Terry D EA

Okay I do handle a few 1065 rental returns. The partnership can have ordinary expenses outside of the rental expenses. Some of those can be legal fees related to the partnership itself, annual report fees for the State, here in NC anyway, office supplies and accounting/tax preparation fees that should be on page one of the 1065 form. Your client should keep a separate mileage log for each property to properly allocate the expense. Mileage and auto expenses are not deductible on a rental, just travel mileage to and from to perform services on the rental property. Only meal deduction would be to entertain new business and is only 50% deductible reported on the M-1 and K-1 resepctively as a non-deductible expense for the other 50%. If any evictions take place, those expenses are allocated to the individual property. Remember, the partnership is an entity filing form 1065 that can experience ordinary operating expenses. If your client has improperly reported previous expenses, you should advise them to amend with the explanation they are responsible to file an accurate tax return. If they choose not to amend, then move on as it is not your problem. With that said, if incorrect depreciation has been taken, then the same approach but use form 3115 to correct it. That would be a requirement that would determine whether I took on the client or not.

Well put and enough said.

What we really don't know here is if the RV was rented just one time or is this something the client plans on doing in the future or is currently engaged in. Knowing those answers would help identify which form to use. If it was a one time use, I would use the line 21 mentioned above. If more than one time, then the schedule C would be my first choice. In my opinion, this would not qualify for the 27.5 year depreciation because it is not "Real" property. The OP says RV and motor vehicle which leads me to believe this is a motor home RV and should be five or seven year class.

Here is my theory. More detail is better than less. I had a previous client who now resides in Portugal serve on a jury for the IRS. He told me to NEVER stop reviewing the returns line for line with the client. Those who tried to use the excuse they didn't know what their preparer put on the return was not acceptable to the IRS. Bottom line, the client is responsible for every line on the tax return. I make sure they understand their return, where the information came from and receive the worksheet, statements and whatever else they need. They cannot say they didn't know. So I don't limit the number of pages and I do give them everything the software does provide simple because they are entitled to it. Last year I purchased a binding machine because I have too many clients with 100 plus pages in a return that I choose not to staple. I cut my folder to make a nice cover for the bound documents. Looks professional and includes everything used to prepare the return. Their name and mf firm info is still visible through the cover.

I am sticking with Judy and Jack and following the same procedures. Until we have a definitive directive or official guidance, I'm charging the penalty or filing the extension if the client chooses.

Original OP stated this is a 3 member LLC. All income/loss pass thru to each partner from form 1065. Schedule C and SE are the wrong forms. This is rental activities that are not subject to SE tax unless they are real estate professionals. If there is a partnership agreement that specifically states the partner's guaranteed payments then no 8825.

A new business owner who started his business in September of 2016 that doesn't understand the rules of employee vs sub contractor, had a person working for him that he paid 2k. He does not have the person's SS# or a good address. This guy supposedly is a convict and left the area for some reason. The new business owner is trying to do the right thing. How do we issue a 1099 to someone who we have no information on? In order to deduct the expense a 1099 has to be issued correct? Re-classify?

Don't mean to be insensitive but another case of folks making decisions and acting on them without consulting their tax advisor or accountant.

Partnership guaranteed payments are the partner's distributive share of income/loss. cbslee is correct to include the guaranteed payments on the 1065 line 10. My question is, does the deduction of the guaranteed payments result in a loss to the partnership. If so, I believe it would be an ordinary business loss. Here is an excerpt from Pub 541 Payments resulting in loss. If guaranteed payments to a partner result in a partnership loss in which the partner shares, the partner must report the full amount of the guaranteed payments as ordinary income. The partner separately takes into account his or her distributive share of the partnership loss, to the extent of the adjusted basis of the partner's partnership interest. Guaranteed payments do not go on the 8825 they must be included as ordinary income to the partner receiving the payments regardless if the payments result in a loss.

Between 600 to 1000 here too.

