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re: Drake - I don't have IL loaded to test, but it appears that Drake considers this taxable in Illinois and would not include this payout in the IL exclusions. Comments on Drake's forum said that in March of 2015 Drake made a change so that anything with Code D in box 7 is taxable in Illinois. Prior to that change, Drake included items with code D in the subtractions making it necessary to manually override the subtractions on IL. Another comment by an EA regarding that programming change said he'd confirmed directly with IL DOR and with Drake Support that this nonqualified annuity income has always been taxable to Illinois, and that prior to 2014 Drake's program contained an error that caused this income to show up as nontaxable. I've seen some comments out on the web where it was said that Illinois was going after taxpayers that try to exclude this. Other comments specifically said that Lacerte's default programming excludes payouts with code D and that there is a checkbox to indicate that the amount doesn't qualify for the exclusion. I don't have that program, just what I read.

@SaraEA I believe what you say is correct about not being able to access your file cabinet if your firm did not renew the Creative Solutions products. Drake's document manager has all of that same functionality that you describe AND files are stored directly on the C:drive in a directory that is accessible outside of the program. I am 100% sure that I could retain access to those pdfs even if I left the company. @Abby Normal what pdf program do you use to insert the adding machine tapes into the pdfs? I have Acrobat and don't see that but have not explored the plug-ins.

^^ Catherine said exactly what I was also trying to convey. I have a Twain scanner that works perfectly within Drake's doc mgr, but I can also scan using the scanner's software and save to Drake's Doc Mgr directory without ever opening the doc mgr or tax programs. I did that last week when someone brought in a state revenue notice that didn't require any attention on my part, but I wanted to save a copy in the client's records. I scanned and named the file using the scanner without having to enter passwords to open any of Drake's programs. Easy and quick. Drake "recommends" using a twain-compliant scanner, but it is only "required" if you want to scan from within the DDM software itself.

Is the IRS using the early birds to test its systems? Why the rush to renew at the earliest possible moment?

1. You probably already know all of this, but for anyone reading this that doesn't - It was implemented in 2016 on a much smaller scale and expanded to the 50 million level we encountered last year and was still considered in the testing phase. IRS reported a success rate of about 94%, and a reduction in refunds issued on returns with fraudulent W-2s. Even if the W-2 contained the code, not entering the code didn't stop a return from being processed. We don't know if the return received extra scrutiny, but I'd say probably not. 2. They won't. IRS and the large payroll processing companies collaborated on this, and the verification code is the generated by applying an algorithm provided by the IRS. The resulting code is unique and is based other data contained on that particular W-2. I suspect that even our tax software that we use to prepare and file W-2s will not be able to generate these codes. Logically, the IRS won't be releasing the details of how the algorithm generates the code because that would defeat the purpose if the fraudsters are able to generate valid codes for a fake W-2. That's in a similar vein to why we practitioners were not told specifically what additional data is being transmitted with returns that we e-file. One was obviously the amount of input time so that IRS could shut down the preparation mills where thieves were generating fraudulent returns in a matter of seconds or a few short minutes.

Disclaimer - I don't do farm returns so this reply is meant to generate additional discussion in hopes of getting to the proper reporting and may not be helpful, but I'll take a shot. Thinking out loud - I think these are the main issues regarding the wife's involvement in the farm: First, the wife already has s.e. income from another activity other than the farm. Does she also materially participate in the farming operation in a substantial and significant way for this to really be a partnership for tax reporting purposes? If she doesn't then I'd have trouble calling this a partnership merely because jointly held land and buildings are used in the farm operation and are collateral for the loan. If you think it's a partnership and if she does materially participate, then this can be a qualified joint venture and not be treated as a partnership requiring 1065 reporting, and instead the income and expenses may be split and reported on the appropriate schedules and forms of the 1040. https://www.irs.gov/businesses/small-businesses-self-employed/married-couples-in-business If the wife doesn't materially participate but you still think this is a partnership, then they can't claim QJV and report only on the 1040. In this case the proper reporting would be on a 1065. Additionally, without her participation, I believe that any loss to her would be considered passive and not be available to offset her other s.e. income. If after all of this, you decide that the 3 years' tax reporting is not correct, I don't see this as a 3115 change at all because there is no change in the income or deductions due to an accounting method change, only a split in the reporting and that the wrong forms were used. Sorry that's so lengthy and might not be of much help.

