SaraEA

He said Skipper, but looking at the wages I highly doubt it. The more I learn the more I realize that this is hardly anyone's dream job. They work really long hours and can be called to duty from a sound sleep. Wages are low. Do remember to tip everyone. The crew sure depends on it. I've never been on a cruise and have no desire to go. I don't want to spend two weeks eating, and the tourist traps in every port would bore me (I'm not much of a shopper). When I go somewhere I want to see the historic sites and especially what grows there that I haven't seen growing before (e.g., rice, cacti, pineapples, coffee). The ocean is beautiful and powerful, but it's the same old same old. The only cruise I'd consider would be Alaska, because it would be kind of hard to get around without the guides and transportation. Anyone been?

Carnival. They do port in the US and therefore have to withhold income taxes and issue W2s to US employees. Wages are not subject to FICA or FUTA though. Who would have guessed.

Did some research at the office today and found Rev. Rul 92-106. It states that if the employer is foreign and the employee a US person, income taxes must be withheld if the ship touches port in the US. The income is not subject to FICA or FUTA because no services were performed in the US. Sounds like a godsend to the employee, until it's time to collect SS or apply for Medicare that is. Thanks for all your ideas. I was thinking along the exact same lines until I found the ruling. This international stuff is so tricky that it reinforces my belief that in the future tax professionals will have to have specialties just like physicians....international, small business, big business, partnerships, estates and trusts, multiple states, investments, etc. Already many of us gravitate toward areas we like and eventually learn a lot about, which brings referrals, which helps us develop more knowledge in that area, which brings more referrals. No one could possible know all the tiny details about every area of taxable income, so at some point we'll be saying heck with it and become specialists instead of generalists. I did a return with foreign earned income exclusion a couple of years ago, and the next thing I knew the guy's banker was calling about a client who wants to set up some foreign trusts!! That was so beyond my limits I told him to find an attorney who specializes in foreign trusts. Sometimes you just have to pass this stuff on. If I were to choose a specialty, it would be estates and trusts. What would others pick?

Client lives in the US and is a US citizen.

In keeping with the "emolument" theme, just had a client show up who hasn't filed in four years. He works on a cruise ship. The company is registered in a foreign port (they all are), but the client reports for work at several US ports then launches into (I presume) international waters. The W-2s only have box 1 populated--no withholding or FICA. I can see that the foreign owners have no interest in collecting and turning over SS or Medicare taxes to the US gov't. Usually when I see foreign income though, one country collects the retirement funds, so if say Germany collected them, they wouldn't be subject to FICA here. Is it possible that no country collects them? If this client's wages are subject to FICA, how the heck do I report it on the return (uncollected tips?)

If A takes a loss on his partnership interest, does that affect the basis in the assets? I don't have a research materials with me so don't have the answer. Are the parties related? Does the transaction have what the IRS calls "economic substance"? Did A contribute appreciated/depreciated assets to the partnership? This whole thing sounds like a windfall for B, which may be the intent of A. (A had appreciated property and stock, stuck it in a partnership, abandoned it, and gets to claim a loss instead of a gain.) The reason I'm skeptical is that after years of struggling through multiple courses in partnership taxation I realized that the reason why the rules are so unbelievably complex is that people have used partnerships to do all sorts of things to avoid taxable income. When the IRS catches on and creates a new rule, people find ways around it, which leads to more new rules. I often felt that the only way to clarify the taxation of partnerships is to throw that whole section of code away and start over.

jm, what you are experiencing is the IRS's anti-fraud filters in action! I was at a seminar last week where the IRS liaison told us the IRS had 10 filters in place just a few years ago; now they have 140. Hmmm....here's a taxpayer who hasn't filed in years and suddenly surfaces with a K-1 (that won't be in the system for months) and wants a big refund. Or it could be that someone who knows she doesn't normally have to file has been filing using her identity. That someone got hung up in the filters this year, and now the agency wants to identify the real taxpayer. Or maybe she does file but her income is so aberrant this year that the return was hung up by a filter. We've had lots of clients get letters this year asking to see their information documents (the same standard letter your client got). Some were understandable--they changed addresses, banks, names. Others seemed to have no reason except that just maybe a bogus return had been filed using their identity and the filters put it in limbo, waiting for the real taxpayer to come forth.

JM, that is scary. At first I thought these posts were only showing the incompetence at the USPS. I have an elderly relative who moved recently and we filed the standard change of address with the post office. The notice they sent (usually to old and new addresses) was only delivered to the old address because someone must have gotten tired of typing and the new address field was blank. So he changed his address from the old home to.....no where! It took three trips to the post office to find the right person on duty to fix, but now he gets his mail with the little yellow stickers showing the new address. It is my understanding that when a taxpayer files a return with a new address (particularly one with a refund), the IRS checks with the USPS change of address data base. Good luck with that, if my experience with the local post office is any indication. But to realize that jerks are requesting changes willy nilly smacks of some form of terrorism. This can really throw billers, payers, banks, the gov't into a whirlpool of a mess, not to mention the unsuspecting victims.

