SaraEA

October clients just aren't understandable. Have one right now with two kids in college (could use the money) who hasn't filed for three years. I completed what I could and told them their combined refunds are approaching $29k. One would think they would get me those few missing pieces of info like yesterday. Still waiting.....

In addition to those arrested, they are questioning SIX HUNDRED PLUS people? No wonder everyone in the US has already been called five times. Congrats to the India authorities.

Rfassett, thanks for that insight into the client mindset. We do need to put ourselves in their shoes more often. Of course they jump to the conclusion that a tax letter is from the IRS even though it's from the state, because the IRS is most fearful in their minds. And of course they deliver to us any correspondence that has numbers on it (property re-evaluations, insurance bills, etc), ask us questions about working and taking Social Security, whatever. Our receptionist pointed this out to me this week. I had had it with clients who haven't paid their state registration fees and secretary of state fees for a few years and get furious with us for "our" omission. Excuse me, we don't renew your sales tax license or driver's license or law license or medical license, why are we responsible for renewing your business license? The recept made me see it in layman's terms: You get a notice that says "tax" or looks like a bill from the state, and you assume your trusty accountant is handling it. We don't pay their bills, but they just don't see it that way when it looks like a tax TO THEM even though it isn't. Maybe we should get certified to issue marriage licenses and to register motor vehicles too. It would make our clients' live so much easier. Heck, Block is offering to renew ITINs for free.

Let's not take this "known or should have known" mandate so seriously. Schedule A itself is optional, so I assume the various components in it are each optional in their own right. If you can have $20k in qualified mortgage interest or state income tax withholding and still choose to take the standard deduction (perfectly legal), why can't you have $20k in charitable contributions and choose to claim half of them? In your case, though, where the client has the right documentation, encourage him to take the tax break he deserves. Tell him you will take his foolproof receipts to any audit and he won't have to worry himself about it. Tell him that one of our presidential candidates declared himself a "genius" for knowing how to work the tax code and that claiming documented contributions is a "no brainer." Seriously, teach him that those carryovers last for five years, and who knows if he'll need them in that time. This discussion reminds me of a problem raised in my Master's program. Many Jewish people give large sums to their synagogues and in return receive preferential seating and other social perks (just like in the BC days). Students wondered if the full amount of their donations counted for the deduction because they got something in return. There were a bunch of IRS agents in the course, and they all agreed that never in a million years would they get away with digging into the intent of the donation. The only thing they were taught to watch for was tuition to religious school disguised as a donation. Your client has nothing to worry about.

I think what confused you ILLMAS (if not the links above!) is that the 1099B shows the wrong cost basis. Look to see that it says "cost basis NOT reported to IRS," which it should say because the broker has no idea how much the employer included in wages. The client's cost basis is the amount paid for the stock plus the amount included in wages. If sold the same day or thereabouts, the result is usually a wash or a small loss, which is the broker's commission. (The commission gets added to basis too.) I have a client who gets about $300k added to wages from restricted stock options each year. And every year he gets a loss of $45 that the broker charged.

Don't worry about the Oct 17 deadline; the estate is due a refund so the IRS doesn't care if the return is late. I believe that when the box is marked that an executor has been appointed, the refund check is made out to the estate. The return must be paper filed with the court appointment letter attached to the 1310. When no executor has been appointed, the return can be efiled and I think the check is made out to the administrator (wlho signs that they will distribute the funds according to the laws of the state). I've filed lots of both types, but alas no one alerts me as to how the check was delivered so I'm guessing. I wouldn't rush it. If the heirs want to argue about it they can just wait for their money.

