SaraEA

Depreciable rental property is Section 1250 property. Accounting for the depreciation already taken is calculated on page 2 of the 4797, which will indicate how much depreciation if any must be recaptured. Can't do this on Sch D or 8949.

Medlin, while the Google voice seems a workable solution to the problem of unwanted calls, aren't you spooked by the possibility that your entire life is out there for advertisers and data miners? Google is pretty famous for sharing your info (not as bad a Facebook, but bad enough). If they turn your phone messages into words, they can mine those words and suddenly everything you ever said or anyone said to you is ripe for the picking. They may sell your info only to "reputable" parties, who then sell it to other reputable parties, and it eventually can wind up on the dark web for sale to organized criminals. In recent months IRS had to shut down taxpayer access to transcripts and PINs, including IRS-issued IP PINS. Even though these sites used "out of wallet" questions to verify taxpayer identities, thieves had enough info to answer the questions and get in. Where do you think they got that info? Social media and google searches to be sure, but maybe GV? We have been warned to never answer surveys of any kind because anything we voluntarily offer is owned by the survey taker and can be sold to anyone at all. Can the same be said for our internet phone calls and messages? I'm scared.

Terry, these crooks are so good that their phones are set up to accept calls only from the numbers they have dialed. If they call your landline or home and you return the call from your cell or office, the call won't go through. If only these people would put their obvious talents to better society the world might actually become a better place.

If someone has already invented a robocall blocker, why don't our phone companies use one???? I blame AT&T, Comcast, Verizon, all of them for allowing this to happen. I can only believe they must collect tons of revenue from these creeps who dial thousands of numbers a day using their infrastructure. Passing laws against robocalls (which congress tries to do from time to time) won't work because these callers are not law-abiding folk. It is possible to deny robocallers access to our phones, but the phone companies won't do it. (Note I didn't say "can't" do it.) What we need is a law to make them do it.

These opinions uncover the real reason most of us are still in the profession: The opportunity to learn something new everyday. It could be a basic Sch A that forces us to look into the rules on 50%/30% charitable contributions, or an odd household formation that makes us review the finest details of filing status or dependency exemptions. Like others, I love the research into pubs, rev rulings, court cases, and the code itself to assure that I'm doing whatever it is right. I love to take courses too. Way back when I was at Block, I'd sometimes take 100+ hours. Now that I have to pay for CEs, I could never afford that many. Even with an EA, though, there are just some things I am not comfortable doing. Sure I can memorize the instructions and read the rulings with their wonderful examples, but if I'm still dizzy it's better for the client if I just say No. Some things are best done under a mentor, or at least someone to look it over. If you don't have such a person available, maybe it's better if you don't learn by practicing on a real client. And some rules change so dramatically it might be best to step aside, e.g.,the ACA rules for employers. Even if you've attended a million seminars and read the ever-changing rules a million times, I for one am still confused. We are deferring to payroll companies more and more. Like I said, unless congress really simplifies the code, we will eventually be better off becoming specialists in this or that area of code, not unlike physicians who now specialize in various parts of the body. The tough part is when an established client presents us with something like a trust, estate, new partnership, whatever, that is not something we have done before. We don't want to turn them away because they've relied on us for everything tax. Some preparers can do it--I've had some clients come to me for entity returns because their regular preparer can't do them, and they take the K-1s I prepare back to him or her for their individual return. I also have a couple of clients whose accountant does their partnership returns but will not do individual returns, so I'm the one who gets their K-1s. I even have a client who has me prepare his Sch C every year--nothing else! He then takes it to his preparer. I give that preparer credit for knowing what he doesn't know.

Reading the posts on this and other blogs, I wonder if some of us are trying to be all things to all people and not recognizing our limitations. Some questions are so basic that you wonder if the poster should even be attempting such a return. And some topics are so out of my league that I am grateful that I am not doing such a return. I believe the most important thing I learned during months of study for the SEA is that there is a heck of a lot I don't know, and probably never will. I have shunned some returns that I felt I could not complete correctly. I am not comfortable with foreign citizens with US income unless they are on the most basic visas, because I know they can be deported if I check the wrong box or rely on certain treaty provisions. I have done a few nonprofits but I am never certain if I am listing their raffle proceeds in the right places. I've done corps too, but I don't like them and am unsure of whether I did them right. Fortunately, I work in an office where I can pass these on to someone else. (In the case of foreigners and foreign trusts, we pass them on to somewhere else.) We also refer new EITC clients elsewhere. The due diligence standards have become so demanding that these clients are better served by preparers with appropriate training. We all know that the tax code is wildly complex. My hunch is that each of us who prepares tax returns will eventually have to come to specialize--whether it be regular individual returns, small businesses, certain professions, corps, trusts and estates, investments, partnerships, noncitizens, whatever. We gravitate to what we like, take our coursework there, and should be willing to acknowledge that certain returns are over our heads and decline to do them. (Works best if we have a large enough network so we can refer these rejects to someone rather than show them the door.) Thoughts?

