SaraEA

Definitely read the trust doc. The trust likely became irrevocable at death and should have filed 1041 each year, but since there was no income or expenses all those years one wasn't necessary. (Expect IRS to come back when the current 1041 is filed and demand the past ones--a simple letter should clear it up.) What you are finding on the tax return makes no sense. If you brought the gain to zero, then line 9 (total income) should be zero. The tax on nothing is nothing. Further, if you marked the box for final return, all income and expenses get passed through to the beneficiaries and the trust pays no tax. Perhaps you haven't added the beneficiary info yet so the program doesn't know what to do with the income distribution deduction? Realtor fees and closing costs get added to basis. (They can't be treated as administrative expenses because a "related party" was living in the home.) Fix up costs are also added to basis. Your fee, by the way, is deductible on line 14, even if it hasn't been paid yet or goes into the next fiscal year. I don't have the cite with me, but politicians (many of whom are attorneys) decided unpaid attorney fees could be deducted and for some reason included accountants in on the perk. Property taxes usually go on line 11. However, if they were paid on behalf of a beneficiary who was using the home, you can't deduct them. They instead get taken from that person's share of the distribution. You really need to read the trust doc to determine what to do. Don't be afraid of this. It's a very straightforward 1041--one transaction and some expenses. The 1041 instructions are all you need to read.

I have found that many folks who have struggled with doing their own taxes and finally give up and seek a pro are amazed about how smoothly and quickly the process goes. They often decide that all the painful hours they spent on the thing isn't worth their time, plus they walk out feeling confident their return is correct. They become long-term clients. I had one last year who had multiple PTPs plus some inherited annuities and a trust K-1. He had spent days on his return before he came to me. I charged $1,000. He came back this year and said he and his wife would have killed one another if they tried to tackle it again. He had sold 14 of the 15 PTPs, so I charged him $1,500 with an assurance that next year's price will be much lower. I'm willing to bet he returns.

If they have the funds available, I often suggest to my elderly clients that they make one ES payment for the year and get it over with. That way they don't have to remember IRS's odd quarterly dates. Almost all of them love the idea.

Not just pass throughs will get the new low rate. From the article: " Mr. Mnuchin offered few specifics about the blueprint, other than confirming that its centerpiece will be a 15 percent business tax rate, which would apply not only to corporations, but also to small businesses...." The IRS has been working hard to reclassify "subcontractors" who are really employees. If this passes, bet their lead dry up.

I'd like to think this proposal is a rough draft. The last time rates were cut and corps allowed to repatriate their profits with reduced tax rates, the money saved went into the bonuses of the CEOs and never did "trickle down." Studies have proved that G W Bush's repatriation effort did not have the intended effect but just allowed the rich to get richer and the income gap to widen. So how will this plan be any different? Didn't Einstein define idiocy as doing the same thing over again and expecting a different result? I thought about that saying recently when the IRS was ordered to use private debt collectors...tried that TWICE before and lost huge sums each time. A very thoughtful, bipartisan tax reform plan has been waiting in the wings now for a couple of years at least. Why suddenly start from scratch? Did anyone ever think through what will happen if all business income, including Sch C, is to be taxed at low rates? Heck, I'm telling my employer I want to be paid on a 1099. I believe once the economic impacts are calculated and reality becomes apparent, none of us will have to fear for our livelihoods.

All I can think of is perhaps there was a penalty calculated in cents. Yes, in CT you can get a refund and still get penalized for not paying the right amount of estimates each quarter. There was a time when CT required you to sum things like individual W-2s and only round the total, so someone who had three W2s each reporting income of XXXX.49 got that extra buck taxed. Then they completely dropped the cents column from the CT return. Go figure.

How on earth did anyone accumulate over $400k in student loan debt? I never thought it was possible to even borrow that much. She must have gotten one heck of an education, so try asking her to interpret the IRC! I agree that the debt is taxable but insolvency might erase some of it. We were only told her income, not her assets.

