SaraEA

I too want clients to call before a tax situation arises so I don't have to pick them up off the floor in April when they do their return. How many clients have you had who took $100k out their 401k, had 10% withheld, and told you they had the taxes taken out? I like it when clients call to tell me they sold their home (main or vacation?), inherited something (makes a difference if it's a 401k, IRA, savings bonds), got divorced and are now paying/getting alimony. I can tell them how much to set aside for taxes, set them up with estimates if necessary, or tell them no problem. Makes me feel good that they thought to ask me. Had a client query today about some weird profit interest warrants his company granted him. Glad he called now instead of during the busy season so I could do the research. We've also had some legitimate questions about employee health care reimbursements that I am still clueless about. Then there are the high-maintenance clients. Today I did my FOURTH tax projection for one. God forbid he pay $100 too much for his 4th quarter estimate. Another has asked about 10 times about how much he could contribute to a solo 401k vs. a SEP, income changing as the year progressed. Another had a million questions over the past few months about renting out very expensive inherited property. Like Rita, we just keep raising the fees. Maybe they're at the point where they feel free to pick up the phone and call us anytime because we charge them so much. I was at a seminar last week where the speaker was an attorney who helped people with foreign tax issues and big IRS debts (not a pennies on the dollar guy). When people called he would tell them if their case was easy enough to handle on their own or they should come in to see him. To those who asked if the initial consultation was free, he told them they just had it.

We had a client who had a bookkeeper and all we did was access the Quickbooks every quarter to clean the books up and do the financials, sales and payroll returns, etc. We started noticing funny stuff, mentioned it to the client, and the bookkeeper quit shortly after being questioned. We had another attorney office partnership where essentially the same thing happened. Turned out the bookkeeper (a different one from the first client) had been stealing from them for a couple of years. Then it turned out she had worked for four or five attorneys over the years and had been let go for the same reason. Common thread is that none of the business owners ever pressed charges. The bookkeepers just applied for other jobs and were hired because there were no black marks on their records. They were "clean" to apply for other jobs and keep up the thefts. We have hired a few people in our CPA firm who turned out not to be good workers (not thieves though). We never checked their references because we liked them and knew that in today's litigious society no former employer would ever say anything bad about them anyway. What is America coming to? People are not accountable anymore because no one will go through the trouble of having them make good for their misdeeds or dare say they're not model employees? Everyone gets a gold star.

"Under the ACA, the IRS issued Notice 2013-54 that said this could no longer be done on a pre-tax basis (whether the employer was reimbursing the employee’s own private insurance or insurance purchased the exchange), even if the employer is otherwise exempt from the ACA due to having fewer than 50 full-time employees." grmy2h Key words here are "PRE TAX." A business with under 50 employees does not have to offer health insurance but is free to give employees extra money to help them buy their own. The payment goes in Box 1 of the W2, just like any other wages or bonus. The kink here is that the extra money can't be conditioned on the employee using it for health insurance. "Note that taxable reimbursements conditioned on the purchase of individual coverage also create a group health plan with dollar limits in violation of the ACA." ILLMAS So I guess a small employer can give employees $300 a month extra pay, report it on their W2 and deduct it on the employer return as wages, just so long as s/he doesn't insist it be used for health insurance. Are we getting this yet? Will we ever get it? Does the IRS get it?

A lot of confusion about the ACA hinges on ignorance of one critical fact: It does not apply to employers with less than 50 employees. So if a small business employer wants to help his 10 employees out with the cost of their health insurance, it goes in Box 1 of their W2 as earned income. They can deduct the full cost of their insurance on Sch A if they exceed the 10% haircut. No one is doing anything wrong.

I have not only never attached a foreign return to show foreign tax withheld, I have never even SEEN a foreign return. IRS has never questioned. They must already know that in certain countries sale of real estate, for example, is automatically taxed at an obscene rate. And in some countries the tax is levied on the gross sales price, not net gain. Kind of like foreign dividends. Some countries tax them at 20 or 25%. Has anyone ever had the IRS object to what you put on the 1116?

Personal use will go on his W2. I hope the company has an accountable plan or else ALL the use goes on the W2 and the client deducts the business portion on Sch A (subject to 2%). I was at an IRS liaison meeting once where the agent said the only company vehicle that the IRS believes has no personal use is a cement mixer!

