Terry D EA

Unfortunately, I now have another divorce case issue. My client had entered into an agreement with the now ex-spouse to pay them 250K. here's your money now go away type thing. Doing this left their retirement in tack which is a significant win due to the retirement having a value that exceeds 2M. I am assuming this would be sort of the same as a transfer incident to the divorce and not taxable to the recipient nor deductible to the giver. First time dealing with this kind of issue. I will be preparing a 2025 estimate within the next few days

Can you provide the link to the article?

Judy, Great question! All I do know is they are divorced. I have only processed the client's tax returns for the last four years and all are filed as single. I pull the property tax bills each year for Sch A and those are all in my client's name only. The tax card shows my client's name only. Another idea crossed my mind that maybe the ex bought her the house or like you say refinanced in the ex's name only. I say this because the home is located in a very upscale area and far more than a person on disability can afford. Might be a stretch but you never know. There is an attorney involved who has asked to speak with me about all of this. I don't think it really matters. The proceeds minus the payoff is being paid directly to my client and the IRS doesn't really care who pays them. Neither does the state.

It's been a while but this scenario stuck in my head from studying for the EA exam. Can't remember which part but I do know the employee can definitely be held accountable. Probably a lot more to this story.

Quick question. Client has been placed in a long term care facility and the personal representative needs me to calculate the gain on the sale of the primary residence. So far so go and no problem calculating the gain. A little tid bit that may or may not muddy the waters. The home is deeded in the taxpayer's name. The mortgage on the home is in the ex-spouse's name. The client meets the 2 of the last five rule for the 121 exclusion and there will be some remaining gain. My take is the client is 100% responsible for the gains on the sale. Correct?

I prepared amended returns and a current 2023 form 1120 S for a client who received the ERC. The client did not like the tax bill associated with the amended returns. The client had talked to a CPA friend who told them not to amend and to report the wage reduction in the current year because the ERC refund was received in 2023. The S Corp experienced a huge loss for 2023 which the majority of the loss would be absorbed by the disallowed wage deduction adjustments. I researched forever trying to find a citation, article, ruling or whatever to support that position and could not find anything. I even enlisted the advice of a former IRS agent, professor who can normally cite any code that is available who told said the CPA friend was giving very poor advice. His research did not turn up anything more than mine. I advised the client the language was very clear that an amended return(s) are required to be filed showing the disallowed wage deduction for the period and year the ERC was calculated. Client has chosen to terminate my services and presumably follow the CPA friends advice. Client paid 85% of my invoice which is ok with me to cut my losses and move on. Questions are, should I send a letter to the client citing the date of the termination of my engagement? If so, should that letter contain a statement holding me harmless of any future tax filings? I think I should at least revoke the 2848 that is on the CAF. What documents, worksheets or other information that I have should I turn over to them? They have been provided copies of their tax returns, depreciation schedules; etc. every year. This is kind a sad really as I served this client for 20+ years.

It greatly depends who is your client's payroll processor. If the processor is running your client through a PEO, and if they processed the ERC, then they most likely will not provide a 941. I tried repeatedly to get a copy of the 941X for one of my client's from PayChex. All we ever received was the spreadsheet with their ERC calculations. Another suggestion is to obtain POA to look at the transcripts. But, if a PEO is involved you won't see it. If no PEO, you should see the 941X if it was filed. If nothing has been filed, it is the client's responsibility to file the 941X. I second what Patrick said. You should probably run the analysis yourself to verify the figures before amending anything.

Well, the HOA may be exempt if they are recognized as a 501-C4 entity. We are registered as a non-profit organization. I was not involved in this when this got started in 2018. I know I will reach out to the CPA who has handled this since day one.

I'm definitely following this one. I am the treasurer of our HOA and we do have a CPA firm who files the taxes and provides yearly audits and we do use a management company. I never gave any thought to the BOI requirement and I an almost positive the manager of our HOA is clueless about this.

I was told the same thing as Lee B.

For anyone who is covered under Hiscox insurance and wondering if you are covered to assist any clients with the BOI requirements, Hiscox is not providing any coverage. I spoke with an agent yesterday who really didn't seem to understand what the BOI was. After explaining it a few times, they finally said we are not covered whether a CPA or EA.

Example: 1. client received ERC (prepared by a third party) for three quarters in 2020 totaling 200,000.00. 2. Reduce the wage deduction on line 8 by 200,000.00 3. The wage reduction results in an increase in income on line 21 in the amount of $80,000.00 4. The amount in number 3 above passes thru to the single shareholder, thus requiring his/her individual tax return to be amended and pay the additional tax. Am I correct here? I have read so many different articles and studied this stuff until my eyes can no longer cross that bad. I am well aware of the need to report the ERC on the K-1 and the affect this has on basis. Some have said there is no impact to the shareholder because of the credit on the K-1. That I think is wrong. Any help will be appreciated.

I did not prepare anything for this client when this sale occurred. All I have is the originally filed tax return. The tax return shows the sale was reported on from 4797 from the K-1 information. Therefore, it appears the client did elect out of the installment sale. The gain was reported in the year of the sale. I do not have any of those calculations. At this point, I will ask the client for the worksheet, statement or whatever they have that shows the calculation. I did ask how the gain was determined. The response was the gross sales minus the investment for both tangible and intangible items, re-captured depreciation; etc. So the facts that I know, the seller opted out of the installment agreement due to the sale being reported on form 4797 and not form 6252. I know the terms of the sale, sale price, and terms of the sale. I don't know how the original gain was calculated. I do know it was a capital gain and by the Pub it should be a capital loss. A lot of extra work still needs to be done here.

