Christian

Margaret has pretty much cleared the clouds on this one. I'm going to print the entire disussion and place it in the client file.The client provided utility bills for her home and this along with the FRV will likely just about exempt the HA from any tax. Many thanks to all as I was in the weeds on this one. ( I am sure there are some that feel I stay in the weeds.)

I used the method my nephew's then CPA used and never had any problems. That being said the ATX worksheet approximates the one in Pub 517. By FRV of the house do you mean the Fair Resale Value ? This is a rare bird for me so it's incumbent on me to get it correct. The CPA simply put the HA on Schedule C showing him as a minister. He showed the full amount as profit which was carried to the Schedule SE but did not allow the profit to flow to the 1040 and thus avoided income tax on it. This client gets a cash payment each year annually approved by the Board of Deacons and as noted it is shown on the W-2 she receives as a church employee in Box 14.

I've been reading prior posts on this subject and have yet to gain much clarification. The clients prior taxperson added her church salary (reported on the aforementioned W-2) which no Social Security tax was withheld from and her housing allowance and then deducted expenses from the combined total. The result left the salary fully exposed to SE tax but sharply reduced the housing allowance leaving a small portion of the housing allowance to be added to the salary for inclusion on Schedule SE. The client does incur auto expenses in her ministry but I was unable to define much else. I plan on contacting her former taxperson but she is in bad health and speaking with her may be problematic. She did not report using Schedule C but derived her figures using a worksheet provided with Schedule SE. I examined the one provided by ATX and have yet been unable to quite understand it.

A new client has come in who is a minister. She lives in her own home and iis given a housing allowance which is designated on her W-2 Box 14. A nephew of mine is also a minister and receives a small housing allowance which I have reported on Schedule C not deducting any expenses and filing Form SE for his self employment tax. I then deduct the allowance on the other income line of his Form 1040 so he owes no income tax on it. The client receives a much larger allowance and her prior taxperson deducted expenses from it which are not identified and unlike me did not report the allowance on Schedule C. What expenses can be deducted from the housing allowance if reported on Schedule C. The nephew basically had none and in reading I am unclear what can be used as an expense.

That brings up a question that never ends. Why are clients so resistant to making a change on their returns that will be really helpful to them ? They will invariably insist on the same filing info year after year to the point I ususally just give up pointing out a possible problem.

I have one accepted in February and still unpaid. The client says she has received no mailed info or info request from the Service. She has submitted a request to our local Congresswoman which I have found from past experience will get the tree shaken and get it resolved fairly quickly. She has a possible issue with a dedpendency matter which I had advised her and now deceased husband to address to avoid any problem but as so often occurs they set on their hands until the possible problem becomes a reality.

My experience parallels Lions especially since it is going to be ongoing. I have had clients who wanted to overlook the SE tax who were hit a couple of years down the road. I have a client who made $19,000 which his employer reported on a Form 1099- Misc. This is a common dodge among employers so as to avoid withholding and reporting requirements. He about passed out when he got the combined federal, state, and SE tax he had to pay. I have repeatedly warned him of this but to no avail.

There is diplomacy and then there is diplomacy.

I have been listening to an IRS webinar and done some additional reading. The simple reality it's basically a judgement call. There are not a few variables that can effect it as well and frankly it will take up far too much of my time to examine them to produce the correct QBI. The fact that these guys would seemingly qualify under Sec.162 doesn't entirely cut it and on and on. What would at first appear pretty simple falls into a quagmire of sorts. Needless to say I simply don't have the time do fool with it.

I have an IRS webinar scheduled to address this when time is available. I can always file an amended return for either of them. The operative question then is if they do not meet the requirements for the safe harbor rules what Rita WOULD qualify them to use the deduction ?