The sale of a foreign asset is definitely reportable (Sch D if investment property, Form 4797 if income producing). Your client will get a foreign tax credit for the tax paid to India, but don't mislead him into thinking he'll get away with the full amount. First, if this was long-term capital gain property, he won't credit for more than the US would tax him (usually 15%, more in highest income brackets). India is going to tax him way more than that so kiss the excess goodbye (likely you will use the high-taxed column in the general category on F 1116). Then there's a reduction based on how much of your US income tax is attributable to the foreign income. Simplifying things a bit, if your foreign income was 10% of your total income, you can't get a credit for more than 10% of your total US tax. (There are worksheets for this so don't fret.) Unused credits can be carried back for one year or forward for 10 years. I just completed one of these for a couple who paid $40k in foreign tax on a $160k gain. Their foreign tax credit was in the neighborhood of $10k. And I couldn't arrive at any of these numbers until I converted francs into dollars! You have every right to charge A LOT.

Grand Poo Bah, you sure got to the heart of the matter. First Intuit was advertising that anyone could do their own taxes using Turbo Tax. The last few years they have offered professional advice for the do-it your-selfers from CPAs. Maybe not enough signed on so they then included EAs. Intuit actually called me at home a few years back to ask if I wanted to become an advisor. I told them what I'm sure all the other CPAs and EAs told them--that I already work 60-70 hours a week during tax season and couldn't give them another hour. Now it seems they are moving beyond the DIY or DIY-with-advice parameters and getting into preparation. If their software was so "intuitive," why would people even need advice or referral to a professional? We've all had clients come in because they tried TT and gave up because they owed. Or something out of the ordinary happened this year and they came in with last years TT return. After we reviewed it and discovered they had cheated themselves out of a few grand in deductions or credits, they vow never again. Or, worst case, they come in with an IRS notice because they messed up royally. I once had a couple in that situation who made way too much to claim any education credits but somehow were able to override the TT system and claim them. They had read that if you had a kid in college you can get all this money but never read the fine print and just assumed the software was wrong. How they overrode TT I can only guess. I'm not saying that people shouldn't do their own taxes or that TT isn't useful to those who can. Folks with simple Sch A and B returns should be able to manage it. It seems that Intuit now wants it both ways (three ways actually): Our software is so great anyone can do their own taxes; if you get stuck we offer professional advice; if you give up we can refer you to people who know what they're doing.

This discussion focuses on the rules/requirements for releasing client info. Let's talk about the pragmatic side. We always provide depreciation schedules when a client or new preparer asks What is the point of withholding them? The client has already chosen a new preparer and they're not going to change their mind and stick with you because you won't release their data. It costs you little or nothing to print and fax the schedules, so just do it. Maybe the client moved and wants to use someone local, but they'll have a good word for you to people they still know in the area if you're not uncooperative. Or maybe the new preparer will not be a good match and they'll come back. (We just had a client return after 2 years away.) Or maybe the new preparer charges twice what you do so they'll definitely be back. Don't burn bridges if there's no real reason to. Sound like this client's old CPA just doesn't get it. Ever notice how CPAs seem to be more competitive and unfriendly with one another than EAs and other tax professionals? Maybe it comes from their training. In my Masters in Taxation program one professor said he liked teaching tax people more than MBA students because we were eager to help one another whereas the MBAs hated each other. Something to think about.

kc, you're right not to downgrade yourself by saying the chains can do a better job, but unless your pricing is through the roof there is no way they are less expensive. They charge for HOH filing status, child tax credit, additional CTC, and of course the EITC and due diligence forms. A one W-2 return with these items can end up costing over $300. Just hope the client doesn't have a retirement saver's credit too.

Thank you Easytax. This might do it. I hope there are course materials to print out and review as many times as needed before tax season hits.

Don't do it! Or do what Jack wisely says and treat them like any other client--ask the due diligence questions and charge your normal fee. The problem with not signing as a paid preparer is all the fraudulent preparers who do that and get caught. We've all reviewed many EITC returns from prior years that say "self-prepared." Yea, right. The IRS notices too. Of course if you do this as a freebie you can't sign as a paid preparer. But the bad preparers didn't sign and did get paid so you'll get lumped right in there with the rest of them. Do you really want a call or letter or visit from the Office of Professional Responsibility? Explain to the parents that you'd really like to help their children out but the IRS has strict controls over EITC returns and the responsibility is so great that you can't do it without interviewing the children and charging a reasonable fee for the risk. I too would refer them to Block or JH--just tell the parents these chains are experts in EITC, which they are, and can do a much better job than you because they are so well versed in the EITC rules. In our office we do very few EITC returns, all for clients we've known for a long time who own businesses that had a very bad year, just got divorced, whatever reason for their income to plummet. We don't take many new clients, and those we do who turn out to be EITC-eligible get referred right out the door. Hard to do sometimes when they were sent by a good client, but it's just not worth the risk.