Good point about the Twain issue Randall. I can't answer about the Creative Solutions program that Sam is using because he didn't mention which one, but I use one of their too, and I'd suspect that their files are stored in a proprietary area that may be less flexible than Drake's as he mentioned Drake is the other program. Drake recommends a Twain-compliant scanner so that all of the features that make their document manager fully functional, functions that would include scanning, naming, remembering those common names, and turning duplex on and off from within the doc mgr itself. With that said, Drake's Document Manager will install and still function as a file storage directory because it simply puts the files into a directory on the C: drive, and it is absolutely possible to scan and save by using the scanner's software itself outside of Drake while still naming and saving within that same Drake doc mgr directory. In a similar vein, it's possible to save other files such as Word & Excel to that Doc Mgr directory in their original formats or as pdfs. There is a slight inconvenience to using a non-twain scanner, but the files are still there and accessible, either by launching the doc manager from within Drake's tax program, opening the Doc Mgr program itself separately, or opening files directly from the file directory of the C: drive.

I agree with cbslee and that we should continue with our usual abundance of caution. I don't know why the articles I read said that MS had released and emergency patch today, because the updates that I received late this afternoon were for ancillary programs and the usual database updates for my AV software.

No, I never have either. I can tell you that when one of my corp clients called the state to inquire about a refund that was due for that year that included a 3115 for the 481 adjustments due to the repair regs, and was told that the delay was because the client had filed corrected returns. I don't think the state knew what to do with all of that extra information, and I could just picture the poor person that had to wade through it.

Yes, everyone should be on hardwired access. Interestingly, when I googled to find more information about the Windows update that is scheduled for tomorrow, I also found articles about Microsoft issuing an emergency update today that already shut down this KRACK attack on systems running any of their OS that are still supported. I can't see what is coming in yet, but I can tell you that my system is receiving some update now.

Not personally. I've heard of audits where the agent questioned the depreciation because of the underlying allocation of the basis between building and land that would affect the deductions.

Haha, that's funny because we don't operate like that around here and some members haven't even visited or read the post yet. You'll have to get used to us being overly generous with advice and the fact that we do continue to discuss topics and offer opinions on subjects that interest us even if the original poster has received valid answers. It only ends when the last member who wants to comment has done so. Beside, I made some .

Thanks for the notice.

I had one other worrisome thought that goes back to the missed election to opt out of the bonus depreciation. The election was missed yet that extra amount wasn't deducted, so the effect is that expenses and NOL were minimized, and there is no statement with the return that puts the bank on notice of that. We all know that banks think accountants have deep pockets and will try to lay blame on us when the loans go bad, and with the bank relying on these tax returns as part of the basis for their lending decisions, I think you may have some exposure here. This is not an insignificant amount of debt, so I'd suggest that you have documentation in your files that you and your client discussed the effect of making the election, that he made an informed decision on opting out, and make sure that the election is attached to the returns in future.

You agreed with me but didn't like my post! I'm devastated.

Part of our reaction to your client's situation might have been because we didn't have all of the facts of this client's revenue stream, your mention of the NOLs, that he doesn't have any other job, and that it's hard to have time for anything else with his level of production and gross farm revenue. We now know that in addition to the farm operation and equipment sold, he has income from a separate trucking operation and machine rentals. JohnH made good points about the bank allowing the continued borrowing, and the ballooning debt you described is a problem. I've seen banks that use a client like this, one that looks great on paper with nice collateral and excellent credit, to prop up and offset other less-than-stellar loans in their portfolio.

