SaraEA

PS. We are adding ATX this coming tax season. An accounting firm merged with ours and they want to keep their current clients on ATX, plus we will be using their payroll and information form processing. We will have to figure out how to print these things to File Cabinet. Maybe we'll end up scanning the client's copies and printing those to File Cabinet. I'm not happy about the extra step, but I think ATX is much easier to use for payroll reports, W2s and 1099s than UT's Creative Solutions Accounting (which is AWFUL).

We use File Cabinet which is integrated with Ultra Tax. The program automatically creates a file for the client and you can print the completed return directly to that folder. Same with the 9325s. We then scan all the client docs and file them in the same folder by year. We can also send copies of emails to the folder and make notes on the client's "home page." A default folder under each client is "permanent documents," where we store mortgage notes, state registrations, POAs, 8332s, whatever. When a client needs a copy of the tax form (what DO they do with the ones we give them?) or two years of W2s, we can send them directly from file cabinet with password protection. Or when they call we have all their info right at our desks and don't have to go digging up files (and then refiling them, which never seemed to get done). We have two monitors, and sometimes it's helpful to have prior years from file cabinet open on one screen, or instructions about how to enter some oddball items we stored there after we figured it out last year. We keep almost no paper anymore. Exceptions are estates, which are almost always on fiscal years but the tax docs come in for calendar years so you draw lines dividing everything between the taxpayer's final return and the estate's first return, or the estate's first and second fiscal years. I need those papers in front of me to make heads or tails out of. When we first started scanning all our paper files, we had some clients with years worth of brokerage statements and hung on to those in the event they ever sell some of those investments. It's not worth the time to scan 500 pages of documents and then search through 500 pages when you need something.

Did your client use standard mileage rate for those years? Unlikely, but if he did depreciation is figured in the standard rate. Check with irs.gov to see how much depreciation was included each year.

A dual member LLC will be considered a partnership for tax purposes. Even if husband and wife, if it's an LLC it's a partnership (no joint venture where they can each take half the income and expenses). The properties should be retitled in the LLC's name. Yet I have partnerships that own real estate and when a property is sold I discover the member's name is on the HUD, not the LLC. (Kind of defeats the purpose of having a a LIMITED LIABILITY company, doesn't it?) When I look up the property taxes I often find them in the individual's name. Sometimes the mortgages are in the LLC's name and sometimes in the individual's. People seem to do whatever they want with LLCs, most likely because they don't understand what they should do and the point of doing it. The banks don't seem to care as long as the mortgage gets paid and neither do the towns as long as they get their taxes. The IRS may be the only one who notices. Agree with others--the passive activity loss rules still apply, as do the basis limitations. Say your client puts his spouse on as a partner in the LLC, but she didn't co-own the property and didn't contribute anything. Her basis is zero, and her half of the losses is not deductible. This could backfire on your client. Get more details on the other member(s).

At an NCPE seminar last week, the speaker noted that the IRS will not challenge the $2500 in years prior to its effective date of 2016. He said go ahead and use it for 2015. Only problem I see with that is the election statement, which specifically says $500. I don't think you can do a free-hand election stating $2500.

I know that IRS backed away from making individuals who have rental properties issue 1099MISC forms. How about partnerships that own rentals? LLCs?

Catherine, how does this sync with IRS's identity protection efforts? We all know they shut down the "get transcripts" function for individuals and made it more lengthy for pros to access anything because we can no longer enter POAs online. And now there is software to make logging in and retrieving client info a breeze? I guess I don't understand how the software works or how it keeps the bad guys from using it.

I used e-services with Firefox on Monday with no problem.

This is great for some clients but not for others. I think I will ask some of my "younger" businesses to write accounting procedures that say they will expense items costing $500 or less, thus allowing them to use the "old" new rules. Newer businesses might not need to expense those higher amounts because their taxes are low anyway and may hurt themselves in later years when income rises and they don't have much to depreciate. As for keeping a separate schedule for property assessor reports, I know what's right and what's too much of a pain in the ..... I echo jmdaviscpa: " LOL." But I do follow the IRC to the letter.

