Terry D EA

In NC, it used to be the first week in August as folks prepared for back to school. Now our greedy State government took it away along with all of the other tax credits.

Single shareholder S-Corp had gross receipts of 1.3M. Bottom line, 154K passes thru to the shareholder. Any way that any part of this can be kept in retained earnings and not all be taxable this year? Just seems wrong that losses can only be claimed to the extent of basis or income and can be carried forward but profits get hit all at once.

Client handled mother's death without an attorney and I might say it seems he did pretty good. He applied for an EIN for the estate. The only income to the estate was proceeds from a 401K that had taxes deducted and was issued to the Estate with the Estate's EIN number. Client deducted all expenses and distributed the remainder equal between himself and brother which was in line with the deceased's will. It appears this should be fairly simple 1041. Because the estate paid the tax on the distribution from the 401K, the funds distributed to the bene's should be tax free correct? Been a while since I have done one of these.

Sounds like a good idea. But then again, I personally wouldn't be comfortable releasing my personal information without limitations. The way things are today, you can't be too careful. It's great to know folks trust you but I'm still going to error on the side of caution.

I guess I need to learn how to spell or maybe not type so quickly without proof reading. If Judy or KC can fix my subject line to "Loose" I would appreciate it.

Well your scenario is not a partnership as you don't mention anything about a partnership agreement. Did the client's in your OP have a partnership agreement? If not, then no partnership. If they did not expense or depreciate those items, then no reason to show them as taxable on their respective returns. >>>>>>I expensed everything on my 2015 taxes and on January 24, 2016 my taxes are filed and paid.<<<<<< If this is the case, then you have already expensed as you say everything you purchased. You can now sell the items, if you chose, and any proceeds will become taxable. Same thing goes if you convert the equipment to personal use, then there is a taxable gain to declare.

How many clients do you have that are in the process of getting you more information? I have about 15 that are waiting for information. Of course, these folks have to pay and are in no hurry to get the information. I'm will be notifying folks today that if the information is not here by April 8th, their return will be extended and if they want it expedited, there will be an additional charge. How do others handle this? More aggravation, client drops off return last Thursday. Calls Tuesday of this week and complains because I don't have it done. Mind you there are 8 drop offs ahead of them that are mostly complex returns. So, I jump on the return, and they have to pay. Now, they are in no hurry to pickup their return and pay my fee. I called Tuesday evening and let them know the outcome on their voicemail. No return calls until this morning. Go figure.

Well I don't know about the "Old Lady" thing because I have never met you personally and no I'm not saying you are an "Old lady". Regardless, you do still have a lot of value and your knowledge of the tax laws and experience is immeasurable. Over the years, I have appreciated your input and advice immensely. Also with these amendments, after all is done, these folks will end up with an extra $1100.00 they had no idea they could get. They have brought me three other clients with the same situation. While doing amendments at this time of year isn't something I would normally do, I will at least get the 2012 taken care of for each of them due to the expiration date of April 15. Each situation is different and maybe I'll get lucky and find out that an extension has been filed.

In my situation, my client is already itemizing so the additional will be a benefit.

I agree with KC. I have reviewed these returns and found errors but did not do so until I had the client's approval which I think I put this info in a previous reply. All is well. I agree that no one has the right to show a return to another preparer or other person without express written authorization.

Well first off, the monies each of them spent and gave to the partnership (little items you mention) would make-up their individual basis as well as be capital contributed. If you are ending the partnership, then each partner's portion may be a return of capital and therefore it would not be taxable to either partner. You said "they purchased" are they splitting what was left or not used by the partnership? What was their initial cost to purchase these items? It still seems to me to have the character or a return of capital. One example is a partner invests 10,000 cash in a partnership and decides to leave the partnership. The other partner(s) pay out any remaining capital/basis and therefore the amount received would be taxable.