I work with CPAs, and I believe no one with this credential can imagine working without one of those big, noisy machines on their desk. Maybe the noise has the satisfying sound of work getting done. They even make fun of my little solar powered Casio that I use for quickie calcs. Hey, it has perfect sized keys, a change sign key, and retains numbers in the memory even when the machine is off. No ribbon, no battery, and it's quiet. Cost about $10. I can't imagine why they don't use Excel for serious calculator work. I add up piles of receipts in one column, move to the next to verify, and if the totals don't match it's easy to scan to find the culprits. If you have a zillion numbers, you can write a little formula for column 1 - column 2 and instantly pick out the mismatches. So why is it that CPAs are wedded to their desk calculators? Luddites?

I believe it was handled by the appropriate legal forum. Divorce decree says she will sign, she did not, ex-spouse took her to court for contempt. Judge says sign, and she did. End of story. I've seen this happen multiple times, but I've never seen the ex-spouse press contempt charges. Usually it's too expensive to return to court.

We got called yesterday about having some kind of problem with our computer. Husband told them what to do with themselves. I would have preferred to tell them I had to boot up, but the computer is at the other end of the house and the connection is slow so it might take awhile. I'd then put the call on hold, maybe pick up every five minutes or so to say I'm turning it on.....it's loading..... Then leave them on hold while I go to work. These guys get up early--call came at 8AM. Last year they called before 7AM.

A problem with those lost 1095As is that if you later get insurance off the exchange, you no longer have internet access to your account. Have a client who got a job with insurance during 2015 and cancelled her exchange policy. Of course she can't find that pesky form at this late date and can't retrieve it online.

Stop telling the crooks how to make their scams work! What we want are dumb criminals. The reason the phone scams are so lucrative is that the callers are part of organized criminal syndicates with lots of resources to hire well-paid, very smart people to carry out their schemes, including spoofing phone numbers and IP addresses and creating mazes so the payments can't be traced to the recipients. Or trolling the internet and social media to learn enough about victims to get into their IRS transcripts or IP PIN accounts. I already related the tale about my clients who had identity theft in 2014 and filed 2015 using IRS-issued IP Pins, only to have the same thing happen. Those crooks sure are brazen to enter an IRS website to retrieve a new filing number after they already stole using these people's credentials and the IRS obviously knew about it. Kind of like breaking into the same person's house twice, realizing they bought attack dogs and guns after the first incident. As I said, these people have all the time and money and brains they need to steal from the US gov't. For those of us who use e-services, the IRS has announced that after late October we'll have to authenticate ourselves and set up a new password and/or user ID. After that, every time we use the service we'll have to enter a single-use code that will be sent as a text to our cell. While some financial sites use this added security layer, what's to prevent a thief who already stole someone's login credentials (or got new ones by pretending they are that person) from inserting their own (spoofed) cell phone number? Can this really work, or is it just another hurdle the thieves will soon learn to navigate?

If you use Microsoft Outlook for your email, it has a built-in calendar that you can link to other devices.

The estate does not begin until a person dies, so the FY runs June 3 (date of death) until May 31. You don't have to mark it as a short year because it's not considered one. The second fiscal year, if there is one, runs June 1 to May 31.

Talk about dumb crooks. Guess they never imagined that the IRS now has 16 cameras sighted on that PO Box and an agent sitting in the parking lot ready to pounce. Today a client brought in a notice they received in the mail about an IRS lien from 2011 (which did exist back then) and a proposed settlement for something like one-tenth the amount of the lien. I long ago filed the missing returns and as far as I know the lien was removed (client had refunds for all six missing years). I googled the phone number and up came many scam reports, with one poster remarking that they were using old data bases of lien info. This message came in the mail, not by phone or internet, so I guess that's one more warning we have to give our clients.

To me it seems like the guy created both the calendar and the mapquest log two years after the fact. So I file a tax return, get an audit notice, so I pull up a blank calendar from the internet, circle some dates, and pretend I went there those days. Very different than if I had a real calendar I actually used that year showing my appointments at various places each day. In that case, even if I guessed at my mileage when I filed (you know, the numbers on the ceiling), I could visit mapquest to create a true mileage log. Of course, how does the auditor know it's a real calendar? Electronic calendars have date stamps, but lots of business people still use paper weekly or monthly planners. Maybe just having one of those for a year or several proves your trips were real (hard to buy a Mead calendar for 2013 when it's 2015). Wonder if a regular guy or gal who just started a business and worked to round up customers would be given more slack than a CPA, who definitely should know better.

