lives should be made easier starting this tax season with Box 1 filled out. You still need transcripts in the event of 529 distributions though. Earnings on plan distributions are tax-free if used for qualifying education expenses, but not the same expenses used for the education credits. However, payments for room and board count as allowable expenses for plan distributions (but not for the credit). Books are allowable expenses for both but won't be listed on the T. Let me try an example. Client withdraws $10k from a 529 plan. Tuition is $5k, r&b is $4k, and books are $1k. The ed credit uses $4k of the tuition payment. That leaves only $6k to apply to the distribution and thus a $4k excess distribution. The earnings on that $4k is taxable but the penalty is waived because otherwise qualifying distributions were used for the ed credit. You calculate the earnings on the $4k by first calculating the ratio of earnings included in the distribution (Box 2 divided by box 1 on the 1099Q). Apply the resulting percentage to the excess distribution to determine how much of it is earnings and must be reported as taxable income. The IRS may still demand proof, which you will get by supplying the school's financial transcripts (which show r&B, which is not on the T), book receipts, and your calculations. Good luck with those receipts. Today's plastic generation does not know what a paper receipt is, so educate your clients who will have a college freshman in the fall to demand them. I am sorry to go into so much detail, but your statement " In any event the client had enough money in basis in his 529 distribution which was paid toward tuition to qualify him for the credit" suggested you didn't get that you can't apply just the basis to get a tax break. Each distribution contains both basis and earnings and you have to pro-rate the amounts applied toward each break. This is not a witch hunt but has been a focus of the IRS for a couple of years. Last year we had a half dozen or more such letters, including for clients who made too much to take the credit.

NoMoRobo is free for landlines (not sure if business lines are included) and is available for cell phones for a price. Not much, I think $1.99 a month, but it may be worth it to you if you are being overwhelmed. It's available for iphones but not sure about Androids. Might be worth looking into

So this is why I am now getting tons of calls apparently from local numbers? I have gotten dozens of calls to my cell with the same area code and prefix--just the last four digits vary. I also gets lots of calls to my home phone that have a local exchange but no message is ever left. I looked up a few of these and none is on a scammer list. I think they are just regular folks whose numbers are being imitated by a bot randomly picking the last four digits. Scares me to think that mine is being used in this way too. We installed NoMoRobo and all but the imitated numbers have stopped. If you can do this for free, we will never be rid of crap calls. Why don't the authorities make the phone carriers do something?

Last summer we got at least a half-dozen of these letters, all for clients who had 529 distributions (some made too much to even get an ed credit). You can't double dip--expenses used for the education credit must be deducted from the "qualifying ed expenses" used to account for the 529 distribution. Of course, the 529 allows expenses for room and board that can't be used for the credit, so hopefully the remaining amount of the distribution can be accounted for with those. You need to show that the qualifying expenses used for the credit were paid, and that the distribution from the 529 was used for other qualifying expenses. One of my clients took out exactly the amount of education expenses from the 529, to the penny. Deducting the $4k used for the credit resulted in an excess distribution. Fortunately no penalty applied because the $4k was used for the credit.

I wouldn't file with no income. IRS computer matching will turn up zeros so no tax will be due and no letter will arrive. State rules may be different. You might want to file a 706 to elect portability if there is a spouse and it looks like he or she will exceed the exemption amount.

You seem to have an "implied" life estate. Mom lived there, paid all the bills, and didn't pay the daughter rent. I did extensive research on this before but won't be back in the office until Tuesday and can send you the details then if not too late. The conclusion was clear: this house belongs in Mom's estate, and daughter gets step-up basis. Peruse Section 2036(a). A quick internet search turned up this, which gives you some court cases: https://elderlaw.info/2011/01/01/life-estate-can-be-retained-for-estate-tax-purposes-under-internal-revenue-code-section-2036-without-being-reserved-in-deed/ Brother gets half of sister's basis (stepped up). Let me know if you want my brief.

Roberts, do read them. When a new scam is unearthed, I get messages from IRS, my professional associations, and sometimes the software provider and state, so it does seem like overload. However it serves to drive the point home and keep you alert to the latest tricks. Last week I read one (not sure if from IRS) that scared the .... out of me. Crooks are dropping into accounting/tax offices and leaving thumb drives behind, sometimes on the floor, near the door, a desk or counter. Our clients drop off these drives all the time, and if the recept is busy at the moment it might not get put with the appropriate file. If you were to find a stray one, what is the first thing you'd do? And guess what? Your computer and likely server get loaded with malware. My boss, who is kind of like you getting sick of the warnings, immediately decided that we will get a supply of little Ziploc baggies and label every thumb drive that comes in the door. Anything not identified will get loaded into an old server that isn't connected to anything. Some old scams continue. Just today I had yet another message on my home phone that the IRS is suing me. There was no number on the caller id, and the recorded voice left an unintelligible call back number, but the answering machine memory showed a number that filled in the blanks of what "she" said. I have never before reported these calls to the FTC because the scammers keep changing their numbers, but this time I think I will. I don't think it is the same crooks calling my number repeatedly. I think they are selling their phone lists and those are getting sold again and again. How many people will believe 15 calls stating "this is your final notice before we file a lawsuit against you"? Final should be final. I guess it doesn't cost them anything but the price of the temporary phone number, and if only one person out of a million falls for it they get some cash.

