SaraEA

Many of these problems are also caused by people not READING what's on the screen. They just click away. And then they never LOOK at the completed return to see if it makes sense. I had one this season where the parents efiled the child's return and never realized they allowed her to claim herself. Couldn't even blame the kid in this case. I told them there's a reason we only charge $50 for dependents' returns--so this kind of mess doesn't happen. Now they can wait 3 months for their refund from their paper return, and they had to pay me to amend the child's and re-do their returns. Bet they don't try that again.

The IRS says the income should be taxed to the person who received it, regardless of what SS# it's reported under. The withholding, though, cannot be passed through to beneficiaries. If he puts it on his personal return the IRS will object because it will have no record that he had that amount withheld. The deceased person cannot file a tax return, period. WalMart should issue a new check; their legal dept will choose whether to him or to her estate. If to the estate, it will have to file a return to receive the refund, he'll have to deposit it into the estate account and then write himself a check. If the federal and state withholding amounts are small, perhaps he can deposit the check into the joint account, report the income on his personal return, and just forgo the refunds.

If the client is eligible for the AOC, the rules this year are that they HAVE to have the 1098T. It's a worthless form, except that it indicates s/he was perhaps at least a half-time student. The numbers on it don't count. If your student can't get one, perhaps it is like Jack said and the kid dropped out. (If they drop a class and can't get a refund, that amount can be used toward the AOC, but they do have to be at least half-time.) Maybe the school isn't eligible to participate in the federal student loan program and therefore can't issue the T. Note that many schools nowadays send the form by email to the student, not the parent. Maybe the kid didn't pay attention. (Kind of scary when you think that this generation is our future.)

Just be careful that the client isn't using his or her cost instead of what the charity will sell them for. Sometimes it's easy to pick up. I just had a client who donated four pair of sneakers for $400. I don't think Goodwill gets $100 for a used pair of sneakers. Or the one who donated two bags of clothes valued at $1000. Another gives entire bedroom and living room sets away every single year (valued at 10K+). She must re-docorate her home on an ongoing basis. I either call to make sure they are using FMV or just cut the listed amount to 10% of whatever they listed. I usually enter each slip individually but draw the line at 10 or more and take the easy way out.

Early in the season I was alert to the fact that we are now supposed to enter verification codes if they appear on the W2. Then I forgot about them and just woke up this week and started searching for them. Not easy to find! Some W-2s have them only on one copy. I make a habit of zeroing in on the bottom copy so likely missed a zillion of them. I have found them on some ADP forms but not others. The number itself is a bear to enter--a million digits, mixed alpha and numeric so you can't use the number pad. I wonder if this great experiment is going to fall flat because preparers and likely self-prepareds are ignoring the codes. They will blame us of course (another avenue to impose big fines?). Anyone else guilty of not religiously entering these codes?

My stomach is churning over these stories of greedy crooks taking advantage of innocent people. Worst I saw was an elderly lady who came in with a stack of 1099Rs and had no idea what they were for. Turned out her advisor had sold her an annuity and every single month cashed it in and sold her another one. Big commissions on the sales, big penalties to the lady for early cashouts. We called the state insurance commissioner and the offense was so egregious everything got fixed. I have noticed that when I tell a client to contact their advisor to find out why their fees are so high, or ask about what the heck is this investment, or whatever seems to me to be questionable in their account, I will often get a call from that advisor. Client likely called and said "my tax person told me to ask ...." Sometimes they defend themselves, sometimes we get to talk about the person's financial situation and the advisor is grateful to get a better picture (e.g., hey, this person needs income, not tax-free investments that carry risk, they have minimal tax liability as it is). I believe some of these people then do a better job for the client because they know someone is looking over their shoulder. Sad that the fiduciary rule is about to be tabled before it goes into effect.

Abby, your client has an SEC case against that broker. His first step is to contact the brokerage's compliance department. They do not want complaints lodged against them! Usually they try to deny everything (investor signed something that indicated his risk tolerance was X), but tell him to keep pursuing it. He is elderly, did not understand, these investments were not appropriate for someone his age, etc. If some were advisable only for long-term investors, that's a case right there. This person should not be in anything risky or long-term. Several of my clients had the same nasty broker and lost mega bucks. Some of their investments were things I never heard of so I called a trusted broker who explained that these instruments were meant to be held for at least 5 years and that if he had frequently bought and soon sold them in his own clients' accounts he would have a message to see the compliance dept on his desk in the morning. Some of these clients were made whole by the brokerage firm. One sweet old man who lost over $200k was asked by the broker not to report him "or I'll lose my job." But he promised to get the money back. How? By making the riskiest investments in the world? I have kept a careful watch on brokerage statements that still show him as the advisor and haven't noticed any hankey pankey lately. Sometimes they just need to know someone is watching.

