SaraEA

Accept the fact that there will be a few questions you have no idea what the answer might be--just guess and move on so you don't waste time on them. I studied hard for months, and there were a couple questions that I had never encountered the subject at all. I just moved on and somehow passed all four parts first try (there were 4 parts not so long ago). One was on the optional method of reporting self-employment income. I've bumped into the topic a few times since the SEE but never once used it. I've often thought that the most valuable lesson I learned from studying for the exam is that there is a massive amount of stuff I don't know.

We haven't heard a word from UltraTax yet--although we did have to re-file our ERO application and something else. I wonder if the new password requirements will apply to the more expensive software like UltraTax and Lacerte. The crooks were all using TurboTax, cheap and readily available, no ERO status required, so that product is now implementing all sorts of ID-verification requirements and attaching tags to the efiles. Likely the other DIY companies are too. I don't believe Drake and ATX have DIY versions but are inexpensive enough to attract medium-sized players who file enough phony returns to make it worth their while. I can't imagine a thief shelling out the $15k+ for UT or Lacerte, so maybe those users will be spared the complex-ever-changing password requirements? QB Online forced a password change on us last week. While it's convenient to download bank statements, it doesn't work nearly as efficiently as regular QB. Like if you want to split a transaction, first you have to save it and then go back in and split it. Almost impossible to delete a transaction or choose preferences, can't just hit "enter" to save, etc. One would think this "wave of future" cloud-based product would build on the best of the software version, but not so. Time to be brave and go watch the election results.

We don't take many new clients, some referrals from current clients who have a friend or relative whose former tax pro retired. Often I am shocked at how little they had paid and warn them before I even enter their basic info that they will pay a lot more than they used to. They react like they were expecting it, and not one has ever complained about my bill. There must be some preparers out there who don't raise their prices very often, and their clients stick with them for 20+ years paying little more than they did two decades ago. That's impossible in a modern tax office. Starting maybe three years ago we have raised our prices almost every year. The big culprit is software costs, which we all know go up at the rates of college tuition. There are also increasing costs of compliance and risk. When the due diligence rules came out for EITC, we raised the price on all those returns $25 (I know, for folks who can least afford it), even though we do very few EITC returns and know all of our clients. We'll have to determine if we'll do the same for Additional Child Tax Credit and education credit clients this year, now that due diligence will apply to them as well. Whereas we used to take info verbatim from our clients because we know them, now we have to fill out another cumbersome form and face penalties if we don't cross all the t's and dot the i's. Oh, and did I mention the costs of E&O and now computer intrusion insurance? Many of the old timers still did returns by hand (law against that now) and didn't fuss with insurance and potential penalties. A couple of years ago I had a lady come in with three multi-unit rental properties who had paid $100 for tax prep. The hand-done depreciation schedules were accurate to the penny!

I got two emails this summer, from irs.gov they said, telling me there were messages in my PTIN secure mailbox and to click the link to log in. I went to irs.gov directly, not using the link, logged in, and there were no messages. Scary part of this is that the return address was dot-gov, not the do-com we've been warned about. How do they do this? We know criminals can spoof caller IDs on the phone, but I didn't know it was possible with internet addresses. (PS, I recently got a message from irs.gov telling me it's time to renew my PTIN, but it just told me to go to their site to log on and didn't provide a link. That one is legitimate I assume.)

Richdpaman, isn't that $40 fee "nickel and diming" your own clients?

Like Jack said, a 1041 is an income tax return. The paragraph that mentions an estate tax return refers to Form 706. Unless your client's estate is worth more than about $5.45m ($10.9 MFJ), you probably won't have to file a 706 and can ignore that warning. I've been doing this for years and am about to file my very first 706 ever. Well, I've done several in various courses but this is the first real one.

You need an account transcript, not a return transcript. Best to have the original IRS letter that shows the exact differences between what the taxpayer reported and what the IRS has. You'll have to buckle up and make that call. Have fun on hold.

