Terry D EA

Well we did finish this up. We did submit the corrected forms, included receipts showing actual expenses as required and the form 1098T they asked for and included an explanation of the error. I did amend the return to claim the tuition and fees deduction as it returned a lesser difference than the life long learning credit. I am hopeful that all will come out well. Thanks for all the advice. BTW, all documents were mailed to the address on the letter as instructed. My client also included a check for the difference.

Very good client received a notice their 2016 return was being audited for the AOC credit for TY 2016. The first part of the letter states the items they want to prove eligibility to take the credit. No problem except these folks have three kids in college and the letter only mentions the word student and does not identify which on the return. Deeper into the letter, the IRS states the credit has been taken for more than 4 years but makes no reference as to which student. So, looking back thru the returns, the AOC had begun in 2012 for the oldest student which now leads us to believe this is the student they are referring to. Here is my dilemma. I feel we should amend the 2016 return to remove the AOC for the oldest student but in turn utilize the life long learning credit which they would be entitled to. The IRS gives instructions as to where and how to send the documents to prove eligibility to take the credit but again there is the additional year the credit was claimed which the letter gives no instruction on what to do. So, my question is if we take the amendment route, should I have the client mail the amendment in with the letter, documentation to prove the eligibility to claim the AOC for the other two students, and the check for the difference. Anyone see any other way this could be handled?

I'd like to see how that excuse would fly in the eyes of the IRS and circular 230. I get upset with that type of lame response too. Trusting the software to do its thing is not a good idea. Many programs are good. Drake is good but I still do manual calculations for verification purposes if something doesn't seem or feel right. I couldn't do that if all I did was input.

I have file many NC S-Corp returns. Not that much to worry about but if you have any specific questions, you can PM me or post here. I probably won't be on this board until after next week.

Well I hope you have a great time and enjoy that sundae. My wife and I are being so elaborate, we are just spending a much needed evening together. Now that I have all the scoop on the IRS outage it is time to shut this thing off. Enjoy!!!

I have a client with a similar scenario. Son filed his own return using TaxCut and said he never got the option to either claim himself or not. Don't necessarily believe that, but I have zero experience with TaxCut. It is a good question as to how HRB would know who filed how. Hmmm

Tom, You've already received very good responses from everyone of your friends and colleagues here. Anything additional I would add would not be anything different that what others have already said. My dad always told me, that a time will come when you screw-up. You're human and it will happen. But....beat yourself up for a little while and then get up off the ground, brush your pants off and go again. Never count yourself as a failure nor accept failure as an option. I am willing to be that your client will understand. Offer to pay any interest/penalties, not tax, offer next year for free or at a sizeable discount. Remember, we've all been there. Pick your chin up and be proud you've done the right thing to correct the mistake.

"If a child receives social security benefits and uses them toward his or her own support, the benefits are considered as provided by the child." To allow the mom or whomever to claim HOH, the qualifying person, tests, must be met. In your scenario, the real question is what the SS payments the kids received were used for. Normally, the SS benefits the dependent children receive in this case are survivor's benefits and you state that the kids have no other income which makes the SS benefits received tax exempt. The statement above was taken from Pub 501 under the qualifying person and 1/2 support section. It clearly states the "certain SS benefits that are tax exempt are included in determining if a person had paid 1/2 of their own support. The exception is above. Did the kids use the SS benefits received for their own support? If so, when looking at the income mentioned in your original post, then no HOH would be allowed. I have to agree with Judy in wanting to know with whom did the mother live for 2017 and how long. That is the first step in determining filing status. In your second statement you say mom lives with the grandparent ( I am assuming her mother) which in my opinion nullifies the HOH again. As you say, HOH is out and mom only has the option of single or MFJ if she lived with her deceased spouse. Of course, if they were separated then the 6 months out of the year rule applies. Find out who she lived with during the year and you'll have your answer. Mom will still win with the EIC and additional child support.

I know you know this but whatever depreciation amounts were taken reduces the cost basis of the home which in turn increases the capital gain on the sale. I wouldn't guess at all and would take Gail's advice to try and get the transcripts. However, if you can't find the information, the only alternative is to calculate what would have been allowable. Ask the client if he knows anything at all about bonus depreciation and if he has any knowledge as to whether bonus depreciation was taken? It sounds as though these returns were self-prepared. I would hope a professional would not use varying cost basis for the same asset for different tax years.

Drake is definitely superior to OltPro. Been there with OltPro and am sorry I ever did. Drake will cost a bit more but it is more than worth it. If you only have a few clients, check with Drake to see if there are PPR options or some other that would not cost you the full price. Which ever way you choose to go, purchase Drake before May 31 so you get the best discount.