Wow, you learn something new here everyday. It wasn't my question, but thanks everyone for the learning experience.

Saw an article today that two people were arrested in CT for being part of the IRS phone scam. These people weren't the callers. They were paid $40 for each Western Union check they picked up and deposited somewhere. One of them said she was making about $500 a day doing this. That's 12+ victims A DAY. Lends insight into how hard it is to catch the real perpetrators. They're organized crime syndicates that hire unknowns in small towns that have WU offices nearby, have the money deposited to a legitimate bank and then immediately transferred here and there and somewhere else. Too bad CI couldn't have convinced the two arrested to keep picking up the checks but not depositing them. Bet the criminals would have shown up at their doors in no time. But then again, the visitors would probably be hired hit men and not the brains behind the operations. By the way, the callers are getting more aggressive. One woman interviewed said the caller threatened to shoot her in the head if she didn't pay up. Guess they weren't getting enough people to succumb to their threats to sue/arrest/deport.

Had an elderly client come in yesterday because he received a call from a "state marshal" for his supposed tax debts. He asked if I would call the number again for him. I don't think so. The local paper ran a front-page story on the scam the day before. I was finally able to calm him down and warn him about the new scam from DHHS who calls to verify people's Soc Sec and Medicare numbers. Just today I heard about another scam where crooks are hacking the email accounts of realtors. The realtor emails clients the details of their closing date and how much they have to bring in a certified bank check, and the crooks send a new email saying the money now has to be wired to a certain account. Could you imagine showing up at a closing after you wired $20k or so and discovering you are out all that money? We already know that we preparers are being targeted by criminals, but who would have suspected realtors? The internet as we know it is going to have to change.

Your client "forgot" he had $165k in assets? How much income did he "forget?" Did he deduct property taxes, registrations, heavy road use, maintenance, fuel, etc all those years? I believe the tractors depreciate over three years and the trailers over five, so most of the expense is behind him. Form 3115 is the only way to go. Reminds me of a client I had once who forgot he was married! And I had a client this season who only had one W2, nothing else, and guess what he forgot to bring to his appointment? My memory ain't that great either, but......

I just had a MFJ couple who hadn't filed in two years (well, one died so that's a good excuse) and hadn't sent in the $14k ES payment I had calculated for them when their 2014 went on extension. When the IRS sent a kind reminder to file,I had the living spouse send it in even before I completed the return. Money accepted. There ended up being a $5k overpayment, which I applied to the 2015 return. When I filed the 2015, there was no way I could convince the program that the applied amount wasn't from a timely filed return so wasn't timely paid. An IRS letter arrived shortly thereafter, charging interest for late payment of the applied refund. Their programs must be better than mine. I just told him to pay it.