People cannot contribute to a traditional IRA after age 70.5 (the RMD age when they have to start taking the money out). They can contribute to a SEP or solo 401k if they are still working and to a Roth if they are within the income range. I don't believe farmers have different rules, but maybe someone else knows.

Bank of America = Worst Bank in America. I pity your client because you have to call and go through 100 menus to get a real person, who tells you to call back tomorrow, and then you go through 100 menus again. If you go to a branch and find someone to help you, they too have to call and go through 100 menus ("press one for English"). When we sold our last house the title search revealed BofA had a lien on our property, although we had never had a loan with them and carried no mortgage with anyone. It took them weeks to release the lien, and they only did it after I pulled my last card and threatened to call the state Banking Commissioner. This is definitely a bank problem and your client has to put it squarely in their lap. With gov't deposits of any kind they have an obligation to check these things, but gee that might require hiring an additional employee who understands English.

Anyone know if taxpayer's bank account and routing numbers are part of the transcripts? Lots of clients use direct deposit or direct debit. And thanks for reminding me we can get transcripts through eservices--just have to fax the 2848 and wait until it gets into the system. For the past year we've been asking clients to get their own transcripts because it's faster.

According to the article, the thieves hacked the IRS transcript system. They already had the taxpayers' names, birthdates, SS #s, and addresses, which is all they needed to get in. So all they got that they didn't have before was tax return transcripts. And what are they going to do with those? All I can think of is present them to banks and take out big loans in the victims' names. Note that the personal data they used to access the system was exactly what was stolen in the massive Anthem breach. I wonder just how many people who ever had Anthem Blue Cross/Blue Shield signed up for free credit monitoring. Doing so will at least prevent the bank loans. I wonder what other disasters these poor folks have in store for them in the future. Also note that in the "old days" (last year), the only people who could get transcripts instantly were tax pros who had POAs and had been vetted to use eservices. Taxpayers could request them online or by phone but had to wait a few weeks for them to arrive by snail mail. Now the parties are reversed. CPAs, EAs, and attorneys can no longer get transcripts through eservices, only taxpayers can. Someone high up in the IRS had to distrust tax pros enough to push for that change (the initials KH come to mind). I couldn't believe there was that much of a problem with credentialed preparers gaining unauthorized access to a taxpayer's records--we had to present a POA, PTIN, license number, CAF--lots of safeguards there. Now we are locked out. Anyone with stolen Anthem data is allowed in. What is wrong with this picture?

Sorry to confuse. You have to purchase a rider to your E&O that overs loss/theft of client data. You can buy another rider that covers employee theft of same. Tax refund theft is such a ballooning problem right now it's not a bad idea. Thieves know that tax prep firms have the data they want. If you don't get the insurance, at least invest in an alarm system. I know, during tax season most of us feel like we never leave our offices.......but eventually it will be July.

At a professional association meeting a couple of years ago the IRS liaison told of a preparer in our IRS area whose office had been broken into. The thief took tax returns or data, I don't remember which. Long story short, the preparer did not have insurance and just the cost of paying for credit monitoring for all those clients put her out of business. I would say no one can afford NOT to have E&O.

The only available choices are a partnership or a qualified joint venture. Since they formed an LLC, their only choice is a partnership. http://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/Husband-and-Wife-Business "A business owned and operated by the spouses through a limited liability company does not qualify for the electionOnly businesses that are owned and operated by spouses as co-owners (and not in the name of a state law entity) qualify for the election. See Rev. Proc. 2002-69, 2002-2 C.B. 831, for special rules applicable to husband and wife state law entities in community property states." I'm working on one of these right now. And since the couple never told us about the LLC, just popped in with a new rental property, we never filed an extension for the partnership. It will be okay since their return will be timely filed with the LLC income reported from the two K-1s, but you know it will mean some IRS correspondence. Let us know if the community property rules are a way out. (Our state is now CP so I didn't dig deeper.)

Karen Hawkins was one tough cookie. If you've ever seen her in person on watched one of her webinars, you couldn't help but feel that she didn't like you, didn't trust you, and was just waiting for you to do something wrong. Maybe it was just a personality thing where she came across that way, or maybe it was a power thing. I was shocked to read that she actually complimented tax pros in her farewell message, but even there she couldn't resist the parting shot by reminding us to stay on the straight and narrow. I am happy to see her and her attitude go. Hopefully she will be replaced by someone who treats us as stakeholders in tax administration, as valuable contributors to the IRS's work, instead of dishonest, incompetent cheats. Instead of supporting us in our role, Hawkins was just waiting for anyone to make a mistake so she could pounce.

You're right that congress enables refund fraud by mandating speedy refunds. By law the IRS has to pay interest on refunds they don't pay within 60 days of receiving the return, and on their tight budget they can't afford it. I'm sure the agency would rather wait until its computers can match tax reporting information to the return. Then they wouldn't have to pay the 3,000 agents working in the identity theft unit, all the back and forth postage, not to mention trying to catch the crooks and reclaim all the refund money that was stolen. I disagree that this is going to be a problem for clients for the next 20 years. It has simply gotten too big both in terms of the monetary loss and the number of taxpayers victimized. This year for the first time large numbers of state returns were affected. The states are NOT going to take it. They will apply pressure on the feds to do something to verify the identities of those filing returns. If that fails, they'll do it themselves and thus become a proving ground for a model the IRS can emulate.