The stock receives stepped up basis. Calculate the mean of the high and low sales prices on the date of death for basis. (If the client died on a weekend, see my earlier posts on how to calculate basis.) If the sales proceeds are more than $600, a 1041 is required, even if the net gain is less than that. This can be a benefit to the beneficiaries because you get to deduct probate fees, attorney fees, and accounting fees (even if not paid yet!) If these deductions are more than the capital gain, the excess is passed to the beneficiaries in the final year of the estate. They can deduct these on Sch A without the 2% haircut.

This sounds like a grantor trust, which was reported on Dad's return when he was alive. At his death it became an irrevocable trust (which can also be a grantor trust, but not if the grantor is deceased). You will have to read the trust document to be sure. It sounds as if all Dad's property is owned by the trust, so the trust gets the income and pays and claims the expenses (including mortgage interest). The will does not override property titled to others. In this case, the will says the son gets everything, but Dad didn't own anything, the trust did. There will be a problem if the trust doesn't have enough income from the rental property to pay mortgages, taxes, insurance, etc on both houses. Son can pay them if he wants but will get no credit because he is not legally liable for these bills. If he wants to protect assets from creditors, he should talk to an attorney, not you. (They prefer to talk to their tax pro because we charge a whole lot less, but some things are out of our bailiwick.) If the homes are distributed to him and the trust dissolved, he will treat expenses for his personal residence like everyone else--mortgage interest and taxes on Sch A. He can put the rental into an LLC if he is concerned about liability. Be careful not to give him legal advice.

With 401ks, if you're still working and contributing to the same 401k, you can skip the RMDs until you stop working. If you have old 401ks hanging around, you have to take those RMDs. Five percent owners have to begin RMDs, although they can still contribute. Are 403b rules different? I'm sure they are, because this whole area is so #%@ complicated with different mandates for plans that are essentially the same thing. In your case, though, the client is not contributing to her old plan so must begin RMDs. She may not want to wait until April 1 following the year she turned 70 1/2. She will be required to take two distributions that year, one by April 1 and the next by Dec 31 (the RMD for that year). This might bump up her tax bracket, raise her Medicare premiums, reduce allowable deductions, etc. I agree with Pacun that she should take the distribution and put the max into a Roth.

I filed an extension for a fiscal year estate today and it was accepted within a couple of hours. The last one I tried to do the same thing for had that database mismatch. So it was the IRS, not me. Not too often we can say that.

Ran into the exact same thing for an estate I was trying to put on extension. I am using a fiscal year and filed the first 1041 with whatever year-end date. The extension for the second fiscal year kept rejecting because year end did not match IRS database, even though it exactly followed the prior year end. Thanks for sharing this tidbit. Now I know it's not me doing something stupid.

Maybe the trust will have to file a second year, but not for this reason. An IRS refund is not income. A trust must file a tax return if it has more than $600 in income, which might or might not be the case. If the trust had no other income and is just distributing assets (the refund), no income tax return is required. BHoffman, did you mean the DECEDENT'S primary residence and a residential rental house he owned were in the trust? If the beneficiary's own assets were in the trust mixed in with the decedent's, you have an ongoing trust and will file returns for many years. And no, if there were no nondeductible contributions to that IRA, there is no basis (all contributions were pre-tax). The whole thing is taxable. Check if the decedent has been filing 8606s to report basis. It seems to me as if this poor guy went to one of those dinner seminars and got suckered into forming a trust he didn't need. From what you've said, he didn't have enough assets to justify protecting them in a trust (he may have had liability reasons). I have witnessed this many times--unsuspecting people fork over a fortune to form a trust they don't need, then have to pay for trust returns every year. I'm dealing with one right now where the decedent had a trust that expired on his death and all the assets were to be distributed to his son. Son called me because the jerk who set up the trust years ago insists the assets must be distributed to a new trust set up for the son before they can be distributed. Cost to set it up is $8500. I told the client to call an attorney, who reviewed the trust document, called the jerk and told him to distribute the assets directly to son. I'd report the jerk if I knew whom to report him to.

Answers to two more of BHoffman's questions. The unused basis in the IRA passes to the trust, so the full amount will not be taxable. Exceptions to the early distribution penalty include death (Code 4 on the 1099R).

Backup withholding can be passed through to the recipient of the income. Regular withholding cannot--it is credited to the trust. Since the amount withheld was 10%, and this is the amount IRAs withhold by default unless the payee tells them otherwise, I don't think you are dealing with backup withholding, which is mandated at 28%. Sounds like this is regular withholding and the trust gets credit for the amount withheld (and the refund).

But accounting practices do have to buy QBooks and tax prep software (and maybe asset management and tax planning modules) and continuing ed. Those sure eat into the bottom line.

"This tax applies to the part of the distribution that you must include in gross income." And what part is that? Taxman, what does Box 2 of the 1099R show? That amount is subject to penalty.

Agree with MDEA. If this was life insurance money invested in the annuity, it was after tax money. Only the earnings should be subject to penalty. This should be apparent in box 2 of the 1099.

