SaraEA

The thieves already have a handle on obtaining PINs and last year's AGI. I too had a client who received an IP PIN this year and his return rejected because one had already been filed. Seems the crooks stole enough info about those whose identities they used last year to answer the "out of wallet" questions on the special IRS tool (use reserved for those issued IP PINs) to pass as the real taxpayer and get a new IP PIN. For others who just forgot their last year's PIN or AGI, they just had to log onto another tool, enter their SS# and birthdate and get a valid PIN issued. The thieves actually programmed computers with that info they had stolen and robotically requested PINs. Once the IRS noticed over 700k inquiries, a "tad" over the usual usage, they shut down the site. The "get transcript" site was shut down for similar reasons. The IRS has tried all kinds of ways to verify the identities of the "real" taxpayer, but the criminals are always two steps ahead. The IRS knows they are dealing with international criminal gangs who have the brainpower and resources to get what they want. It's no longer some guy sitting at his home computer with the info his girlfriend stole from the dentist's office where she works. I have long argued for removing the EITC from the tax system and putting it back into Social Services (where it used to be and was called "welfare"). At least there the applicants have to meet face to face with someone. They have to bring documents to prove they are who they say they are, their kids are really their kids, really live with them. People have to do that to apply for food stamps, housing assistance, etc. People should bring their documents and completed returns to the Social Services office and then get approved for the money. Tax preparers and IRS agents are trained in accounting and law,, not social work. So let the social workers do their thing, which they are way better at than we are. That said, removing EITC from the tax return won't eliminate the fraud. Sure, there are the folks who hide income, hide spouses, claim kids who aren't theirs, change addresses, whatever it takes to max the EITC. But a lot of the organized criminals don't even claim EITC because they know it gets extra scrutiny. They make up W2 info, often with employer EINs they obtained from discarded or intercepted or purchased W2s, and file away. A fake return filed for one of my clients last year showed income over $60k--no EITC there, but a hefty refund with the excess withholding reported. (The clients makes over $600k and if she gets a refund always applies it to her estimates.) Only holding off on all refunds until matching can be done will solve this one. Or will it? In CT, the Dept of Revenue Services said crooks were going so far as to register fake businesses (online of course) to obtain EINs so they could then make up W2s. If these same crooks then file the W3s, 1096s, etc, they'll still outsmart the IRS. Maybe the only way to stop the theft is to stop refunds. In PA, if someone is overwithheld for local taxes, they actually have to give an explanation. The amount withheld is always the amount due (except for self-employeds). There are no refunds.

I didn't say the cousin was living in the house. We don't know what it's being used for. It could be investment property--maybe to turn into a rental or hang onto and sell when prices are favorable or use for a commercial tax prep business. If cousin lives in the house and later sells, most likely will be a gain (if mother bought a long time ago and has a low basis) subject to the $250/500k exclusion if cousin lives there long enough.

Mom gifted the house to her son, who gets her basis. He in turn gifted the house to his cousin, who now gets his basis (which is the same as Mom's unless son made some improvements before he gave it to cousin). Unless, of course, the value of the house decreased below the basis in the interim, in which case there are two bases--basis for loss and basis for gain. In either case, it is now the cousin's problem when s/he sells the place. There was no sale from client to cousin, so capital gain or loss is not in the picture. Cousin is the one who will have a gain or loss when he or she eventually sells.

In this case I would call the person who prepared the 706 and mentor them. I would hope that if s/he prepared other 706s this way, the IRS would have caught it and returned the money. I do a fair amount of estate work and have never filed a federal 706. (I have done a very few CT state 706s, which have a $2m deduction.) I may end up doing some only for the spousal "portability" provision, which requires a return so the living spouse can "inherit" the deceased spouse's unused exclusion. And I have one now that just may exceed the $5.3m--the attorney is still trying to get a handle on all the assets. It will be my very first, and I've been at this awhile. What the heck was this preparer thinking?

You have a right to be suspicious. Whom did the letter come from? You said the phone goes to the "return preparer office." What is that? Everyone on this board has a "return preparer office." SSA has no interest in your professional status as far as I know. I'd give them a call (using a public number you can find on the internet). This might be a new scam and they should be alerted. Professional status can be verified through any number of professional organizations. If you're an EA, the IRS has that info. CPAs are licensed by state boards of accountancy, attorneys by state bar associations. Anyone who really needed to know would contact those organizations and not rely on some certificate from you that can easily be faked. It's becoming a scary world out there--even those of us who are trusting by nature are becoming suspicious of everyone and everything (not a peaceful way to live.) We hardly ever answer our phone at home anymore: nothing but calls from 800 numbers that never leave a message, or from "unavailable" or "private." Even the IRS said recently it will no longer notify taxpayers of in-person audits by phone. They usually call to set up an appointment, but with the number of scammers pretending to be the IRS they decided to send letters instead and then follow up by phone. And now it appears that even letters are being faked. Whom do you trust?

Roberts, it must depend on state law. In my state, Probate must approve all distributions.

