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Agree with Max, and it could also be that he wouldn't get the best deal as a corporate customer, whether because of price or because of the interest rate on the loan. Aside from the tax implications, if your client is going to lease to the company, make sure that lease is formalized and includes a clause releasing him from personal responsibility in the event of accidents. He doesn't want to place his personal assets at risk because the vehicle is still titled in his personal name.

Medlin is correct IF this isn't for household help. The employer isn't the child's parent, so that rule wouldn't apply and the entire $5,500 would be taxable for SS and Medicare. However, IF this is for household help, see the rules on this page that detail the age issue regarding SS/Medicare withholding: https://www.irs.gov/taxtopics/tc756

There's no need to change the designation from passive to active. Keep it as "passive" if that is the client's actual participation. Even though your client is passive, he still has a share in the S corp's trade or business income that is flowing through to him as reported on his K-1, and he may have the QBI deduction depending on his taxable income. Enter everything as it is reported on his K-1. The specified service trade or business designation (SSTB) means that and the QBI deduction has additional limitations. If the taxable income is at or below $315,000 for joint filers ($157,500 all others), then the SSTB limitation on QBI deduction does not apply. Above that, the limitation on QBI begins to phase in between $315,000-$415,000 for joint filers and 157,500-207,500 for others.

As Gail said, you should check pub 3112. Last time this question came up, I answered with the following: Because yours is a deferred adjudication, I believe that means that it was not recorded in any court system and should not show up at all. On top of that, yours is already beyond the 10 year look back. I'd say that you should be able to get an EFIN, and the only way to do that is to apply and see what the IRS does with the application. The service will notify you if denying.

Notice 972CG is only a proposal to assess the penalties at that point, not actually an assessment. Did you respond to the notice within the prescribed time, 45 days? How long has it actually been since your response? Did you follow the procedures for verifying the TINs on file, or trying to obtain the missing ones? There are very specific rules regarding solicitations by the issuer in attempting to rectify this problem. There is no statute for when the IRS might respond, but it doesn't usually take years. You may think so though if you've had ocassion to call the IRS and be placed on hold these days! Did you try calling? Generally speaking about notices, the IRS' next step would be to either send another notice either asking for additional information or one actually assessing the additional tax, penalties, and any interest due at that time. Then, if not paid within the prescribed time, it will then send a demand for payment, and if not paid by that due date, then it sends a notice of intent to levy. Specifically in the case of the 972CG, the next step from the IRS would be either letter 1948C (that either asks for additional information OR documents that the penalty was waived) OR notice CP15/215 that actually assesses the penalty and demands payment. Are you sure that the letter 1948C wasn't received by your company and not routed to you?

No, I disagree with this ^^. The instructions are clear that the the otherwise allowable deduction is reduced by the amount of the credit on line 2 of the form, NOT the amount of expenditure used to generate the credit. If line 1 says to not enter more than $1,000, then the amount on line 2 is $500. So, in Edsel's client's case, the expenditure before considering any credit of $2000 is then reduced by the credit of $500, and the remaining allowable deduction is $1,500.

@Edsel , it's clearly covered in the instructions. See below. Also, I edited your original title so readers don't think this is 'N/T' :

OK, I removed the reference and the link.

Drake's tech support is pretty amazing. Last year I had a problem with the format on the DE 2210 where all the figures were correct but were printing 1/2 line too high. It's a little hard to explain, but numbers ended up in the wrong boxes. Connecting with the tech support person that monitors the company's forum, she put me in touch directly with the state programmers via email so that I could send them the pdf of the incorrect form and another correct presentation to show them the problem directly and as it should appear. There was another instance of working directly with the programmers, the details of which I don't recall, but I doubt this level of interaction directly with the programming dept would be possible with ATX.

Edsel didn't give us enough facts to definitively determine if it was all disallowed, but it is a good point and Edsel should know. We don't know for sure what adjustments the IRS made and if the adjustments were for all years of farm activity. Edsel, were there were any profitable years, or if there were eventually so many loss years that the TP eventually ran into the hobby loss rules? Too late now to do anything now, but I'm curious if you tried to argue the point that your client did have a profit motive based on cash flow before the depreciation deduction. It's been many years, but I had a very similar scenario with depreciation causing losses each year that the IRS questioned, and we ended up with no changes on examination, and this exam was one where the IRS requested invoices for every expenditure on the return. The agent was so beligerent, she tried to disallow his business deduction for trash collection on a multi-unit apartment complex saying that the TP was driving for miles and miles with his own trash to deposit in the bin, and the expenditure was too high compared to what she paid at her private residence! We shut that down by providing his own trash bills and I finally had to get her supervisor involved for stupid she was dreaming up.

It may be useful or may not. Unless Eric requires that box be filled in, many of our members may leave that blank, and most here do still use ATX. Also, some would forget to indicate a change when they switch to other software in future. In the meantime, for those that are reading this and feel inclined, the software one is using could be indicated in the signature line that would show up in each post, or it could be shown in the "About Me" section found in the member profiles. Of course, if someone has made the choice to hide signature lines so that posts take up less space on the screen, then adding it to the signature line won't help.

I moved 2 more posts out of this topic into one of its own. This new one is found here:

I don't know if this helps or what other assets were involved, but the IRS gets in line behind those that already have a claim if the property is collateral on an existing loan such as a mortgage on real estate or others with a security interest in the property seized. There are some strict rules where Ch 7 bankruptcy can eliminate some tax debt, but that is a straight outright bankruptcy and not a reorganizing or restructuring.