Margaret This was taken from Pub 527. This does not address the issue of stopping the rental and then making extensive repairs to make the home marketable. I am of the opinion that any repairs or improvements made after the termination of rental activity would add to basis of the property as this is most likely not the owner's primary residence for the 121 exclusion. Adding to the basis would reduce the capital gains generated from the prior depreciation and appreciation of the property. You stop depreciating property when you retire it from service, even if you haven’t fully recovered its cost or other basis. You retire property from service when you permanently withdraw it from use in a trade or business or from use in the production of income because of any of the following events. You sell or exchange the property. You convert the property to personal use. You abandon the property. The property is destroyed.

I have an HP multifunction machine that has performed very well over the years. Now, the scanner has gone stupid. When using the document feeder, the documents scanned come out upside down and mirrored. The first time I saw this, I said WTH????? Anyway to no avail, I uninstalled and reinstalled the printer/scanner and all was fine for one scan only. I have to unplug the thing and reset it and it scans one time just fine. Any ideas? I guess it's time to shop for another machine.

Judy, I don't know if this will qualify or not. But.... one of my more brilliant business clients (Sch C) had in their expenses for 2017 $300.00 deposit to open a new checking account. I mean really, you just can't make this stuff up.

I hope you haven't transmitted this return. If the receipts do indeed exceed the 250K and you checked the box No, then the IRS will be looking for the Schedules you mention. I always complete the balance sheet, the M-1 and M-2 regardless of the income.

I do have the brokerage statement that does indeed break out the basis. So, and as you said, I entered it exactly so the return matches the 1099B

<<<<<<<OK, Margaret, since you want some concrete suggestions, here we go.>>>>>>>>> Isn't this why she posted it in the first place? While I'll agree that I am glad that I am not dealing with this, I too would suggest taking each item separately. The debacle with the 12 room unit is a challenge. You could keep the expense to each unit separately along with the rent received for those units. Question is, how do you take depreciation on anything when the building in it's entirety was not ready for rent? It is apparent the rehab(s) are capital improvements but again, how do you determine basis if they are not keeping up with the expenses. Maybe they will have credit card receipts or statements that you could pull expenses from. Maybe the other thing is if the units are all relatively the same size then maybe you could divide the expenses proportionately. It will be interesting to see how this comes out.

I guess if we only had that one client, then that might be something one could do. I agree though, no way. I guess the guy isn't concerned about security issues.

Thanks Judy and yes I did have a typo in the OP. I did enter it as a capital loss on Sch D. I guess for some reason I had to get my head wrapped around this. Once I did, it made perfect sense. It is just one of those things when you have been working too many hours and the brain begins to get clogged. But... thanks to all who gave input here.

Thanks Gail but does is go on Sch D as a loss from the sale or is it a taxable gain from the sale? Also, I see an error in my post the cost basis was 34.54 and not 34054. What makes sense is if you invested 34.54 and only received 2.19 then you have a loss of 32.35 even if the return of the investment was in the form of cash. Correct? I agree they did not receive a negative check.

Max W. The basis is reported on the 1099B. See my reply above. We were both typing at the same time.

Let me add a bit more information. I now realize this is possibly a fractional part of a share of stock for which the TP received a check rather than the fractional portion of the stock. Everything I read seems to lean toward this amount is reported as a gain and enter cost basis as zero. No problem, I fully understand that. But here are the figures: .13333 Shares sold on 7/10/2017 purchased on 2/5/1999 Proceeds: 2.19 Cost basis 34054 Gain/Loss -32.35 Cash in Lieu. Shouldn't this still be reported as a loss on the SchD and form 8949? How do you receive a check with a negative amount on it?

Client presented a Consolidated 1099DIV. Only one barter exchange that is a 34.00 loss. Beside the loss amount are the words "Cash in Lieu". I have never seen this before. Does this mean the TP received cash for this loss? Do I still report this on the 8949? Thanks

Just to add, for NC Drake automatically selects either the standard deduction or itemizing for NC based on the input in the program. Because I know the standard deduction amounts, all I have to do is look at the page 2 of the return to see which deduction was selected. Of course, there is an override if one would be foolish enough to take the itemized deduction when standard is higher. Although there are many hoops and in Drake you can write macros to automatically fill in some common areas, it is still better than paper, pencil. Just my 2 cents worth.

Yes, only the earnings are taxable

Tom, you are correct. They can withdraw the funds and use them for what ever but will be assessed the penalty and tax. Only exception is amounts used for educational expenses.