Thanks to all who replied. I have completed the 2012 amendment and it does generate a refund and I will have these folks sign and mail the return this weekend. Moving forward, the refund generated from the 2012 error from both Fed and State, covers the balance due for amending the 2013 and 2014. My suggestion to these folks is to wait to get the refund, then send in the 2013 & 2014 with a payment due to both entities. This way no out of pocket funds are needed and they may just come out a few dollars to the good. Under the guide lines of the revenue procedure 2009-20, the amendment will be reviewed but electing the safe harbor method the return/amendment will not be challenged by the IRS. Here's is what I now know, Ponzi-schemes are a mess and terrible to be a victim of. At least the IRS has recognized that taxpayers should be able to obtain some relief from these schemes and have provided a means for individuals and businesses alike to do so.

Jack hit the nail on the head with this one.

Still getting repeated errors from this so-called tax program. Here are some other areas of trouble I found as well. The MFJ vs MFS tool is absolutely useless. It calculates the same as last year. It might as well not be a part of the program. I will attempt to call support tomorrow which I will probably be wasting my time. I will start with Dan and then on to OLT. The TRX snafu was almost better than this stuff. I have learned my lesson and will be going with Drake for next year. Can't stand it any longer. FYI - I have noticed that on Sch E when dividing expenses between personal use and rental use, the program takes the full amount of expenses and does not calculate by the number of rental days. Watch out for that. It doesn't even ask if you want to include the difference on Sch A. Also, if you use form 8829 OIH, the program will not separate the expenses by the percentage of use. You have to do it all manually. It does ask if you want the difference in mortgage interest to go to Sch A but my client was not itemizing so I don't know if it actually went to Sch A or not.

Take a look at Pub 527 page 17. It is pretty clear that dividing the expenses is permissible. This is to be done by using the number of days of personal use divided by the number of days of rental. This returns the percentage of rental expenses and personal expenses. The division of the two must equal the total expenses for the item that can be split. These items are mortgage interest, property taxes and mortgage insurance. The other expenses such as repairs and depreciation can only be taken for the rental days and you loose on the personal use end. I know the publications are not always authoritative but it is a good guide to go by.

I am going to look into this a bit deeper as I have the same scenario. When a person converts rental property to personal use, only those expenses for the rental days can be taken on Sch E. However, It would only seem right to deduct the remainder on Sch A. Interesting and I am looking forward to what others have to say. I will post what I find from my research.

Thanks to the both of you. I replied in another post that these returns were filed by April 15th and not on any extensions. Due to the complexity of this, I want to be absolutely sure that I am handling this correctly. These things are weird and apparently not a lot of folks on this board has dealt with them. The person who has prepared the returns for these clients is an ex-HRB employee who classified them as worthless stock and therefore justified the capital loss method. However, the code is real clear on the fact that a Ponzi-scheme is not a capital loss but a theft loss reported on Sch A using form 4864. This person has prepared quite a few returns for victims of this scheme in my immediate area So, with that said, I may see additional work coming in. One guy is going back to this person again even after being shown the code indicating his returns have been filed incorrectly. His call completely. Just for anyone's curiosity, the Ponzi-scheme I am speaking of was the ZeekRewards which is labeled one of the largest Ponzi-Schemes next to the Madoff scheme.

Thanks Judy, these returns were filed by April 15th. I am checking everywhere possible for information regarding this Ponzi-scheme and how to correct the wrong filing.

Someone correct me if I'm wrong but isn't this the last year to amend a 2012 return to claim a refund?

Just to add, I am a teacher by day so I can tell you the schools are open. I'm not sure about the minds that come through the doors. Students don't have the requirement to think or implore critical thinking or problem solving due to technology. Some, as you can tell from deduckshuns, can't even use spell check. All they have to do is push buttons, which they do quite well. Sad thing is they have no idea what the buttons mean. What drives me crazy is when I ask how they got a particular answer all they say is I don't know that's what the calculator or computer said.