We click on the "like" for a variety of reasons so you shouldn't use those as affirmation or agreement with the technical aspect of the post. Likewise, a perfect answer that is correct in all aspects may garner zero likes at all. If someone is wrong, we aren't shy about pointing out the error and continuing the discussion. You'd have to know the personalities of the posters and those using that function. Many of our members stop visiting or posting off-season, and since you joined on April 16th of this year you may not know everyone well enough to judge the tone yet. I wouldn't consider 2 likes and 2 laughs a whole gallery of members considering the number of posts, posters, and views this topic has already had. I can only speak for myself, but my "like" was the mention of Rita telling off her client wanting to deduct a swimming pool and the visual of someone driving industrial farm equipment to Walmart, plus we love Rita and her way of breaking the tension with her humor.

I agree with Gail and was typing out the same thing. If I understand correctly: AZ contractor is AZ LLC -->owned by DE LLC -->owned by DE corp. If that is the case, I see your logic in reporting on the DE 1120, and then you have the apportionment that will work back to zero activity within the State of DE and no tax due to DE. So the DE corporation will file a Fed 1120, DE 1120 apportioned to zero, and whatever AZ requires for the corporation.

Yes, I realized you are trying to take the least amount possible. I wanted to get the facts on the election (or none) at the start of the discussion. Technically, you and your client now have some problems if you failed to include the election to opt out of the bonus depreciation and you didn't deduct it either. Now your client has phantom depreciation on those assets that he didn't get the benefit of either through current deduction or a larger NOL, and the regular depreciation you did deduct is also incorrect because it was calculated on a basis without reduction for the special allowance. Without the election that bonus depreciation is still "allowed or allowable" even though you didn't report it. If I recall, you are using Drake, and the election is made on an original return and easily generated by the software by checking one box on screen 10. Without that election, the software will calculate the bonus depreciation automatically. The program will allow input to override that calculation by entering a -0- on the bonus depreciation line. If the 2016 return hasn't been filed yet and your client doesn't want the special allowance, it's not too late to include the election.

@Coopedup - This forum is for tax professionals only, most of whom use one particular brand of tax software. We do not help the general public here. I'd suggest that you consult with a tax professional or tax attorney that is familar with ROBS.

Are you electing out of the bonus depreciation too? Does the farm show a profit in enough years that profit motive won't be questioned, or is this a very expensive hobby?

Lion, I have that trouble too, but I know enough of the answers to get through the security questions. I run into this every time after clearing my computer's cache. The question that usually pops up for us is about my husband's address from his first marriage that ended 27+ years ago! At least his ex didn't remarry, so I don't have that complication. It's totally ridiculous that there isn't a time limit on those things.

Oh no! Dental trouble...*shudders*. You both have my sympathy. I've had a lot of dental troubles over the years and am a nervous wreck in the chair until I'm numb. The numbing is a big part of my problem because it takes multiple shots and more time for me to get fully numb than the dentist would like. After each appt, I seem to continue to get more numb when I'm on the way home, which means it is still taking effect after he's finished torturing me. Fwiw, if you need a root canal after the permanent crown is in place, that can be done through the crown the same as if it is a regular tooth. At least that is what my dentist told me after my last crown on a tooth that he was kind of worried about. Not exactly the news one wants to hear right after paying a lot of money for a nice new crown. I know you are busy, but if you think there is infection building in there, please don't wait to be seen. That infection can damage adjacent teeth, can travel along the jaw line, or get into the jawbone itself or other tissues. *more shuddering here*

I think this page from the IRS site on the topic might have your answer. The third paragraph under the heading of "Electronic Funds Withdraw" says this: I'm interpreting "due date" in that portion in bold to mean "4/15" so that, unlike when filing before 4/15 where the debit payment can be scheduled for a future date, when filing after 4/15 the payment date must be the same as date that the ERO transmits. I'd try transmitting again tomorrow with that as the payment date too.

Interesting. I really don't remember ever having the organizers in October from any software. Printing them while in the returns is a good idea, and I agree that this seems too early for clients to have them.