I take a few courses in spring and summer, but I agree that Nov/Dec is a better time because the courses are more up-to-date. We've all noticed that in recent years congress has waited until the last minute to pass tax law changes, sometimes as late as after Christmas. This leaves the IRS scrambling to get forms and pubs updated and efile ready on time and us tax pros little time to digest the changes and be ready to roll with them. (Remember the repair/capitalization rules that weren't finalized until they were in our face, and the regs didn't come out until March of filing season?) The Taxpayer Advocate has chastised congress for this, but you know where that went. I used to attend NATP's 1040 workshop. I stopped going for several reasons, but one was that they were too early to capture any legislative changes. Around here the workshop will be held next week. The only thing new they'll be able to teach are the amounts for exemptions, tax brackets, etc.--nothing I can't read in Pub 17. They can't fill us in on the expired extenders (and they are a few important ones for both 2016 and 2017), postponement of controversial mandates, whatever changes are made to make the temporary budget permanent. Congress is on recess and won't act until the lame duck session, if then. See, not everyone who waits until late in the year for CPEs is a procrastinator. Some of us have a method to our madness.

Say what? This sounds like a question on the SEE exam. (Sorry, I don't minimize your dilemma. Sounds like you've spent so much time researching this and are so into the rules and terminology that your posting comes across as proof that the IRC is gibberish at this point.)

Well, the scammers have to find a new tactic now that law enforcement has shut down the big IRS impersonators. Here's the latest one: http://www.nytimes.com/2016/10/28/us/politics/us-indicts-dozens-in-300-million-indian-call-center-scheme.html?_r=0 Note this is not the same bunch arrested in India a week or so ago. Between the two of them, though, hopefully they've put a huge dent in these calls and discouraged others in the same business. Of course there will always be those who think they are smarter than the average scammer and try to pick up where these jerks left off. I have gotten emails and calls from banks where I don't even have accounts asking me to verify my info, from the "IRS" wanting me to verify my login credentials or check my "secure" mailbox, probably a zillion others the spam filter picks up, calls from "Microsoft" because something is wrong with my computer, and seen clients with actual paper letters about supposed IRS tax liens. It's a scary world out there. I am scared for myself because I'm so skeptical I'll probably miss some critical message by not responding, and I'm scared for my clients who aren't privy to all the junk out there and do respond.

I wasn't talking about forms but about tax software. The IRS has to approve all federal tax software, and the states do the same with the state versions. I'm thinking credits, taxability of pensions and Soc Sec that may differ from the federal amounts, state allowed itemized deductions and depreciation, etc. Am I wrong?

e-services passwords expire every six months. Did you remember to change it? You can't use any password remotely close to any you've used in the past four years either. And they wonder why folks do the forbidden and write their passwords down (hopefully not on a sticky note on the front of the computer screen). Logging into e-services is always an experience. I am registered for three users (one for where I work and TWO for me?) If I can't get in under one I just try another. Sometimes nothing happens, or it brings me to the welcome screen for e-services (no access to transcripts). So I just try again, same user or different, and eventually it goes through. I believe that sometimes the system just isn't working at that moment. Often I just exit and start all over again and get in. Try giving e-services a call. I found them to be helpful when I registered but still couldn't access transcripts. They said I had to efile X number of returns before I could get in. (There's a rule about that--is that your problem maybe?) When I told them I was an EA exempt from that rule, they acted surprised and said no one had checked that box on their end. I gained instant access. Even so, getting in is frustrating but I persevere and usually succeed eventually.

I find that the local chapters of professional organizations that host CPEs really do read the comments. The big corps like NCPE and even NATP when the national group delivers the courses pay no attention. Around here NATP is begging people to attend their "famous 1040 workshop," still held at the same dump people have been complaining about for years and finally voted with their feet. The local NATP events, are so well attended they had to move to a larger venue. There's a lesson in here somewhere..... Tonight we got a phone call for a political survey. You can bet people are paying attention to those responses.