Jack, the new forms (3 I believe) were released in draft form just a short time ago. Last year we learned about the NIIT and Medicare surtax, and the info was available on what employers needed to do in the line of reporting, credits, etc. For 2015 we're getting into the individual side of it--shared responsibility, minimum essential coverage, exemptions. The Regs just came out, so it's not like we all just woke up. How did you have access to the 2015 details, regs, forms, two season ago?

Does anyone know of a CE course that covers all the new ACA forms and rules we'll face this coming tax season? Last year I studied all the printouts I could find regarding the Medicare surtax, what constitutes Net Investment Income (remember to mark those K-1s as passive or not), at what income point the tax kicks in, etc. and thought I had a handle on it. Reading about what is required this year has me feeling insecure. New forms, a form for those who got insurance through an exchange (courts still haven't settled whether only a state exchange counts), a form for those who don't have insurance. I have some ideas but am not absolutely sure about how the penalty is calculated. (I'm not one to just trust the software.) I just read that a hardship exemption must be issued by an exchange, which gives the taxpayer a code to be entered on the appropriate form on their tax return. I"M LOST! I need to go to a seminar or webinar and have all this put in one place before me, hopefully with a really good text that I can read and reread as many times as needed until I get it. I almost wish I still worked for Block because I'm sure they've developed a really good course that pulls it all together. I would think the professional associations (NAEA, NATP) would have come up with a course by now but I haven't seen one. Help!

Remember " substance over form." If this went to Tax Court, the verdict would surely be that son never really owned the place and none of the gain is his. If you can't do a nominee on Sch D, do what PapaJoe says and have the son issue the 1099S to dad. Son may have to file a gift tax return if he pays his aunt directly, but he probably won't owe any tax. Oh, the tangled webs some folks weave because they think they're getting away with something! I just read a Tax Court decision in the NATP monthly about two sets of parents who traded houses they didn't live in and then each sold their "new" home to the other parents' children. Made both sets of children eligible for the First Time Homebuyer's Credit (which didn't apply if you bought from a relative). The Tax Court said "substance over form" and voided the whole deal and both credits.

The shlared responsibility penalty for 2014 is $285 because it it limited to the monthly cost of a bronze plan, but I believe that is for each family member. 1.5000A–4 Computation of shared responsibility payment. (a)In general.For each taxable year the shared responsibility payment is the lesser of—(1) The sum of the monthly penalty amounts for each individual in the shared responsibility family; or (2) The sum of the monthly national average bronze plan premiums for the shared responsibility family.

Around here cities sometimes have a turn in your guns day, often for cash or a gift certificate. They usually collect a lot of weapons. Sure some are nonworking junk, but many come from inner-city moms who found them under their teenager's mattress or hidden in a drawer. They don't have much control over their kids, but they throw out the drugs and turn in the guns if they're lucky enough to find them because they really don't want their children involved with that stuff. So yes, these collection days do get some illegal guns off the street. That said, I wouldn't touch the idea of a private collection. Let the police do it. It would take a real jerk to try to rob a police station. If people know you are collecting guns, you are a sitting duck.

CT audits almost every EITC return (the state EITC is 1/3 the federal amount). They want EVERYTHING: birth certificates, proof of address, business receipts, etc. Some of our Sch C clients who had tough years don't respond because they don't want to copy 10,000 receipts. At a tax authority liaison meeting I asked if the state shares the results of their EITC audits with the feds. One state tax guy said no, but about 15 minutes later when we were on a different subject and they were winding up another state guy resurrected the question and responded with bifurcated gobbleygook. I came away with the impression that they don't want us to know. My hunch is that they indeed share (and the IRS loves that the states are doing the work they don't have the resources to do).

My boss is also applying for a mortgage. The underwriter saw on his bank statement checks to the US Treasury and our state tax dept written on 1/15, 4/15, and 9/l5 and demanded to know what they were for. Groceries I guess. The courts are just as bad. Last year we had a couple who had divorced in August 2013 and came in with a divorce decree stating they had to file jointly.