There's a little confusion going on here. JKLCPA notes that the 1116 instructions say it's okay to put the foreign taxes paid on Sch A if the requirements are met. That is not the same as putting it on page 2 of the 1040 as a credit against tax liability. I think that only foreign taxes reported by Regulated Investment Companies (e.g., mutual funds and brokerages) can skip the 1116 and go directly to Line 48 of the 1040 (could be wrong). PTPs are not regulated investment cos. And even if the 1116 is not required, your client may benefit more from a $61 credit than a Sch A deduction (they might be subject to AMT or not even itemize so lose the whole thing). And like Lion, I notice that clients who have one of these PTPs have others, and you never know when you start out if they will meet the threshold for skipping the 1116. Mod edit - the following portion of this post is going off topic, yet it warrants further discussion so I have copied and posted it in its entirety into a topic of its own pertaining to various software vendors and program robustness: UltraTax also does not have an entry for Box 16 of the K1 either but supplies a link to the 1116, another thing that makes me think it's required. Lion notes that sales of these investments require hand calculations of adjusted basis and ordinary income. The broker statements where these are held list the sale under "basis not reported" but usually give some number, which is wrong. Also note that the rules are different if you sell the entire PTP holding as opposed to selling some of it. If you sell it all, you just follow the formula and adjust for ordinary income and calculate gain/loss. If you only sell some of it, it is not treated like sales of stock where you can do FIFO. Instead the entire investment is treated as one unit, even if different blocks of shares were purchased at different times. Then you have to do something like average cost basis (like with mutual funds) then calculate gain/loss and take the ordinary income portion out of there (and yes, even if you have a loss on the sale you still have ordinary income, which ends up increasing your basis and your loss). Last week I did one of these partial sales out by hand so I would know what the result was supposed to be. I fully expected to spend the next hour or two coaxing the software into putting the right numbers in the right places. Well, UltraTax just did it! No coaxing required. Add this to our list of second thoughts about quitting UT and staying only with ATX. Maybe I'll put this return and some other doozies into ATX and see what it can and can't do. We'll definitely keep ATX for payroll and 1099s--can't beat the ease of use or the price. For tax, though, we really need a strong program. We would love to save the $15-18k price of UT, and geez I did the partial sale out by hand anyway, but ...... And thanks Lion for the motivational comment: "So, let them pay you for the tax reporting consequences of their decisions." My client with five K1s from PTPs and the partial sale is going to pay $500 extra.

Those little booklets written in tiny print that come with the PTP K-1s come in handy sometimes, eh? If I find one with diagrams and readable print, I always put it aside to use with all my clients who have these darned investments. Lucky you get to do two 1116s because you have both passive and general category income.

The holding period for inherited assets is always long-term. If the estate earned dividends and they were reinvested, the gain on those new shares only will be short term. Check that the basis is correct for the inherited shares. They take date-of-death value, but many brokerage house computers still list the deceased's original basis. And note that the gain will only pass through to the beneficiaries if the estate closes or makes distributions during its fiscal year.

I wouldn't lose sleep over it. When that 1099 comes to us, we have no idea when the bonds matured, just when they were cashed. Most likely the client doesn't know either. And if they matured years ago, even the IRS can't retrieve their tax return to determine what bracket they were in back then. All we can really do is report the interest when it's reported to the client.

I am sure the IRS, which is part of the Treasury Dept (that issues the bonds) do not communicate on this one. The old bonds actually list the buyer's Soc Sec number right on the face of the certificate. Since these bonds were issued well before everything became computerized, I'm sure they have no way of cross checking. Leaves those of us who "know the rules" in a conundrum. I would think that when the bonds finally get cashed and the IRS finally gets its share, no harm done. We're not exactly following the rules, but the IRS is still getting paid. I recently had two clients who called when they found some really old bonds that matured 12-20 years ago. I wouldn't even know how to access their returns from that long ago to amend them, and I'm sure the IRS has no record of them either. My advice was just not to cash them all in one year. I'm known to be a stickler for the rules (my boss says he often feels like asking me for my badge number), but I feel no guilt on this one. This resurrected thread brings me to an insight we might all use to help elderly clients. Some Series EE bonds were issued for 30 years. Some owners who bought them a long time ago are now in nursing homes. These people could take advantage of claiming the interest on a yearly basis. The first year they choose to do so they will have to report all the interest accumulated so far, but their nursing home bills will likely wipe that out so they will pay no tax. I have a 97 year old client who has a bunch of these bonds, still earning interest, with over $80k in accumulated interest. I plan to report it all in 2017, then deduct his $120k nursing home costs, which even with the 7.5% haircut will wipe out the income. The heirs will receive the bonds tax free. I have several clients who bring in an elderly relative's tax docs. and this year I plan to ask them all about uncashed bonds.