I've done several of these and never has the IRS refused to waive the penalty. Be sure to tell them the missed distribution was taken as soon as it was remembered and steps have been taken to assure it will never happen again (automatic annual distribution). I believe the agency knows it isn't very popular with the public and doesn't want to be seen as taking money from little ole ladies, so it's quite forgiving with late RMDs.

I read that these criminal gangs are so good that their phone systems are programmed to accept calls only from numbers they have dialed. If they call your home phone and you return the call on your cell or work number it won't go through.

The advantage of making the 645 election at this point is that the estate and trust will file a single 1041 return, and the trust will be able to use a fiscal year. The election is good for two years after death. Is the home going to be distributed to the beneficiaries or go into an irrevocable trust? It sounds like the estate won't have any income but the trust will, so there may be no point in making the election, i.e., the estate won't have to file a 1041 anyway. If the trust missed its filing deadline, though, this may be the way to go.

No, it can be filed by the due date of the estate return (including extensions). If you use a fiscal year, it will be due March 15, 2018 (August 31 if you use an extension). Good idea to put it on extension if there are brokerage statements that don't arrive until March 30 (and then get corrected twice). Since this was a revocable trust, did it file its own return or were the assets in the decedent's Soc Sec number and the income/expenses reported on the individual return? If that's the case, often the grantor had large expenses in the year of death that might wipe out the trust's taxable income. You'll have to do the returns both ways to see if you really want to make the Section 645 election.

The 8855 is filed by the estate. Put it on a fiscal year ending Nov 30, 2017 and you'll be fine.

For a gift the basis is the same as the donor's basis, in this case $20k, plus any gift tax paid. It is highly unlikely any gift tax will be paid because of the unified credit. The gift tax will be calculated on the FMV at the time of the gift, but after the credit no check will be written so the donee's basis will stay at $20k. I think you're getting confused by the rules about gifted property where FMV is lower than basis. In that case, when the donee sells you have to do some fancy math: "If the FMV of the property at the time of the gift is less than the donor's adjusted basis, your adjusted basis depends on whether you have a gain or loss when you dispose of the property. Your basis for figuring a gain is the same as the donor's adjusted basis, plus or minus any required adjustments to basis while you held the property. Your basis for figuring a loss is the FMV of the property when you received the gift, plus or minus any required adjustments to basis while you held the property. Note: If you use the donor's adjusted basis for figuring a gain and get a loss, and then use the FMV for figuring a loss and get a gain, you have neither a gain nor loss on the sale or disposition of the property." In your case, though, the property is appreciated in value so donor's basis is the donee's basis. Just file the gift tax return and be done with it. If the children build a house on the land and live there for a couple of years, they will have a $250-$500k exclusion on the profit anyway, so the chances of them ever having to pay capital gains tax are minimal (in the current tax code).

Sorry CPAs! I didn't mean you have it easy when it comes to CEs. I cannot imagine having to sit through 8 hours of compilation and review once never mind every year. I was just having fun with differing ethics requirements. Maybe the IRS thinks EAs are more sleazy than CPAs so they make us take ethics every single year. It's boring to both professionals, it's just that EAs have to get bored by it longer than CPAs do. On the other hand, EAs never have to suffer through the boredom of audit and attest.

Divorce courts are civil courts and do not trump federal law. One of these spouses can choose to file 2015 separately and that's fine with IRS (could face contempt charges in civil court though if the other spouse disagrees). If this is not an amended return, let them file jointly with no direct deposit. The refund check will be issued in both names so neither can cash it alone. Then the check can be given to one of their attorneys (doesn't matter which) and become part of the final settlement. Check state rules though. Some states require MFS filings if the spouses lived in different states even though they filed federal MFJ. I had a couple whose divorce became final in Sept or Oct but their divorce decree ordered them to file a joint return for that year. What did I say about civil courts vs. federal law? Makes you wonder about the competencies of the attorneys who agreed on this and the judge who rubber stamped it.

The unified credit for gifts and remaining estate is based on $10.9m for a married couple. Is there any chance your clients will ever give away so much and have enough left in their estates when they die that they will exceed that amount? If not, don't worry about the gift tax! Just file the 709 and assure them they won't have to pay anything. Only a few states still have a gift tax and the lifetime exclusions may be lower, so check to see if that will be a problem. I wouldn't stretch it out over two years because the recording fees etc will probably exceed what you charge for the 709.

You CPAs have it easy when it comes to ethics. EAs have to take 2 hours EVERY YEAR. Gets old fast. The best I've taken was one like Catherine had that was a discussion of real-life situations and another taught by an IRS agent (who started off saying he knew he was "preaching to the choir"). Worst I had was a video presentation of Karen Hawkins reading Circular 230 to us for two hours. Talk about dozing off.......zzzz