But do bill for calculating and filing the extension. I went through my file last week and decided to submit bills to clients who have unfinished returns sitting here that I have a lot of hours into. They can't seem to find the time to deliver what I need to complete them. A couple of them I've waited over a year for the missing info. I decided that doesn't mean I should wait to get paid for the work I've done. The boss agreed and sent bills totaling over $6k. I haven't decided if I'll add some if they ever do show up. I just think I might.

I could be wrong, but I thought all software had to be "approved," first by IRS systems and then by each state. Some states take their dear time, especially with entities. I often have a 1041 all ready to go for federal but I have to hold back until the particular state is released. Sounds like AL didn't do its scrutiny? Just maybe the states take the easy way out: if it's good enough for IRS, it's good enough for us. CT passed a secret tax hike this year (well, lowered the AGI thresholds where people could claim the full property tax credit--I call that a tax hike) and didn't tell anyone about it. They didn't even tell their own programmers never mind the tax prep or software developer communities. No one noticed until the later half of March, after many folks had already filed. You would think they would have waited until after April 15 to notify everyone, but they didn't. In the height of tax season we were taking a dozen calls a day from people who got letters from the state demanding more money. What is with these states? Why did AL not notice the error when it approved the software? Why did CT not notice at all? (I know the answer to that one--didn't want anyone to know.) Is the onus on us preparers? We know to comb through every completed federal return to be sure it is accurate, but errors are usually our fault--forgot to enter state withholding or to check a box that taxpayers had insurance. That's what diagnostics are for. And when we get an odd tax situation we often do the math by hand to be sure the software handled it correctly. It has never occurred to me to check the basic applications of state software--I just assume it was approved by the state and is accurate.

Joan, don't you know that if clothes hang in a closet long enough they shrink?

Michaelmars, where are you advertising your job openings? People don't get newspapers anymore and thus don't read the "help wanted" sections. You have to go on social media these days. We advertised an opening at all the local colleges that offer accounting degrees...not one response. I'm not sure I trust those posting to get where they need to go. You have to post the opening online but aren't "registered" with the college so can't check if your position is actually posted. If you know people who teach there, it might be a better bet to contact them directly. Our professors at the university where I got my masters used to forward us emails about job openings they received personally. Another thought is to spread the word when you attend live seminars. Ask a few people if they know of anyone looking for a new job; it will get around. I know that a lot of H & R Block staff, many of whom are very well trained, think every year about getting another job where they don't have to put up with senior management's ever-changing nonsense. Problem is how to reach them. Linked in? State employment office sites? Local employment sites? You just have to get on the internet. Ironic that now that we have all these ways of reaching a million people, we can't reach them.

Hahn, this is a confusing area and I think you are confusing two things. When property is foreclosed, you have to distinguish two events. One is the transfer of the property, which results in gain/loss on Form 4797. The other is the cancellation of debt income, which goes on Line 21. CODI comes into play only when the loan is recourse. Your client had a loss on investment property, which is a capital loss. She also had income from the cancelled debt. The insolvency test can erase that. Whether or not EITC is a possibility is a good question. Since Line 21 will show zero after the insolvency subtraction, I would guess she is eligible. For the capital portion, you need to know what her basis was and if there is depreciation recapture. She might not have a loss, and gains cannot be erased by insolvency or the other tests.

Note that the 4838 is a request or application for an automatic extension. It's not a given. From the instructions themselves: "You don’t have to explain why you’re asking for the extension. We’ll contact you only if your request is denied." If you don't file by the extension deadline, your request is denied and failure to file penalties are assessed back to April 15. Saw it happen with several clients. From the IRM: " In the case of an individual, if tax shown on the return is paid after the extended return due date (e.g., with a late filed return), reasonable cause must be shown for the period after the extended due date. If the taxpayer is unable to show that the late payment was due to reasonable cause, the penalty for paying late must be computed from the original return due date, even if 90% of the tax was paid on time and the balance was paid with the late filed return.... The extended due date is used to determine the number of months (if any) that the return and payment are late for the purpose of computing the penalties for filing and paying late. However, the original return due date is used to determine the amount subject to the late filing penalty if the return is not filed by the extended due date. See IRM 20.1.2.2.7.2." Guess we'll have to get creative with conjuring up "reasonable cause" excuses. Can anyone offer better wording for lazy, disorganized, better things to do, just don't care?