Clients were an elderly couple with nice pensions, some investments, and over a dozen rental properties. As the years went by it was obviously more difficult for husband to keep up with the books for the rentals so I put them on extension and eventually the numbers came through. One of those years he was very ill and let the Oct 15 deadline pass by; he died that December. The following year I did both the missing and current return, both with hefty balances due, and even got IRS to waive the penalties. She is in her early 80s and appears to be quite with it. Yet in trying to get documents from her I realized she is lost in paperwork. Trying to keep track of taxes, insurance, repairs etc on all those rentals would be difficult for anyone, but I couldn't even get Soc Sec statements or 1099s without her spending two weeks looking around. (I finally pulled IRS transcripts.) One day when she brought me a stack of papers I found a ES voucher from 2012 so I put it in the shred bin. I told her she would never need it but she got upset enough that I pulled it back out and returned it to her. Obviously she can't keep track of anything because she has every piece of paper she ever got. I gave her a big envelope marked "taxes" and told her to put every envelope that came in marked "important tax information" in there this year. Bet it's empty. I haven't heard from her so put her on extension and wonder when I'll find out. In the past, I suggested she might hire a property manager, which she thought was a wonderful idea. I also suggested she talk with her children about taking over the rentals. When her husband died, neither I nor her lawyer could convince her she needed to go to probate to have properties re-titled. She has excuse after excuse for not doing this or finding that, but I believe she doesn't want to admit she has lost control of her finances and no longer has the ability to handle them. I feel I need to tell someone that she needs help with all this, but who? I don't really know the children, and her attorney is elderly himself and long ago retired. It matters because they typically owe, and forgitabout her making estimates.

Who pays? That can touch on familial issues of control. I have clients who bring me their adult children's tax docs and communicate with me every step of the way. Their kids are married, highly-paid young professionals, living in other states. One of the kids found an excuse to leave our firm, the real reason being "they mean well but...." The other two are still with me, but I communicate with them directly via phone and email. Mommy usually rushes in the minute the returns are done to pick up and pay the bill. I can't complain because we're talking a couple grand here, paid instantly. This year I decided to send one of the "kids" the bill and guess what, he paid. Mommy felt a bit put out. Come on, he makes over a half mil a year. Another dad still insists on paying for his kid, who is an attorney working in NYC for a Fortune 500 company. (She pays more just in taxes than I earn in two years.) Another mom just paid for her daughter and significant other's returns, both making well over $100k each. Please, parents, let your children grow up. And that goes for the ones who are doing exceptionally well and those who are still struggling. My practice is to bill the child unless told otherwise.

TAG, the Scottrade brokerage statement likely lists the sale under "basis not reported." Whatever gain is reported is phantom. You have to do the worksheets and then plug in the actual basis. I'm doing a return right now where the guy sold at least a dozen PTPs. UltraTax this year will calculate the ordinary income and cap gains portions when I enter the numbers from the PTP 1099B. YEA!!!! It used to take so much time to do this by hand and then double-check my math. Now I'm concerned that these sales are all reported on the brokerage 1099s (four separate brokerages) and then again on 1099Bs from the PTPs. Client didn't sell the shares twice. If I enter the sales in the K-1 part of the program, which will generate 4797 entries, will they transfer to Sch D and duplicate what's already there? I already had to do a spreadsheet for this guy to double-check all the entries from the brokerages for short-term, basis, reported, not reported etc. This will throw everything way off. Be prepared for your client to have a big gain, although maybe not as high as appears on the brokerage. These things are designed to throw off losses, which catch up to the shareholders when they sell. And John H, last year after the price of oil tanked some of these PTPs passed through huge amounts of CODI. Why do people by these things?

I haven't counted how many returns I have in queue but it's a lot. And numbers don't mean much, it's the complexity. Early in the week I will focus on out-of-state returns that need extra time for mailing both ways. The problem is that most of the other returns are monsters that require time and care. We are closed on Sunday, no clients and the phone is on night service. I reserve this day for the most complex. So today I did a six-hour return and another easy one. The others I touched needed info. It is fun when those last pieces of data come in all at once. You get five returns done in two hours! But then you pick up the four-hour return.....