Agree with Pacun and Lion. It is pretty straight forward that school is a temporary absence.

I too have been wearing progressive lenses for years now. While I have never had a huge problem adapting, I can tell you it is better to buy the lenses with a wider field of view. Varilux is the top lens. Walmart sells a Nikon lens that is very similar to the Varilux. The progressive lens is an hour glass shape and the wider the shape the better field of view. I bought standard safety glasses that are progressive and they drive me nuts. Just my 2 cents worth.

Lion is correct, hope the statement below helps. When the rental property with passive loss carryovers is converted to a principal residence, the carryover losses can only be deducted to the extent of other passive income, or in the year the property is sold. The $25K loss exception will no longer apply to the carryover losses in future years if the property is taken out of rental service.(Sec 469(i)(1). There can be no current year active participation in a rental activity in a year when the property is not used as a rental.

Okay re-read it again and you are right again. He is no longer under 24 and as you say, none of the other items apply so I change my position and he does qualify. Sorry for mis-reading it.

Wait a minute Gail, I would agree with your first post. The OP stated the dependent in question turned 24 sometime during 2016. Item 1c says "Under" age 24 at the end of the year. If he/she is 24 at the end of the year they cannot be "under" 24. It does not say 24 and under. Based on this, the dependent doesn't qualify for the refundable portion.

Hey no problem at all!! I did learn that this morning and as crazy as it sounds, I am ecstatic that I can do this and get rid of some of the paper. I realize that I am behind the times a bit and sometimes it is hard to teach an old dog new tricks. I also agree with Catherine on the stupid idea of requiring paper and electronic copies but like she said, we are dealing with the IRS.

Does anyone know if the IRS has any issues with electronic signatures on the 8879 or storing signature forms electronically and getting rid of the paper. Currently looking at a Topaz signature pad to work with Drake. Give me a bit of a break here, I am a first time Drake user and am very impressed with all of the functionality. I just discovered how easy the doc manager works and how I can add client documents to the return just as I would in a paper file. I am assuming this is an accepted practice by the IRS. Comments please.

I could be wrong here but as I read section 48C of the code, there is no provision for a double credit. Also, It appears the solar energy system is to be installed in a residence for the 30% credit or a commercial application for the 30% business credit. I haven't seen anything that indicates the ability to split the credit between personal and business use. I think you have to take one or the other. It doesn't seem right to take the business portion and then depreciate that portion along with the individual portion. How are the energy costs separated between business and personal use prior to the installation of the solar system. Just wondering.

I am glad we all had some fun with this. Eases some of the stress for the day. I'll be sure next time to keep all my secrets hidden BTW, for the curious, the advice was spot on and just as I expected.

Just sent you a PM

Tom, what bothers me with this is you said he is a highly compensated employee. Why wasn't this included in his w-2 wages? I feel it should have been. However, line 21 would have the same impact as line 7 but I am not sure how you would show what it was for. If it should have been included in the W-2 wages, then I think your client should talk to his/her employer to have it corrected. Definitely would not be subject to SE tax.

Judy I had to click on the links at the bottom of the page you posted to get to this page. Had you not posted the first page I may not have found this. I too received the message in Drake but, as you said, it did not stop the e-filing. It is always a pleasure to work together on different situations. I guess I could have given up and went with the first answers received, but this bothered me enough that I had to know the right answer before contacting my client.