Michaelmars, you really were going to give it your all so close to the deadline--fully staffed, ready to roll--but the stars were against you. Maybe it's time to rethink your dedication to your clients, who when you think about it aren't that deserving of your Herculean effort on their behalf. I believe I'm starting to feel like Catherine. While I bend over backwards to complete as many April 15 returns as I can, even for those who deposit their disorganized messes with us on April 10, I am starting to feel differently about Oct 17 stragglers. It's not like we didn't contact them multiple times to get their act together, or call them repeatedly when they only brought in half the needed info this week. I caught myself getting frantic about the penalties they'll face, until I realized that here I am caring more about their tax obligations than they do. Not good. I worked all day today. Completed a $2k plus return, looked up basis for stocks purchased decades ago on another and checked everything so it's ready to go when those last two tax docs come in on Monday (maybe), and stopped caring about the others. One has a kid in college who will have his financial aid rescinded if parents don't file on Oct 17. Another already owes a zillion dollars and will get hit with a massive failure to file penalty (which the IRS calculates back to April 15 when the return isn't filed by the extension deadline). Even if she brings in the volumes of needed data at 8AM Monday it won't get finished. Too bad, it's not like we didn't try. The others I intend to bill for the work already done. I have 5-10 hours into some returns, and I don't intend to wait until they're finished, if ever, to get paid. Bills go out this week. Next year, set a deadline of Oct 1 and don't promise anything to those who show up after that date. Don't schedule weekend hours to service clients who have been enjoying their weekends for six months and finally woke up.

All our oil and gas clients are in PTPs, which have their own set of nightmare rules.

It's definitely October. Business client finally brought in his six months of missing bank statements, except only four months were in there. Someday I hope to find out if he had health insurance. Another will bring her father's docs in on Friday, and by the way "he sold a lot of old stocks this year." I'm sure every single one will have basis clearly stated. A Sch C client who manages to have an entry on every single line just brought in his stack of folders, the contents of which are so random I don't understand the need for folders. Oh yea, this one has several foreign income sources that have to be converted to US dollars. And the folks with the three years of returns and over $20k in refunds.....still waiting.

You are correct to use the balance of the mortgage as the starting point. Here's the worksheet from the very helpful pub: https://www.irs.gov/pub/irs-pdf/p4681.pdf Alas, your client has a $188k gain. You might whittle that down a bit by examining the original purchase docs. Were all the mandatory fees paid by the buyer added to basis? I know sellers pay the bulk of the expenses, but some things like title searches, title transfer fees, postage, maybe he had his own attorney involved, all should have been included in basis. Also make him do a serious search of his records for any improvements. If he's in a tough financial situation, try an OIC.

I had a client who hadn't filed for six years. The IRS eventually filed a SFR, using single,1 exemption. He finally woke up when they started taking most of his pay. He was married with two children and left way over $10k on the table because it was too late to get refunds for some years, but at least they dropped the liens on his house and paycheck. Advise your client to file because the SFR won't be pretty.

They got 'em! Police in India arrested more than 70 people and more than 600 are being questioned and facing arrest. Here is just one report: http://abc27.com/2016/10/06/dozens-arrested-at-india-call-center-linked-to-irs-scam-calls/ Just today a client called and said the IRS has been calling her (she does have IRS issues), but she could hardly understand their thick accents in the message and every time she called back no one picked up. Hopefully that indicates the authorities have shut off their phones and with everyone in jail there is no way they can answer anyhow. I told her to read today's paper. Of course, I'm sure there are many more scams like this one still operating. And like with local drug gangs, when one gets taken out of commission others pop up to fill the void. Well, at least we and our clients will have a reprieve.