Lion, I read the gov't reports on the funny business going on in get my transcript and the IP PIN websites. They were indeed caused by crooks who were able to answer the questions supposedly only the real taxpayer would know. The IRS said it had used the same system in place when you get your free credit report. Well, I used that same system for my uncle when I was setting up online access to his brokerage account. (I had POA.) One question was when he acquired his home. Hmmm...his mother signed it over to him and his sister over 30 years ago, and when the sister died 10 years ago it went into his name only. None of the possible answers included any date remotely close to those events. First time I guessed wrong, got out and went back in and guessed wrong again. Third try bingo. So maybe the crooks didn't need to know anything about the real person, just used the process of elimination. It is a very weak system, and the crooks can still use it to view your credit reports that contain info like past addresses and old mortgages. Heaven help us all.

The IRS was NOT hacked. The identity thieves had enough info to go into those sites and pass themselves off as the real taxpayers. Don't forget, many of the crooks are organized criminals with lots of brainpower and money dedicated to ripping people off. They subscribe to those paid background check websites that list everything in public records about anyone. I was shocked to read that they pull their victims' credit reports so they know exactly how much your mortgage payment or auto loan is monthly and to whom you pay it. I thought those reports were only accessible to those with a need to know, but I see they are available to those with the money to purchase. And they scan social media, where people foolishly share personal info like their pets' names and where they went on their honeymoon. The ability of the thieves to collect enough personal data to "prove" they are the real person is the reason why the IRS is now using three-factor identification and texting a code. Although in the case of my clients who had their cell phone accounts compromised, a lot of good that's going to do. And Terry, don't worry so much about your credit score. Places like banks and employers and insurance companies all use different ones you'll never see. And unless you are applying for a loan what difference does it make? My score went down a bit after we paid off our mortgage. Gee, we no longer have any debt so that makes us a riskier bet. Go figure.

I use it for a former cop who retired on disability but is now well past retirement age. Every year I attach pages of court cases and rulings he got from the police union years ago defending the "no tax ever" stance. I would not use it in your case. Put the client on extension and tell him to go get copies of the records. He can order an IRS transcript after tax season to see what data they have. Use your estimates to calculate how much he should pay with the extension. What you are doing is what we all do without realizing it--we do the client's work for them. Sure, if they forget their property tax and I can easily access it online, I do it because it's better than putting the return aside for however long for want of that one number. But why should I waste time trying to find a child care provider's EIN or call in for their student loan interest? And let them contact their broker for basis info. I can look up this year's increase in Soc Security and calculate what they got from last year's numbers, but I'm really, really busy right now. In the interest of expediency, we fall into the trap of taking over the clients' responsibilities, which is part of the reason why we are working 16 hour days right now.

We too have had clients whose extensions were efiled (NOT mailed) and accepted and then their final returns were rejected because of identity theft. I thought that odd because thieves usually file early in the season and our extensions were filed around April 15. Last year we had two clients whose iphones stopped working, only to find out crooks had purchased new ones on their accounts and had gotten new numbers. Both filed identity theft affidavits with IRS and were issued IP PINs. When one of those clients went to the phone store to inquire, the people there knew exactly what had happened and re-activated their phones. Apparently they had lots of experience with this problem. Hats off to the new Security Summit, where IRS and state tax depts and others are working together on ID theft issues. Recently there was some new email scam that appeared to be from professional boards but was really a phishing attempt. In the past two days I was alerted to it by IRS, my state, and the local EA chapter. Good job, Security Summit members.

Did these people die in January, after they received their monthly payment? If so, it should have been paid back so their net would be zero. Social Security is paid forward but Medicare is paid backward, or the other way around, never could get that straight.

Charitable deduction.

Terry D, this year we have had zero ID theft cases. Last year we had four (one who had an IP PIN). Year before that, TWELVE. Years before that, one or maybe two, usually deceased. Season certainly is not over yet, but so far so good. I think all the new filters and data points being transmitted with the returns are helping immensely. When I saw how the number of returns accepted by IRS was down over 20% in the first weeks of filing season, I immediately thought that the thieves (who file as soon as possible to get in before the real taxpayer) had been thwarted big time.