If the older brother is 19 or older and not a full-time student, he would have to meet the Qualifying Relative test because he's too old to be a qualifying child. In that case, he can't have income over $4,000 for 2015. If he is under age 24 and a full-time student, he can be a qualifying child regardless of income if he doesn't supply more than half of his own support. If the other son is totally and permanently disabled, he can be a qualifying child as long as he meets the support test. To think they dreamed up the qualifying child and relative distinction to make things simpler!

You really mean you can't make distributions from the estate without the court's permission? Hahahahahahahaha. I wish someone would tell most of my clients that.

I always thought beneficiaries had an automatic right to the return. Guess not. Here it is from the Internal Revenue Manual https://www.irs.gov/irm/part11/irm_11-003-002.html 11.3.2.4.7 (08-29-2008) Estates The administrator, executor, or trustee of an estate may receive returns and return information of the estate. Any heir at law, next of kin, or beneficiary who establishes a material interest which will be affected by the return or return information may also receive returns and return information. A material interest is an important interest and is generally, but not always, financial in nature. Example: Submission of a copy of a will by a beneficiary who is described in the will as entitled to "x" percent of the decedent’s gross estate, together with a statement that the decedent's return is needed to assist the beneficiary in determining whether he/she has received a proper share of the estate, would generally be sufficient to permit disclosure. The merits of an action, such as a law suit brought by a beneficiary, will generally, but not always, have no bearing on the material interest determination. The requester must furnish satisfactory evidence that he/she is an administrator, executor, trustee, heir at law, or next of kin under applicable state law, or is named as a beneficiary in the decedent's will. Generally, written evidence such as a copy of the will, proof of relationship, or letters testamentary will be furnished to show satisfactory proof of entitlement. See IRM 11.3.3.3, Distinction between Disclosure to Designees and the Conference and Practice Requirements, regarding representatives for estates. Requests for returns must be made in writing.

I got to know almost a dozen IRS agents who were classmates in my Master's in Taxation program. They were all smart and very well trained in the law. They wouldn't get a raise or a step up in their civil service classification when they completed their masters--they were just going to grad school because they wanted to do their jobs better. (Of course, the gov't was helping pay for it. But it was a HARD course and A LOT of work, so they had to be interested and dedicated to want to spend two years studying and writing papers and taking exams for no extra pay.) Does something happen to them when they leave the Service? Do they suddenly think that since they know what will and won't send up warning flags, they won't get caught? How can they change mindsets from preventing people from cheating the government to helping them do so? I've attended many seminars where IRS presenters do everything but scold us. (Karen Hawkins did everything but spank us.) I was annoyed because I thought we preparers who stay current, keep our clients honest, know the law, were more akin to IRS agents themselves than we were different. We asked for proof for deductions even if we didn't have to, looked up the Code to see is this or that transaction was allowed, read clients the riot act about amending prior erroneous returns. Lately, though, I am appalled by the number of arrests the IRS makes of preparers who make things up, steal identities, stiff clients. I don't know any preparers who do those things. I cannot imagine any of my former classmates doing those things either once they leave the service. Maybe the former IRS employees whom others in this thread have encountered are former for a reason?

I have a client who every year brings me the copies of his 1099MISC--including the red copy. Hmm...to report or not report? (I do, of course.)

What perplexes me (with Block and other corps that announce big layoffs) is that if they can dismiss 13% or their workforce, does that mean those employees didn't do any work? Why did they have them on payroll in the first place? I surmise that the worker bees were the ones who got pink slips and not a single assistant to the assistant to one of many vice presidents of this and that. Sounds to me like Block's support staff was downsized--the ones who support their thousands of tax offices and develop the training for their zillions of tax preparers. Not a good sign (unless you're a competitor). Successful corporations do a good job balancing the needs of their clients, employees, and shareholders. Seems like Block is only interested in the latter. Sad to see a good company, the one that started the paid tax preparation business and set the standards, lose sight of the big picture.

Last season it was about 12 weeks, sometimes less but don't tell the client that or they'll hound you. If identity theft is involved, much longer.

On a different note from the resident/nonresident rules, the FBAR is required when one has a foreign bank account balance in excess of $10k. Income has nothing to do with it. I know, in the US today you'd need a balance of a zillion dollars to earn $1500 in interest, but in perhaps India and some other places you might earn that much on less than $10k.

Probably $200, $25 more if there was a refund and I had to do a 1310 or turn it into a paper return. I never thought about a "sympathy" discount. I like the idea, but on the other hand final 1040s and later 1041s (and state probate filings) are things that require specialized skills. Often the banks and brokerages didn't get the message that the taxpayer died and they issue the 1099s for the entire year's income. Then you have to back out what was income in respect of a decedent that rightfully belongs to the estate. Prices go up when that happens.

Was that our client who dropped off his sales info late this AM (just pages of long columns, mind you, nothing totaled), when the state sales tax report must be efiled by 4PM?