Excuse me Peter, but I take that as a slight. As an EA, I dedicated the same two days of my life to an exam (8AM to 4:30PM), had the four parts scored on the same type of weird scale (1/3 or whatever pass), and have to take the same continuing education (24 hours required by the IRS, 30 by the professional associations; you might have to take more). The exam has changed some since I took it, but it's still a bear that requires months of study. Unlike a CPA, all four parts of my exam were devoted to tax. Only one of your was. Also unlike a CPA, I am licensed to practice in all 50 states; you can probably practice in one. I work at a CPA firm. One CPA gives us most of his tax work to do. The other does his own tax work but gives me his tough situations, the ones that require legal research or considerable knowledge that takes time and patience to learn and apply. The CPAs do audit work that I cannot, but that has to do with training and education, not software. By the same token, they give me their tax work that they cannot or choose not to handle because of my training and education. I'm glad I work for them and not you. How can you imply that a software program that doesn't seem to handle multistate issues is "okay" for anyone who does serious taxes? I guess you don't think EAs do serious taxes. You are an accountant who also does taxes. EAs are tax professionals who also do some accounting.

We raised our fees $20-25 last year, mostly to cover the ACA reporting. (Yea, a lot of people only needed a check in the box that they had health insurance all year, but it took us tons of hours in classes to learn the rules and how to handle them.) Some of our increase was due to the fact that some clients haven't had an increase in years. After reading these responses, I have no problem going up a bit more again this coming season. Today a client called who has an $800 return--multiple Sch Cs, Sch Es, K-1s. He said that his return seems to have gotten "simpler" over the years and wondered why we were still charging so much. Clearly this client does not place value on our services so Good Bye! Not one of the clients who experienced our increase last year complained.

Sorry that I was assuming your client had questionable motives. The reason I went there is that when her son became an adult she titled the account jointly--that's weird and made me wonder what she was thinking. The son might just take her name off the account if she wants to simplify things and not worry about gift tax returns. This assumes the parents are no where near the $10+ million exemption they share. Let the IRS figure it out (they won't).

If this was an UGMA account, all the money Mom put in for the first 18 years belongs to the son. It was a gift to him over the years and is his money. She was only custodian--if she withdrew any she would have to account for it and use it for him (and not for the basic necessities that parents are supposed to provide for their minor children). There have been many lawsuits where adult children sue their parents or grandparents when they learn they once had a custodial account and the older generation took some or all of the funds. When Mom changed it into a joint account, the son actually made a gift to her! Of course it wasn't a completed gift because she didn't withdraw anything, as Max noted. I don't see any issues with him removing her from the account--it was never her money to begin with. If she put money in after it became a joint account, then that is her money. She should withdraw it and gift it to him. Why do people go through all the shenanigans so they can go on Title 19 and let the other taxpayers take care of them? I truly believe that we as a society should take care of our impoverished elderly. But too many are becoming impoverished by choice. Yea lady, I'll be happy to pay for your care with my hard-earned tax dollars while your son is sitting back counting his $150k.

Texting with clients brings up lots of problems. As others have noted, it means they have your cell number and feel free to call you anytime day or night. People also expect instant responses to texts--wait five minutes and you get another one wondering what's taking you so long (even if it's 2AM). And how secure are texts? I know they are often used as evidence in criminal investigations, so they are definitely out there for someone to access. I won't even let clients email SS numbers because no email account is totally secure. We have a few clients who will call and, if they get sent to voicemail, immediately email and then text--all within 3 minutes time. I'm all for "bypassing the way younger clients communicate" if it means letting the "I want what I want when I want it" generation know they aren't your only client and that others might actually have a life that doesn't revolve around them. I really like texting and finds it saves lots of time in my personal life. I'm just afraid that if I let clients do it I won't have a personal life.