A court appointed rep does not file 1310 (see the instructions). The form is only used when there is a PERSONAL REP (maybe a family member taking responsibility for the tax filings) and a refund. The rep signs that s/he will distribute the refund according to the laws of the state. If a rep is court appointed, there is no need for them to make such a promise because Probate dictates what happens with the refund (usually based on the will or state law if the person died intestate). Agree with rscpa, must paper file with the court appointment attached.

The states have always been the testing grounds for eventual federal policies. Back when we had "little" government, free public schooling was started in MA and eventually became a national policy. MA also initiated mandatory health insurance, and their program was successful enough to model the ACA along the same lines. The same route was almost followed regarding licensing/regulation of paid tax preparers. CA and OR have run successful programs for some time, so the government tried to adapt those models nationwide. They went about it the wrong way, however, and were stopped. What we're seeing now is the states scrambling to regulate tax prep because the feds aren't doing it, and state tax coffers suffer just as much as the federal treasury from the actions of stupid or dishonest tax pros. I'm glad NY is finally taking steps to assure that tax preparers know what they're doing. Up until now it was just a money grabber--tax pros had to pay for the privilege of doing NY returns. In my office those of us who are exempt from registration (EAs and CPAs) sign all the NY returns and don't feel a bit guilty. We give them accurate, honest returns and they want to take our money too? I can't imagine why NY won't recognize IRS approved training though. Maybe because they don't know the ins and outs of how to do so? I can see why they would want so many hours of state specific CEs, like CA does, so maybe all those hours they are requiring are all about NY tax? Interestingly, when state speakers present at seminars that hour or two does not count for EAs but does for CPAs (who are state licensed). I often go to 8 hour seminars but only get 6 CEs (not that I don't learn something in the other 2, they just don't count). I guess NY is just doing the same thing in reverse. When this kind of madness happens it usually triggers a national policy. It will eventually have to happen with same sex marriages and state sales taxes because now every state is doing something different and it gets too confusing when you cross state lines. So just maybe national registration of paid tax pros will come to be, if only because having 50 different sets of rules doesn't work.

In that case he does have signature authority over a foreign account (didn't read that in the initial post), so answer the Sch B question affirmatively.

Your client is a shareholder and owns a foreign asset, not a foreign account. If it throws off foreign income, that has to be reported. The 8938 and 5471 take care of the foreign reporting requirements. There is no question on Sch B that you can answer affirmatively. (Those are aimed at Swiss bank accounts and Cayman Island trusts and their cousins.) Signature authority has nothing to do with it. That only applies to trusts and maybe some other weird financial setups.

I have found amended returns to be really speedy this year. Last year they took 12-16 weeks, so this year we told clients to not even look for their refunds before then. This year we had only one that took 12 weeks (to the day); the others have been 3-4 weeks. I'm still giving the 12-16 time frame though. Better to have the client be pleasantly surprised than to start calling me every week. By the way, to prove the IRS isn't speeding everything up, my clients who applied for the Offshore Voluntary Disclosure Program were finally accepted 4 months to the day after I faxed the request. My first sense of relief was over the fact that their fines will be 27.5% instead of 50%, saving them a huge chunk of dough. Then I realized the real relief is that they won't face criminal prosecution. They aren't criminals, just jerks, but the IRS and other countries are no longer messing around with this. All of my dealings have been with the tax attorney and IRS Criminal Investigation--not the usual phone and fax numbers we all have on speed dial and normal addresses we already have labels for. And today I started a new habit. I asked a client who brought in that last bit of info for his extension if he had any foreign accounts. He asked if that was something new. Most of us have software that automatically checks the "no" box if we don't do so manually. That's not good enough for me anymore after seeing what happens when clients don't report foreign accounts. Interestingly, the guy I asked said he was in Switzerland this summer and actually looked into opening an account just for the sake of having one. The bank said no. I guess the foreign banks are in even more trouble for shielding tax cheats than the tax cheats are themselves.

I try to scan all client docs but admit that some seem irrelevant (Burger King and Victoria's Secret receipts) so don't bother. And when it's April 14 I admit to being lax in the scanning department. I always return the client docs with two staples across the top, with maybe 3-4 inches between each. If they have a lot of docs, I group them into normal income like W2s and 1099Rs, interest and divs, Sch A items, etc. and staple each group with two staples. A colleague used to tell clients that if a packet was disassembled, we would take no responsibility for missing items. I don't go that far, but if a client claimed we didn't include this or that first thing I'd look for is the staple holes. We will pay interest and penalties if our fault. The tax and early distribution penalty are on the client because they would have had to pay these anyway if the return was done correctly.