A couple of seasons ago I had two clients come in with 1099Gs from states they had never set foot in. As the IRS filters got stronger, the thieves apparently started targeting states. I wrote to the commissioner of DRS in CT and told him that these clients would never have know their identities were compromised if these states hadn't sent those postcards. I implored him to switch back to mailed paper statements. He personally responded and said he heard me; he would wait until he saw his budget for the following year to see if he could add the expense. The state has budget problems and it never happened. Now we're stuck with the states individually trying to protect themselves. Well, they are working together in the summit, and I have noticed that when one state picks up a new scam I hear about it both from my state and IRS. Four states are requiring driver license info. (Anyone know for sure which ones? NY and GA, and where else?) Today I asked a NY couple for their license data and they could not find a document number. I emailed them the link to NY that shows where it is. Still couldn't find it, because nothing matched the spots on the examples. They are both highly educated but ended up sending me copies of both sides of their licenses. I saw something that was not labeled document number, and it was more letters than numbers, and used that. Geez, if people with advanced degrees can't figure it out, why don't they just ask for DNA samples?

I thought it was only clients who take vacations during tax season. If I hear one more "We're leaving on a cruise so can you have this done by the 1st, or we'll be in FL for the month..."

You do need the trust doc. This could have been set up as an A trust and B trust. These were popular before the MFJ estate exemption went to over $10m and there was portability of the unused exemption of one spouse. In one scenario, half the assets of the joint A trust went into the spouse's B trust with step-up basis. On B's death, the beneficiaries get step-up on the whole thing. Have fun.......

I have a lot of clients who drop off or mail their tax docs. I email them with my questions or answers to theirs, but I usually call them in person when I'm done to relay the results and any tax advice that appears helpful. I think they appreciate having contact with a real person somewhere in the process. It seems kind of cold to drop off tax info and pick up a completed return without ever reaching out to a human being. Watson could have done their return for all they know. On the other hand, I've had it with calls from people who just have to talk to me--to make an appointment or tell me they'll drop their stuff off on whatever day. Wish the receptionist could do better at screening these calls, but she's just as busy as the rest of us.

I wouldn't say the donee never pay the gift tax. If the donor doesn't pay it, the donee will be held liable. That said, it's unlikely any gift tax will be due. The unified exemption (lifetime gifts + what's left in the estate when the giver dies) is over $5.4 million ($10.9m MFJ). Giving over $14k to one recipient in one year means a gift tax return will have to be filed, but that's just a way for the IRS to keep track of how much a person has gifted. State lifetime limits may be lower, so check that out. So many people think they can only gift $14k a year. I always tell them they can give however much they want; if over $14k worse that can happen is that they have to pay me to file gift tax returns but they won't pay any taxes. Unless, of course, they've already given over $5.4m. That always brings on a smile. Possi, your client has bought a portion of the house so not a gift. Who's on the mortgage doesn't matter. How many times have you seen divorced couples where one spouse gets the house but the mortgage company won't release the other spouse from the loan? The poor guy or gal ends up being responsible for a loan for a home they don't even own anymore.

Whether this was a trust or estate makes a big difference. If a trust owned the house and just sold it because it didn't want it anymore, loss is capital. If an estate owned it, tax treatment depends on the will or state law if no will. In one scenario, say the deceased left all assets to children and the estate sold the house to have cash to distribute. In that case the sale was made to benefit the beneficiaries and no loss is allowed. (They really should have received a portion of the house each and sold it themselves.) Sales expenses get added to investment amount but, as I said, loss is personal and disallowed. If the house was sold to raise cash to pay the decedent's debts, sales expenses can be treated as administrative expenses and passed through to the beneficiaries. NJ does have an inheritance tax, so you'll have to check if the value of the estate exceeds the state threshold.

Just today I got a phone message at home from the IRS, which is suing me for unpaid taxes. All reports say those calls have subsided since they shut down six call centers in India in Sept or Oct. A colleague got a text with the same message. Just like with the drug lords, when a group gets arrested others are standing by to take over the territory. This scam and the others mentioned in this thread are all trying to trick people into thinking they have to pay for this or that to comply with some law or another. Only works when they target law-abiding folks. We must all be renegades.