I think people are becoming way too addicted to their smartphones, mindlessly treating them as a tool that can handle absolutely everything. With all the apps available, they probably can--but does anyone ever think if they SHOULD do everything with it? It's a little gadget...you can lose it, leave it at the restaurant, have it stolen off your desk. I would never put any financial or sensitive data into my phone for this reason. And if huge, presumably very secure systems (Anthem, anyone?) can be hacked, think what crooks can do with the wireless transmission of your data, or what they will find if they steal your phone and have at it. Sure you can disable the phone, but only after you realize it's gone...an hour or two is twice the time they need to copy the memory. And just think of the inconvenience of trying to enter your tax return info into a tiny screen. The IRS even has an app for tax prep--wonder how popular it is. Eventually people are going to have to wake up about the dangers of smartphones. It will take some major hacks and some major damage, but we all know it's coming. Just like the future of the internet. I foresee that the internet as we know it is going to be a very different thing in the not too distant future. It is too insecure, too many places are collecting details of our personal lives from it, spyware and malware are threatening us even in the safe havens of our homes. Forgive me if I pass on giving my tax info to Sam's Club.

Wow. I did not know that disability reported on a 1099R code 3 was considered earned income if the taxpayer is under regular retirement age. This board is great!

Wages are not reported on a 1099R, so no EITC. They may count if reported on a W2 with "third party" payer checked. This really helped a client who was facing pay back of his entire ACA advance credit. We had to do something to bring his income below 400% poverty level so thought of an IRA. The IRS has a safe harbor for IRA contribution eligibility--if it's on a W2 they will count it as earned income for IRA purposes. This client had a W2 for disability pay so qualified for a deductible IRA. Instead of paying back over $8k he was limited to $2500. Whew. Not sure if W2 disability counts for EITC though. You will notice that the "taxable amount not determined" box is checked on IRAs, not pensions. The reason is that the custodian has no idea if the taxpayer's contributions were deductible or not. All the custodian gets is the money, not the tax return or 8606.

You have to file a claim for refund within 3 years after the due date of the return or within 2 years after the tax was paid, whichever is later. So if a taxpayer filed a 2010 return in 2014 and paid up, s/he has until 2016 to file a claim for refund. Since that doesn't apply to your client, he or she is outtaluck. For what it's worth, Wisconsin has a 4 year SOL. Maybe your client's state has different rules as well.

Surely the NJ tax dept has satellite offices around the state. Tell the client to bring the documents to an office. That way they know they are giving up their information to the real thing.

Catherine, tell your hygienist to go to the Compliance Dept where the rep works (if a financial firm). If that doesn't work, go to the state insurance commissioner. Just the threat of either will make the rep or firm more willing to work out a deal. If not, the state will start a file on the rep. Client can't undo what already happened but hopefully can be made whole for the taxes paid and just maybe get out of the annuity without any early cancellation penalties.

We've been getting several calls a day from people looking for a new accountant. In April??? Even in January we aren't taking new clients except those referred by really good clients, financial advisors, attorneys, we don't want to disappoint. Oh, and several of the ones we agreed to take showed up with three years of returns to file. I don't think so. Where were you in January (or three years ago)? This week we have been blasted with corrected brokerage statements. Again, in April??? These have to at least be looked at to see if the client owes. Right now our thinking is that we can tackle them after the 15th because federal rates are so low the interest will be minimal. Our state rates are high but it will only be for a month. Many of our limbo returns are for indecisive clients. Should I pay estimates or increase withholding? Should I pay all that tax now or recharacterize that conversion? Will I owe as much next year if I move to another state? Which state? Each of these take 100 emails, phone calls, will you please make up your mind. Limbo returns have a plus side--suddenly all those last bits of info come in and you can complete 10 returns before lunch.

I believe that many tax professionals today started out their careers at Block. They had the best training in the business, and potential employers looked for new hires who had Block experience. What has changed? I don't know about the training programs at the other two chains, but has Block's been diluted so much that their graduates don't know s**t? Methinks that perhaps what you are seeing is a shift in the workforce--attitude, respect for authority, work ethic. At our CPA firm we seem to go through one new hire a year. Most seem to spend more time on their smart phones than on their job assignments. I'm not talking about young kids but people in their 30s and 40s who spend more time texting and on Facebook than in the accounting software. Most knew tax or were easily taught and did a good job with it, when they actually paid attention to what they were doing instead of being distracted by their phones and personal lives. The best employee we had in the past few years was an undergrad accounting student who worked summers. He kept his nose to the grindstone and the only electronics I observed was ipod music. Alas, he graduated and went to work for one of the big four, where he is working 70 hour weeks even when it's not tax season. We must teach our children to do better. Begin with the forgotten fact that you must EARN your pay, not just show up. Your personal life, except for emergencies, goes on hold from 9 to 5. Next teach them to solve problems all by themselves. Too many parents today do not let their children fail at anything, praise them when they don't deserve it, and run their lives for them. No wonder they don't take work seriously.