I'm also thinking out loud, and I have no direct experience with this but do think this would fall under the category of involuntary conversions that includes seizures. When the IRS sells the property to satisfy the debt, if it ends up with excess proceeds, those funds are returned to the taxpayer. Doubtful that would ever happen, but it does seem that this would be reported as a sale. Also to consider when reporting this is that the IRS tallies up all costs associated with the seizure including costs to remove and sell the property, and if the sale does not go through or property is returned to the taxpayer, those costs incurred by the IRS are added to the balance owed to the IRS by the taxpayer. With that in mind, I would think that those costs incurred would be considered additional expenses of "sale" that would reduce any resulting gain from the transactions. Lastly, if any personal property was seized and sold, remember that a loss from the sale of personal property isn't deductible, but any resulting gains would be taxable.

Hi All, just a friendly reminder to pose and post questions related to non-ATX software in the appropriate forum, in this case in the Drake forum. At the start of 2019 Eric received a complaint(s) about non-ATX software comments that were proliferating in the General Chat, and I agreed that it was reasonable to limit the discussions in General Chat to ATX software as much as possible. With that in mind, I've moved the last two posts out of this discussion into a topic of its own that can be found here:

It is addressed here, and be sure to read the entire page: https://www.law.cornell.edu/cfr/text/26/1.402(g)-1

Link to IRS page about excess contributions that has a lot of references to code sections, and also look specifically at the dialog under analysis. Perhaps the answers you seek are covered there. FTR, I only skimmed that page but think it will lead to your answers. https://www.irs.gov/retirement-plans/consequences-to-a-participant-who-makes-excess-deferrals-to-a-401k-plan

Safe link: https://www.irs.gov/businesses/small-businesses-self-employed/webinars-for-tax-practitioners

This isn't about getting more bang for your buck because you have higher end software. Drake is certainly more affordable than either ATX or ProSystem, and it generally does the calculation too, but this is a recognized problem for software in this specific situation. Abby Normal's post above perfectly describes what happens sometimes when applying the iterative calculation where he said it's "the catch-22 where deducting SEHI qualifies you for a PTC, but then the PTC lowers the SEHI so much that it disqualifies you for the PTC."

Glad to help with most of it.

Yes, the the 1231 gain is an addition to basis. Re: the unrecaptured 1250 gain - there is a worksheet for line 19 of Sch D, and the number from the K-1 should appear on line 5 of that worksheet. Does the wife have a POA that includes tax matters? If so and with that, why can't she contact the CPA firm on husband's behalf and ask for copies of the K-1s or S corp returns that you are missing for 2012 and 2013?

Yes, the 1231 gain from box 9 should appear on the 4797 in part 1 The amount in box 8c that is unrecaptured 1250 gain flows onto the worksheets for Sch D. It may or may not be a flat 25% tax on that number. Because it is unrecaptured, meaning that the entity used a straight-line method of depreciation (no excess of accel deprec over SL that would be taxed as ord inc at a flat 25%), other items may come into play in that calculation to determine the tax on that, but basically, yes, it is separated out with the potential to be taxed at 25% If you want to see more explanation, this page has a straightforward explanation with an example. https://www.taxcpe.com/blogs/news/recaptured-and-unrecaptured-real-estate-rental-section-1250-gain I'm confused about your statement about putting the stock redemption on Form F. I would report the stock redemption on Sch 8949/D like the sale of any other stock investment. Was any other paperwork or calculations provided to the shareholder that detailed how much of the distribution pertains to liquidation of the stock? Were there any earlier distributions during the year that weren't in liquidation or was it all distributed at the end, was it all in liquidation, none as a dividend? Below is a link to another article, this one hits the highlights of this subject. Look under the heading "Determining Character of Gain or Loss" and you'll find an explanation in the last 2 paragraphs of that section of how distribution(s) that exceeds ending AAA will be a dividend if the S corp had AE&P: https://www.thetaxadviser.com/issues/2008/apr/understandingthetaxconsequencesofliquidationtoansshareholder.html One last point is about the basis of the shares to use, specifically because they were acquired by gift and may result in a loss. Someone more knowledgeable than me will have to answer this because I don't know off the top of my head. Do the normal rules for basis in gifted property apply here when the gifted property has declined in value and that results in a loss so that the basis you start with may not be donor's cost but fair value instead? And then run through the basis adjustments that flow from the S corp activity over the years? Sorry, I do not know the answer, and maybe I'm not on the right track with this part of the answer.

https://www.irs.gov/payments/pay-taxes-by-electronic-funds-withdrawal See under "Cancellations..." on the above-linked IRS page. It includes a phone # for the dept that handles this.

For those here that choose to not respond or not see another's posts, I'd suggest scrolling on by, sitting back from the keyboard, taking a break from the forum, or using the IGNORE function. There is no need to make a flounce-like public announcement of withholding answers in future, and stooping to the level of a personal attack on another member is totally unacceptable. Since Edsel seems to have reached a conclusion regarding his original question and the posts have turned to nastiness, I'm locking this one down. I'm sorry for the ugliness, Edsel. If you have any other questions, please feel free to post . . . . . . as long as it isn't politics.

We do have others here too that fail to provide all of the relevant information so assumptions are made in an attempt to help out as best we can with our answers. Sometimes those incomplete questions are the result of not knowing what one does not know, that the preparer is immersed in the current problem without stepping back to see the larger picture, or that the first answers are correct but that lead to further discussion. I think we should remember that what we work with frequently may be an easy question to answer, but to someone else may be a confusing topic or insurmountable problem to solve for the client. I think most of the time we do eventually get to the correct answers, and sometimes we wander off on tangents that end up off-topic but can be an opportunity for learning nonetheless.