I too will follow the Code that is in effect when I prepare the return. "Normal IRS post-filing compliance" just means IRS letters that we will have to answer. When this mess is settled, I have to hope it will be retroactive and those who followed the law and paid the penalty will be refunded (if that's the outcome). The executive order that two regulations must be removed for every one implemented is creating a stir in the tax universe. Does this apply to the IRS? As we all know, IRS regs tend to be explanatory, showing how the code is to be applied in the real world. Remember last year when the ACA regs weren't released until March? Regardless of how many courses we took and how much studying we all did, it was still confusing until those regs came out. I know when I'm faced with a perplexing mess, I turn to the regs instead of the code because they are written in plain English and give great examples that often contain one that applies to my exact problem. A Treasury Secretary has finally been confirmed, so after he learns about the purpose of IRS regs hopefully he'll get the president to confirm that his order doesn't apply to the agency, or at least to the type of regs it typically issues.

I assume the 1099SA was for 2016. The spouse received it so should pay the tax on it (if not used for medical). How about a Line 21 entry showing the distribution ("deceased spouse's HSA distribution") and then back out the amount used for medical expenses ("deceased spouse's medical expenses"). The IRS only knows the money went to the deceased's SS number, so it won't be looking for anything on the spouse's return. It accurately belongs in the estate. If there is one, report it on Form 1041 as nomineed from the deceased, then claim the medical expenses as usual. If there isn't an estate, wait for the IRS letter and explain the situation then.

This is the type of questions clients give us because it has the word "tax" in it (or numbers in it, regardless if it relates to sales tax, Social Security, insurance premiums, the price of bananas, ). Sales tax is NOT our bailiwick! Rather than doing extensive research, I have been making a habit of telling clients to call the state themselves and ask if their services are subject to sales tax. If so, let them register and get their permit. We will do the sales tax returns if they want, but truly this is a question for the state, not us. The exception is when a client starts a new business that I already know has to collect sales taxes. Then I will warn them to get registered with the state and start collecting the tax. I have seen too many cases where a couple of years down the road the state gets a clue and imposes retroactive sales taxes and huge penalties on what the state declares their income to be. I am getting to the same point about Social Security questions. When can I collect, how much can I earn, what if I retire in Sept or May? Call SSA! It sounds harsh I know, but appease them too much on non-income tax issues, and pretty soon they'll be asking you to fill out the forms for their license renewal.

I've been getting emails from this place for a couple of years it seems. I block the sender and the messages disappear for awhile and then reappear (just got one today). I don't think they're a scam because I would hope they would have been shut down by now if they were. Rather they are opportunists. As FDNY said, they probably bought the list of contact info from IRS (I am SO angry that is allowed and we can't opt out) and are trying to capitalize on it. You have to wonder, though, if they sell your PTIN on the dark web once you provide it. They "provide" reviews? How honest. Anyone ever visited their website to see what the "reviews" say? Are they the same for all entries? Hard to imagine that taxpayers in need of a preparer could be suckered like that, but I bet a lot of people believe everything they find on the internet. I'm perplexed how they got the address "dot org." Isn't that reserved for nonprofits? I'm sure at $279 a pop they are making a tidy profit. Hopefully not out of your pocket.

It's always a shocker when that interest they thought was not taxable turns out to be taxable. Sometimes there's quite a lot of it, adding insult to injury with the kiddie tax. Good luck appeasing your clients.

The floodgates opened this week for us. I have only seen one brokerage statement so far (from Fidelity), and when those hit the mailboxes I expect to be inundated. Already have a week or two of work in queue and am already yearning for more sleep and more balanced meals.

Read the text you quoted. The bonds must be issued in the name of someone over the age of 24, e.g., the parents. Banks that sold the bonds were not always good about explaining that to purchasers.

IRS has warned of this two-part scam. First the inquiry and then the PDF. I've received several that were one-part: Just emailed me tax docs, out of the clear blue sky. Just use your head. Why would anyone pick YOU out of a universe of hundreds of thousands of tax pros? No different than the Indian princesses who picked you out of the entire world's population to cash their checks. Colleague got a text today from the "IRS," demanding payment for an overdue tax bill and threatening arrest. Same script that the Indian call centers used on the phone. CI shut them down this fall and it was just a matter of time until other crooks stepped in to fill the void.

I too had to verify by phone because the online process wouldn't work, and I too was told I was good to go. I have gotten into eservices since so assume everything is okay. BUT, they never asked me for my cell phone number, and I thought to get in from now on you need two-factor authentication (code sent to your cell everytime you log in). Did they ask you for cell info?

Is the tax research an add-on that costs more?