Here is an excerpt from the article that Judy had posted that fits my client's situation. They are over 50 and do work in a hospital and have been employed for more than 15 years. So, as it stands, it appears my client has been advised properly. I originally posted this as a code "D" when in fact it was a code "E". When I read the entire article, there are differences with catchup contributions between plans. The last example fits my client's scenario perfectly. This has been good learning for me and I hope that posting the article will help others as well. I plan on forwarding this to my client for them to take to their HR department to be sure this is exactly what they are participating in. Limit on employee elective salary deferrals The limit on elective deferrals - the most an employee can contribute to a 403(b) account out of salary - is $18,000 in 2015 - 2017. Employees who are age 50 or over at the end of the calendar year can also make catch-up contributions of $6,000 in 2015 - 2017 beyond the basic limit on elective deferrals. Limit on annual additions The limit on annual additions (the combination of all employer contributions and employee elective deferrals to all 403(b) accounts) generally is the lesser of: $54,000 for 2017 ($53,000 for 2015 and 2016), or 100% of includible compensation for the employee's most recent year of service. Generally, includible compensation is the amount of taxable wages and benefits the employee received in the employee's most recent full year of service. If your 403(b) plan doesn’t limit the total employer and employee contributions to the annual limits, find out how to correct this mistake. Catch-ups for employees with 15-years of service If permitted by the 403(b) plan, an employee who has at least 15 years of service with a public school system, hospital, home health service agency, health and welfare service agency, church, or convention or association of churches (or associated organization), has a 403(b) elective deferral limit that is increased by the lesser of: $3,000, $15,000, reduced by the amount of additional elective deferrals made in prior years because of this rule, or $5,000 times the number of the employee’s years of service for the organization, minus the total elective deferrals made for earlier years. An employee who qualifies for the 15-year rule can have an elective deferral limit as high as $21,000 for 2016. For plans that offer “15-years of service catch-up” contributions, if an employee making these contributions doesn’t have the required 15 years of full-time service with the same employer, find out how to correct this mistake. Catch-ups for employees age 50 or over If permitted by the 403(b) plan, employees who are age 50 or over at the end of the calendar year can also make catch-up contributions of $6,000 in 2015 - 2017 beyond the basic limit on elective deferrals. If the 403(b) plan doesn’t have the age 50 catch-up and an employee made deferrals over the 402(g) limit (or the 402(g) limit adjusted for a 15-year catch-up), find out how to correct this mistake. If both catch-up provisions apply While the age 50 catch-up is subject to an annual limit, the 15-year catch-up is subject to a use test, lifetime limit and an annual limit. When both catch-up opportunities are available, the law requires deferrals exceeding the standard limit ($18,000 in 2015 - 2017) to be first applied to the 15-year catch-up (to the extent permitted), and then to the age 50 catch-up. Example: Assume Pat, age 50, has worked as a teacher in the XYZ School District for 15 years; is eligible for the 15 years of service catch-up; and has eligible compensation of $70,000 for 2016. The maximum employee and employer contributions to the XYZ 403(b) plan for 2016 for Pat would be $59,000: Pat may have elective deferrals to the 403(b) plan totaling $21,000 ($18,000 plus $3,000 15 years of service catch-up) Employer contribution of $32,000, bringing the total employee and employer contributions to $53,000, the annual additions limit. Pat may also defer an additional $6,000 age 50 catch-up contribution in 2016. Example: Now assume that Pat only deferred $22,000 of his salary under the 403(b) plan. The plan provides both the 15-year and age 50 catch-up deferral opportunities. Under the use test, Pat is eligible for a 15-year catch-up of $3,000. Of the total $22,000 deferred for 2016, the maximum standard deferral of $18,000 is first applied, followed by application of the 15-year catch-up deferral of $3,000, and finally application of the remaining $1,000 to the age 50 catch-up deferral.

Done as well. Thanks Pacun for the reminder and I have to agree with Robin as this site has been invaluable for years. Thanks Eric without you it may have never happened.

Jack, sorry you had a bad experience with Drake. I would have probably felt the same way leaving ATX and jumping into an input driven program. I did issues with that with other programs which is why it was probably easier for me to make the switch. You can dig into the bowels of Drake and solve any issues you may have. As you said, it is important to learn the innermost workings of the program. Pacun, I am sorry but I don't need a long list of credentials to get support from Drake. Believe what Catherine has said. They do answer within three rings which is utterly amazing. Also, the program updates in 60 seconds. Sorry but ATX can't touch that.