I had several of these types of emails early in the season. I deleted them all and guess what--no one who was so interested in having me do their returns bothered to contact me again. See how good these people are? They can spoof caller IDs, IP addresses, "borrow" legit and relevant names and phone numbers and email addresses. LinkedIn seems to have security problems. I often receive emails purportedly from real clients asking me to join them on LinkedIn. Just had one today, although I can't imagine what I could add to a group of land surveyors. Crooks must be able to access their personal computers from their LinkedIn accounts and then send whatever they want to everyone in their address book.

Just today a client forwarded a K-1 from an attorney who apparently prepared it and pointed out to him that the $70,000+ dividends were all qualified and would be taxed at 15%. Um, did this attorney know the client's other income? Did this attorney ever hear of the NIT? Does this attorney know that above a certain income level, the rate is 20% plus NIT? And I will be the one to have to explain it to the client. Grrrrrrrrr. And then there are the real estate attorneys (agents are famous for this as well) who tell the buyers/sellers that they can deduct all their closing costs, fix-up expenses, etc. Oh, the deductions they will get, even if they bought the house in December and didn't make any mortgage payments yet. Double Grrrrrrrrrrrrr.

A few years ago I asked some IRS agents who were classmates in a graduate program with me whether the IRS had any way of knowing if one spouse itemized and the other did not. All of them said that unless the other spouse was under audit for some other reason, they were not authorized to go into that person's return. This conforms with a recent TIGTA report that the IRS isn't doing a very good job of tracking this. They could probably solve the lack of oversight by a computer programming detail, but we all know how behind their computers are. So I guess it's up to us, fellow preparers, to enforce the law as written knowing full well there is little chance of the IRS noticing. I do ask clients if their estranged spouse itemizes; if they say s/he owns a house and makes six figures a year (= lots of state income tax to deduct), I make the client itemize. If they say they don't know, I do whatever works best for the client. Let the IRS figure it out. Even though they require me to do their work, I am not on their payroll, do not get their cushy benefits and retirement plan. I work for and get paid by my client.

To everyone whose clients got IRS letters (and/or state letters), I think this means the new identity theft filters are working. We have had two clients get these letters from IRS this season, and in both cases a return had already been filed and IRS suspected something and was writing to verify. Neither taxpayer had filed yet, so those filters did what they were designed to do. The clients called IRS and had some difficulty proving they were the real taxpayer, but then were treated like royalty--thanked profusely for saving the agency so much work and given instructions on how to file their returns. Apparently the thieves, who are mostly organized international criminal gangs at this point and have loads of manpower and money, actually file fake W2s before they file the fake return. IRS has to go to employers to verify that so-and-so is really on the payroll, cross check state records for dependents, etc.--time consuming research. It is not very clear in the letters that another return was filed, just a sentence buried somewhere that if they didn't file yet to call or write. If your clients already filed, realize that the IRS letter was likely generated a few weeks ago so the letter is questioning the first return they received. (The real return was accepted because the account had been put in limbo.) While it may be a nuisance for your clients, it is saving all taxpayers bundles of money that would have been sent to thieves. Beats last year when one of our clients who hadn't filed yet got a letter from IRS saying that they were adjusting his refund by $160k because he'd neglected to record his estimated payments. Did they really think anyone would forget they paid in $160k?

Can't your clients dig up another $4k they gave to charity so they can itemize? What kind of stingy clients do you have?

We had stopped keeping originals of W-2s etc but started up again this year because of refund identity theft. Last year we had 12 cases and had to call each of them to return to the office so we could get the originals out of their folders to staple to the paper returns. Decided to just hold onto them this year and scan and shred AFTER the return is accepted. This season so far we only have one ID theft victim, who was also a victim last year and both he and spouse had IP PINS issued by IRS. He's the only client I sent home with his original tax docs in his folder because I just assumed this year he was safe. Silly me. Most of the other rejects are those brilliant kids claiming themselves, but at least now we have the originals to put on the parents' paper returns.

Lion and Black Bart, back pain may be caused by staring up at a computer screen all day (and all night) that is too high from where you are sitting. (Or too low.) I worked in an office once where I got serious neck pains. Then I noticed that I was fine on Monday, a little stiff on Tuesday, and by Friday I was in serious pain. It went away over the weekend and started all over again the next workweek. I put two and two together and set the computer on a lower desk; never had it happen again. A man in our office would get such back pain that I would catch him rubbing his back against the doorway to relax it. I had to sit at his desk once and thought I was sitting on the floor. I adjusted his chair upwards and his back pain disappeared. Big offices actually have ergonomic experts come in to examine such things, and often all it takes is adjusting the angle from where you view the monitors and/or type Try it. I hope it helps.

My post made me realize something. Why do we remember and dwell over every single error we ever made (I still remember my first one almost 20 years ago) and not feel good about the zillions of clients we have helped over time? The ones we found eligible for credits they never claimed, played with the numbers and discovered MFS actually would save them a bunch, cajoled into increasing their withholding or paying quarterly, warned about missing sales tax returns, spent precious time calculating basis of assets, dropped everything so we could meet some outside deadline for them......

I did the same thing once, the year of the Sandy Hook school shootings in CT. One of the parents was a teacher at the school. These folks didn't need any more grief in their lives. They're still my clients though, so I guess they forgave me. I will never forgive myself.