I wouldn't file a blank return. Put some numbers on it--bank interest, mortgage interest, whatever, just enough so there is no tax liability. I don't know if a blank return will be accepted. Then amend. We have had two or three taxpayers on extension whose actual returns later rejected. Apparently not all fake returns are filed in the first couple of weeks. One of these clients got a letter from IRS saying his refund would be increased by over $120k because he neglected to include his estimated payments--and this was after he filed the 14039. Let's hope the thief didn't get that windfall. I was annoyed that there was no filter alerting the computer system that while some people might forget they paid an estimate or two, who would forget $120k?

IRS numbers being down can be due to a number of reasons. For one, efile didn't start until Jan 23 this year, so 2017 stats only show 3-4 days of filings. (Many tax pros do not file on the first day even if they have completed returns in order to give the system time to work out the kinks.) Efile was earlier last year, so the 2016 stats likely cover a full week or nearly so. Also, it was well-publicized that certain refunds would be delayed this year, so maybe some of the early-season filers weren't in such a hurry. Call this wishful thinking, but the refund identity thieves file very early in order to get their fake returns in before the real taxpayer files. With all the new security measures and filters in place this year, just maybe they couldn't pad the first week's numbers with a zillion fraudulent returns. I am convinced that was the case in the past, and I am relieved that this year they were out of luck. In our CPA office, we filed a mere handful of returns by Jan 27, about the same as last year. We have noticed that we have more clients' info this year than we did last by this time in Feb. I assume this is due to more payers having to get tax docs out earlier. (Except the laggard broker statements.) With the number of new clients calling, I predict a banner year. We take few new clients each year, but if they call early enough before we get insanely busy we'll consider them. Now that we've accepted some new people we find our regular clients are ready early. Guess working 7 days starts early this season.

From the IRS website: Steps Employers Can Take If They See the W-2 Scam Organizations receiving a W-2 scam email should forward it to [email protected] and place “W2 Scam” in the subject line. Organizations that receive the scams or fall victim to them should file a complaint with the Internet Crime Complaint Center (IC3,) operated by the Federal Bureau of Investigation. See also: Affected employers and companies should also alert the state tax agencies by notifying [email protected].

I asked a client before her appt if she could find something that shows her child lived with her, if not okay. She came in with a letter from the public school. She said the school secretary knew exactly what she wanted and just zapped it off the computer. Guess a lot of tax pros in the area have been asking for the same thing! Only problem was it was dated February 31.

Did the parent who gifted the property live there? Did he die? Critical questions to determine if transferred basis was his original cost or FMV at date of death. Abby, you have to calculate retained value for a gift tax return, which was apparently never done. Also if parent applies for Title 19. And maybe in this case, but we don't have enough details to decide.

Crank, I really think it is okay to ignore the 1098T. The IRS does. And, like Lion says, tell your client to expect an audit notice. We have lots of AOC audits, mainly because the IRS does not trust the 1098Ts either. (Last summer we had 6 or 8.) IRS does not match the numbers on the T to the return because they (rightfully) don't believe them. I wonder now that we preparers have to do due diligence for the AOC, if the audits will decrease or maybe increase (so they can fine us). Add up how much the tuition and fees were, subtract the scholarships applied to the relevant semesters, and use that amount as the amount paid. In Ultratax, if you enter a number in the "amount paid" box, you don't enter anything else (amount billed, scholarships). The program works with the correct, defensible, number you entered. No it doesn't match the T, but it's correct.

Forget when the scholarships were applied by the school's software. Most of these bursar's records are a nightmare to read. Drill down to what the parents actually paid for tuition and fees in 2016. And forget the 1098T. I have been to several IRS liaison meetings where agents told us exactly that--the IRS does not consider the numbers valid and will not rely on them as proof of anything. Request the records for 2015 and re-do that return to see if anything changed using real figures. With that much in tuition, I doubt it. The culprit is that "amount billed" box, which never should have been on the form. When the form was first required, the schools whined that they couldn't possibly calculate the amount paid for only qualified tuition and fees in the two years lead time they had. So the IRS said they only had to report the amount billed (useless info). For 2016 they were mandated to report the amount paid, but they still weren't ready (what, 15 years later?) so got an additional year reprieve. Next year our problems will be over.

Often when a person gifts his home to the kids the transfer docs state he has the right to live there for life. This is called a retained life estate. If there are no such docs, but the person lived there and paid the bills, taxes, etc., there is an implied retained life estate. In both cases the full value of the home is counted in the person's estate when he dies, and the heirs get step-up basis. If the parent didn't die but permanently moved out (like to a nursing home), then you have to calculate the value of the retained life estate and the value of the gifted portion using actuarial tables the IRS publishes. It's complex! The state will do it if the parent applies for Title 19, and the value is included in their assets. Give more details. Is the parent alive? It was a "two flat house." Did the parent live in one flat and brother and another? (In which case the flat that was not the parent's primary residence gets the parent's basis at time of gift while the other half might get retained life estate treatment.) This is not the type of issue you need to be dealing with during busy tax season. If your client is just wondering what the gain might be, tell him to talk to you in May.