We recently had a client call with a trust question and told him to consult the attorney who drew up the trust documents. The response was, "Well, he charges me every time I call, so I thought I'd call you instead." What does that tell us about our billing practices??? Why do clients call us instead of the IRS (no 2-hour wait time), or the Social Security Administration (might actually require driving over there), or the motor vehicle dept or insurance company (hey, the notice has numbers in it--call the accountant). This week we tried to set company policy about nuisance things we need to spend time on and should charge for, but we all got into the "well, he's old or confused" or " he doesn't have any money" or "he's been a client such a long time." that we ended up with no policy. Just decided to charge when it gets out of hand, but by the time you realize that you don't have records of every 5 and 10 minute phone call for a "quick question." How do others handle this?

For the states, I don't get fancy with the explanation. Usually nothing more than "change to federal AGI" if that's the case. Many states want a copy of the federal 1040X anyway, so why repeat yourself. Ah, it's November, time to breathe. Quarterlies are filed, sales taxes filed, assessor reports done, most of the extension crowd filed (still about 15 to go, which will get done if they ever get their info to us). On the agenda for this week: one estate, two estate extensions (due so late in the year might as well extend them and wait for the 1099s to be issued), clean up desk, sort and file reference material picked up throughout the season, clean out email inbox, take a day or two off. I love it. Oh yes, back to the original topic, a couple of amends. No hurry, no pressure.

I am usually a real stickler for rules, but some of the PTPs have 40 states listed. I am not going to look up the filing thresholds for 40 states. (I give you credit, Lion, for all those projections.) Unless I see a significant number listed, I tell the client that I am not going to do the states. If the states think they are owed money, let them alert the client. I'll take it from there if they do. In all these years, handling countless PTPs, I have never had a client get a letter from any state. When a client sells a PTP, I do complete the worksheet that comes with the K1 by hand. (Am I exonerated?) This breaks out the capital from the ordinary gain. This summer I had a client with FIFTY EIGHT of these #**?!# things, 54 of which had been sold. I spent hours and hours doing all those calcs by hand, entering them in the program, and double checking every single one. You should have seen his bill.

Lion, you don't need to file the police report with the return, just the 14039 and form showing why you didn't efile. Of the dozen or so clients we efiled in the last couple of days,THREE were rejected as duplicates. Like you, all of them efiled extensions on April 15 that went through just fine, so the theft occurred between April 15 and Oct 15. That puzzles me. I thought the crooks filed like in January to be sure they got in before the real taxpayer. One of our rejects was the state return only. We've had a lot of that this year. The thieves know the IRS is getting better at detecting fraud, so they are just filing states. I haven't tried suppressing the federal returns on the others and just filing the states to see if they go through. Will try that Monday. You will not be considered late if your return was efiled and rejected. You have 5 days or something like that to get it filed. Related to the original topic, had a client walk in TODAY with her tax stuff. And related to this divergence from topic, a visit from another scared old lady who got a call from the IRS threatening to sue her if she didn't pay over $3 grand. I'm so glad she chose to check with us before she paid.

Tackled one today where the client took $450k out of his IRA and never told me about it!!! He owes $100k+ and says he doesn't have it. How the heck did he spend $450k within the year? I just hope he has enough left to pay for tax prep. We are having a staff meeting next week to talk about training clients better, giving them deadlines, and finally being firm about them.