Get an upfront retainer. In our office we ask for 50-100 percent before we begin work. If someone hasn't filed for, say, five years, it's usually because they fear how much they will owe. When that fear becomes reality, they may decide they don't want to come clean after all. And if the IRS is already knocking on their door, you can bet they'll pay their taxes before they pay the accountant.

Maybe this email was part of a research study to see how stupid Americans really are. The fakeness couldn't be more obvious. I have been flummoxed by the recent scam when the "IRS" calls and demands payment on itunes cards. It's still going on so it must be working. If I complete returns for clients who owe money next season and they ask if they can pay via itunes I will fire them. They are beyond help. I read today that instead of live calls scammers are now using robocalls and leaving urgent messages to call the "IRS" at whatever number. Seems they have learned they can reach more victims that way. As the older generations, who were raised to be trusting and trustworthy, die off I fear they will be replaced with younger people who have learned not to trust anyone or anything. What a sad society to live in that will be.

Hmmm...it would be nice to automatically import all W-2s, 1099s (especially the consolidated brokerage ones), etc. Even if you do some of that now, though, isn't there a need to double check the input? I doubt that automation will void the rule of "garbage in, garbage out. And I believe I'm not the only one who does certain forms in complex situations by hand so I can check them against the software, usually to be sure I checked the boxes right and put the right numbers in the right places. In other words, I figure out the answer by hand and then try to coax the software to agree with me. Can robots handle employer contributions to an HRA when the employee is over 65 and on Medicare? How about amending from MFS to MFJ? How about when spouses work in different states? Live in different states? How about when brokerage statements say "N/A" for cost basis and/or date purchased? Fear not, we'll always have jobs in customer service. Someone has to answer the client who wants to know how much he can make before paying back Soc Security. Or the one who wants to know why his home is assessed so high. Why just today we had a landlord client who wanted us to evict one of his tenants. And the one who called because someone rang his doorbell but no one was there. Someone has to give these folks the phone numbers of SSA, the town assessor, the marshall's office, the police. Or can robots figure that out too? If so, I want one.

Roberts, you only dream that the brokerage will adjust the cost basis automatically! The executor should request a date of death valuation from the brokerage (needed for probate). Even though they receive it, I have only seen one major brokerage firm actually transfer those numbers into the estate account. Part of the problem is that probate must appoint an executor, who must apply for an EIN, and only then can an estate account be opened and the assets transferred. The process can take weeks. The broker may use the original purchase price or the price on the date of transfer--both wrong. Some brokerages put the date of transfer into the "date acquired" column, so the sale looks short-term when it is always long-term with inherited assets. And in Catherine's case, since the sale was initiated by the decedent, I would bet real money that he gets the 1099B. The final 1040s I do usually contain many lines of "nominee" income, and the 1041s contain corresponding lines of "reported to xxx-xx-xxxx." And the "wrong basis" and "wrong type of gain" columns are heavily populated. I have never had the IRS question the entries, likely because they are so confusing they defer to my judgment (and math). Catherine, since the stock price only fluctuated by pennies, unless your talking thousands of shares, there shouldn't be an issue with using the mean of Friday's mean and Monday's mean.

IRS Reg. 20.2031-2(b): If there is a market for stocks or bonds, on a stock exchange, in an over-the-counter market, or otherwise, the mean between the highest and lowest quoted selling prices on the valuation date is the fair market value per share or bond. If there were no sales on the valuation date but there were sales on dates within a reasonable period both before and after the valuation date, the fair market value is determined by taking a weighted average of the means between the highest and lowest sales on the nearest date before and the nearest date after the valuation date.

The decedent did not actually or constructively receive the cash from the sale until after death, therefore it definitely goes on the 1041. (Just like if he requested his RMD before death but the check didn't arrive until after.) The real question is whether it is IRD or income to the estate. This makes a difference because basis will be different. Pubs aren't "authority," but Pub 550 mirrors the code: " Securities traded on an established market. For securities traded on an established securities market, your holding period begins the day after the trade date you bought the securities, and ends on the trade date you sold them." In your case, the trade date occurred after death, so I would say the estate sold them and gets stepped-up basis. (The estate comes into existence at the moment of death, so there is no way the decedent could have sold the stock.) Now the fun part of determining basis. Since the person died on a Saturday, which is not a trading day, you get to do some fancy math. First find the high and low prices of the stock on Friday and average them. Do the same for Monday's prices. There are three days between Friday and Monday, so you have to weight the averages: (Friday's mean X 1) + (Monday's mean X 2)/3. There is your basis. Note that the broker will give the decedent a 1099, so you'll have to report the sale on the final 1040 and back it out. Have fun, and do charge A LOT.

Click on the Fact sheet link above...this is a multi-multi-step process! It should definitely thwart many crooks. (No prepaid phones--phone acct must be in your name.) On the other hand, they have lots of smart people working for them, lots of resources, lots of time. We can only hope that it prevents more id thieves from accessing taxpayer data than it does taxpayers.

You don't establish an accounting method unless you've used the same procedure (even if wrong) for two years. Since it sounds like she hasn't filed 2015 yet, you can just amend 2014 if it needs it. The vacation home rules may apply, so check that out too.