Asset sale. Including all tangible and intangible items.

Client sold their business to an unrelated party in 2021. The business was an S-Corp and gain in the amount of $255,918.00 passed through to the single shareholder and reported on the 2021 individual tax return as a capital gain. The business is closed as expected and a final year tax return has been filed. The initial purchase agreement contained a balloon payment totaling approximately 500K to be paid sometime in 2022 to the shareholder. The buyer failed to make the ballon payment. An agreement was drawn up that reduced the amount due to the seller to $369,069.00 plus $8,003.00 in interest to be paid in 2023. The buyer once again failed to make the agreed upon reduced payment. The reduced agreement gave the shareholder the right to seize any equipment. I am still gathering those amounts. Because the buyer defaulted on the initial required balloon payment of 500K Is the 500K the starting point to calculate the loss or the reduced agreement amount? Also, shouldn't the value of the equipment recovered be used to offset some of the loss? I am also taking the position this transaction is a capital loss. Is my thinking correct? Any assistance is greatly appreciated.

I got the renewal notice as well. If you use the full Pro bundle the price is relatively close to last year if you but it before May 31. It retails around 2900 plus dollars. With the discounts the bundle price is $2094.00. I knew there would be a price increase but this isn't as bad as I thought.

No, I have had to amend a 941 and it requires mailing. I hate that cause only God knows when and if it will get there. The first one I filed in October of 23, is floating around the world somewhere. The PO can not find it. Yes, it was sent certified with return receipt. I was left no choice but to resend the amendment and hold my breath that two amendments didn't hit the IRS. So far so good.

If I can add, I too have been using Verifyle for the last few years. The signature portion is approved through the IRS due to the 2 factor authentication. You do get and can print the certificate which I recommend to. I keep everything digital. Yes, a single email can be used for two people sharing the same email address. I highly recommend this program. The majority of my clients hated Drake portals. I now have at least 85% of them using Verifyle. There are some older folks who just can't seem to deal with any technology. One client suffers from some form of paralysis and can no longer use their hands well. I'm pretty sure Verifyle gives the option of choosing a digital signature or a handwriting signature so a mark can be made. As Margaret said, use workspaces. You have to use workspaces to multiple signatures. Workspaces also keeps thing organized. One thing I want to know is if there is a way to stop a client from becoming the host once I create their account. I have had clients do this which prevents any signing. I'd be happy to help getting someone started. It is easy and you'll love it. If I drop my NAEA membership, I would have no gripes about $9.00 per month. Drake portals has increased to $21.00 per month.

10 years ago??? Seems like yesterday. Wow! Yes, this has been the best team of resources that I have ever had since I started with ATX back in 1998. That was when the tiger roared when you opened the program. Some of the folks on the ATX Board have passed on or retired and I certainly hope retired. KC Jenkins was one of the best. Janitor Bob from Ohio was a hoot too. William Tasker was the best support guy around. Of course, I am dating myself here but those were the good days. I am a member on a few other boards and don't browse them hardly at all. The Drake board takes too many hoops to log on. NAEA is ok and there is one fellow there that is a walking talking IRS code book. He is a professor, retired IRS agent that wore many hats inside the IRS. He is very helpful and pleasant to work with. So, yes folks on this board has saved me too many times to mention. Judy, you and I go back quite a few years. I'm sure there are others too that I just can't remember right now. It is great to have all as colleagues.

I just submitted a ticket to Drake on this. The "See Statement 1" prints over top of the spouse's signature wording on the form 1040. When printed looks pretty bad and can't really be read at all. Second time this year I've had to report something like this to get it fixed. If you include a late election form 2553 with a 1120S form, The required wording does not print at the top of the form. The support agent at Drake agreed it looked bad and unprofessional. However, the programmers said they couldn't change it cause it would be out of the print range. Well, I used Pro Series last year for some 1120S returns that included a late election and it didn't print that way. As I said, I love Drake and have no plans on changing, they just need to clean this up a bit.

Thanks Judy, sounds good to me and I really don't have time to do all the switching.

I did and am now a bit more comfortable with the return. I must have had this battle last year. When I opened the screen 3 input, there were fields flagged which triggered my memory. Because of the fines and penalties the IRS can and will apply to this type of return, one cannot afford to make a mistake. Years ago, I got this guy out of a 50K penalty due to his previous preparer using the wrong form. Best news on that was the IRS themselves directed the taxpayer to use the wrong form on the original letter establishing the EIN when the trust was created. This return has to be mailed. I refuse to have the client mail the return close to the April 15th due date and must be sent certified mail with a return receipt to prove the post mark. We went down that rabbit hole one year as well. I hate having people pay penalties and interest and then have to wait for 6 months to a year to get it back. Only good thing the IRS will pay interest. But, what they pay in interest is nothing close to what they charge.

Judy, I did briefly see that but took a minute to look at it again. In my situation it is the Taxpayer that is in rehabilitation and not the spouse. Would it still work. The check box states "Taxpayer is signing for the spouse and a statement is required". Should I make the spouse the taxpayer and the taxpayer the spouse?

Just found part of my answer. In Drake, you have to use the screen 3 for income deductions and payments to enter the trust expense information. This kinda blows my mind as the 5227, 1041-A and 1041 are all processed through the 1041 package. So, an input in the screen three flows to both the 1041, 1041-A and 5227.

I think the phaseout you mention is for earlier model years. The 2023 Model 3 qualifies for 2023. Some models will qualify for 2024.