We've already bantered about the personality types of those who bring in their tax docs on April 10 or later--disorganized, usually owe a lot, didn't open the envelopes, etc. Now let's amaze about those who habitually go on extension and don't show up until Oct 10 or later. The past month has been a constant stream of emails and faxes. Tell the client you are missing 10 items so they send one. After reminding them they send another. Eventually, some day you get them all (minus one or two, but you may have missed that email). Today I finally got the numbers on a client's foreign pension, but he neglected to tell me if he was reporting foreign currency or US dollars. Another email...... Another owns a huge business and dabbles in a few smaller ones. Brought in two huge volumes of records on Oct 13 but "forgot" to bring one of the businesses. Guess he'll be late. Or the client with a dozen rental properties who finally gave me all the income and expenses but neglected to bring every single other tax doc (pensions, IRAs, bank interest, dividends, you name it). Of course they can't find that paperwork because they got it in January and "put it somewhere." Today a client comes in with his dad's stuff--it's a pretty basic return, nothing fancy. Dig into it and find three documents are missing. Why am I surprised. Sent a client two separate emails today, one with the returns and one with the two documents to be signed and faxed back. So what do I get? One signed doc (not the 8879, the one I really need to file). Another went back and forth 3 times about whether they wanted to send a check or have the balance due direct debited. Every single email I requested the signed docs and it's like they never read beyond the first line. Finally sent a dedicated email today asking for the signatures and actually got them. You wonder how these people even get out of bed in the morning. Oct 15ers have it way over April 15ers in disorganization, disinterest, confusion, carelessness, not following directions. Oh yea, they also rank in amounts they owe. A client just brought in a pile of stuff where I found my carefully prepared voucher with instructions highlighted and envelope attached for a $14k estimate that was supposed to have been made in January. April people may owe a few grand. Oct people owe in the 6 figures. One more day.... (Well, we'll still have a dozen or so like Mr two volumes that will just be late. But it's October--sales taxes, payroll reports, assessor reports. Those returns will just have to wait a little longer.)

Randall, you're leaving out something here. How much was the state refund? If you just enter that amount into the input screen from the 1099G, the program should calculate the taxable amount. In UltraTax, it adds a notation something like "no tax benefit due to AMT." So if your client derived no benefit from deducting the state tax payment because of AMT, any refund should not be taxable. It will depend on his other deductions and whatever else AMT disallowed, but the program should figure that out for you. Let us know what the program ends up with.

mrichman, you have a calculation nightmare on your hands. I can give you some insights into the basics, but the devil will be in the details. When the parent turned the home over to the siblings and retained a life estate, a gift tax return should have been filed. If you can get your hands on it, you're halfway there. Basically, the parent's basis in the home and its FMV enter into the equation. The value of the share of the basis s/he retained is calculated using actuarial tables the IRS publishes. Essentially you look up his or her birthdate and use the factor in the table to calculate the part she retained. The remainder is split between the three siblings. Your client's basis is that number, and gain or loss is calculated from there. A loss will probably not be allowed because your client's share was sold to a related party. There is a catch when it comes to gifted property. If the FMV at the time of the gift is less than the donor's basis, gain or loss is figured differently. Good luck!

Exactly right. First return will be due May 15, 2016.

"So the average investor really only has one major decision to make - What is the appropriate asset allocation that allows me to sleep well at night?" But understand that the "average" investor doesn't know that. They sometimes need a financial advisor to explain it to them. After that, they can just go into a target fund, where the investment mix changes with age (and they can choose one for an older age than they are if they want less risk). Lately even target funds have been losing money, so an older investor might be better off with a fixed annuity. Again, FAs fill a need and have a place. One extra service we can give our clients is to alert them to excessive fees and trading and let them confront their FA.

I am a big fan of Bogle, and am no big fan of money managers--particularly the ones who work with big banks. Yet Bogle's advice quoted by John simply isn't for everyone. For example, an elderly person who has comfortable retirement income perhaps shouldn't be in the stock market at all. Why take any risk to potentially grow your funds (or lose them) when you don't need to? Others can't stomach the ups and downs of the market and will not sleep at night if they are in a total market index (especially lately). A good money manager will help people sort these facts out and put them in investments appropriate for their needs and temperaments. There is no one size fits all, and that's why some folks need financial advice. And, yes, they have to pay for it. Janitor Bob might tell his client to question the manager about the high fees, mentioning that her tax advisor noticed it. I've done this several times when I spotted really high fees or excessive trading. In almost every case the manager called me, made all kinds of excuses for themselves, praised me for working in our mutual client's best interests and for my brilliant insights, and cut out the crap after that. Sometimes all they need to know is that someone is looking over their shoulder. Worth a try.