I posted earlier about a situation with deducting a loss of a Ponzi-scheme. Just spoke with the client that was a victim of a Ponzi-scheme and a victim as well of an ex HRB employee that claimed a capital loss when it should have been a theft loss. This couple is willing to have me amend the returns to correct the wrong filings. Told them it could be costly but they have the responsibility to file an accurate tax return. A mistake was made and it should be corrected. The accepted and I will be amending a few years worth. Now, I guess I will be the Ponzi-scheme expert as they are sending me two or three more clients who were victims of the same scheme and HRB ex preparer. I like the extra business but wrong time of year to do a bunch of amendments. April 18 is the last day to amend a 2012 tax return to collect a refund correct?

Pacun you are correct with some of your responses. Yes I plan on taking a vacation and am planning that right now. After mulling this around, I can prepare the 2015 correctly and legally using the payments they received this year as taxable gain and then send them back to the original preparer who can deal with the wrong advice received from HRB. Also, I will give them what I will charge to correct these filings, how it affect them and let them decide. I was highly recommended by a very good long time client. So, I am assuming their intent was to have their taxes prepared in the same way as usual. I asked for the 2014 year because of rental property involvement and found the other mistakes.

I usually get to unravel some mistakes made by my local HRB every year. Now, this is one that I need to bounce around a bit. I previously posted some of this as part of a Ponzi-scheme which there is still a portion of. The preparer works from home, uses HRB online software, and was trained by HRB (entry level courses). When problems or questions arise, then HRB gets a call and gives advice. Not too bad so far. But..... I was given permission from the TP to call the preparer and discuss the depreciation schedules and how the Ponzi scheme was handled which is where I got the information regarding the background of the preparer. The preparer stated depreciation claimed was using the 200DB method and there were 21 years left. Actually there is 20 years remaining andI asked if SL 27.5 years was used and was told no. I have no idea of what they did as apparently the HRB software doesn't produce a depreciation schedule nor was there a form 4562 included in the client's copy. When depreciated properly, there is a total of $110.00 difference in deprecation claimed and what should have been claimed. I tend to think the person had no clue about depreciation and I don't know where the figures come from that makeup the difference. I know how to correct this using the 3115. No problem with this. After a considerable amount of research, the Zeek Rewards Ponzi-Scheme was deemed criminal activity and there were court cases involved as well as prosecution. So, no problem here determining if this was a capital loss or a theft. By it's very nature it is a theft and must be reported on Sch A. Here is the problem. The loss was realized or known by the TP in 2012. The preparer has reported the loss as a capital loss labeling it as worthless stock on Sch D taking 3k per year. The total loss is 11K. The TP received third party payments toward the loss in 2015 and when the math is done, there is a 451.00 gain to be reported this year if you follow the capital loss. My confusion is how to handle this. If I follow the rules from two different revenue rulings regarding reporting theft from a Ponzi-scheme, I would have to amend back to 2012. One of the rulings references a safe-harbor method for the TP who has been victimized but I can't see anyway to use that due to the capital loss reporting already in place. If I report the theft/loss on Sch A in 2012 which would result in a refund they cannot get due to the statute of limitations to claim a refund. If that loss could be used to repay the years moving forward it may all come out in a wash except having to report about 2600.00 gain in 2015. This amount is what was received as payment from the SEC in 2015. One approach is to ignore the past, report the gain in 2015 and send them to HRB to get this fixed but I am not sure I can legally do that. Any help or guidance here as to how to approach this will be greatly appreciated. I am tossing around the idea of contacting the practitioner priority line to inquire about where to go for assistance.

Thanks to all who replied. I took KC's advice and my own instincts and called the folks before ever looking at their information. I explained to them why I was calling and that it was for their protection for me to do so. They were more than happy to give me permission to review their material and prepare or fix any errors that I found. They were also appreciative of my desire to protect their sensitive information. I did find errors in both 2014 and 2015 that has an increase in a refund. I now will have another happy client added to my client base.

Well let's see. A gas grill mounted on the deck, a porta john and a sleeping bag with a cot. There you go now it's deductible!!! Just kidding.