I want to thank each of you who have replied. In all probability I could simply go ahead and make the deduction for them. In reading Lion's advice I recall reading the Service wanting rental owners to prepare Form 1099-Misc for payments to contractors etc. I have real difficulty in getting them off their butts at usually the END of tax season to get their figures in to prepare the returns ! The idea that I am going to EDUCATE them to prepare forms which they despise and keep time logs and the like would be a mind boggling task. One came in this year moaning and groaning about the five hours he had to spend organizing his matters and having him account for some 250 hrs spread out over the entire year good Lord !! Some time back I told him I did not have the time to sift through coffee stained, ink deficient, and crumpled up receipts and if he was unable to bring me listed costs for each property SEPARATEDLY indicated to carry it to H & R. Folks here can't even manage mileage logs very well. No I simply do not have the time to coach clients. I'll see if there is an available online seminar or webinar I can take but unless it simply involves accepting the fact these guys want to make money with their rentals without all these paperwork requirements I am not going to fool with it and everything I've read indicates the Service expects just that and not they they simply handle the rentals in a businesslike manner.

One of the clients has four rentals the other eleven. Do they spend some 250 hrs. per year on these I have no idea and I am sure other than bills presented by repairmen and the like they do not keep what looks to me to be a formidable record keeping requirement. I simply have no wish to have one of them get an audit and be on the wrong end of understanding the requirement. I know a few real estate owners who take this deduction and feel sure they are unaware of the logging requirements. They are likely going out on a limb but it really comes down to how strictly the Service is able to enforce the above requirements.

Interesting this looks to have been expanded since the last time I checked which was a long time ago. It's a seldom used benefit as not many of my folks post a profit .

Separate books and records must be maintained to reflect income and expenses for each rental real estate enterprise. At least 250 or more hours of rental services must be performed by the taxpayer or other individuals (i.e., plumbers, landscapers, contractors, property managers) per year with respect to the rental enterprise. The activities that count towards the 250-hour requirement include landlord-related duties such as repairs and maintenance, collecting rent, reviewing tenant applications, spending time with tenants, etc. The taxpayer must maintain contemporaneous records of relevant items, including time reports, logs, or similar documents. This requirement applies to tax years beginning after December 31, 2018. Relevant items for recordkeeping include hours of all services performed, description of all services performed, dates on which such services were performed, and who performed the services. This will basically disqualify the two guys I have in mind as they would never maintain these records. This is pretty much what I had expected. The record keeping requirements would likely kill their deduction as they would never comply.

I should have stated Medicare insurance which as you know is shown on the annual Social Security SSA-1099. I deduct this every year myself. This client has multiple other health related policies. Drug, dental, vision and a policy through another carrier. My reading of the law indicates only primary health insurance is deductible but I have known other tax folks who disagree and deduct them in toto on line 16.

No one else carries any insurance on him except Social Security which I understand to be deductible for Schedule C filers like me. He purchases additional drug insurance but my reading is drug policies are non-deductible.

I started out using pen and ink. The first tax program was out of Maine I think. It cost $75 per year and worked quite well. How sweet it was !

Do any of you have a reference for deducting 20% rental income as qualified business income ? I have a few clients having a number of rental properties but in reviewing the rules for them to deduct 20% of their rental income on the Form 1040 it looked to me as if the rules were strictly drawn but feel I ought to review them and see what if any modifications may have been made which might allow them this deduction.

A client has come in with a Form 1099-Misc for over $19,000 reported as Nonemployee compensation. I will fill out the SE to pay self employment tax. My question is whether he qualifies to decuct healthcare premiums on Form 1040 schedule 1 line 16. I would think he would having to pay SE tax but can find no reference to say so.

After checking my invoice I see I did in fact receive the 15% discount they are offering. I suspect WK is becoming aware of the lower priced competition which seems to be now showing up which could better suite a small operation like mine. I expect to reup but will look over the newer software I am seeing being offered as the free file revolution is slowly taking it's toll.

I sent mine in as well. I really enjoy this forum and get great tax info which keeps me from (once in awhile) dropping the ball.

As noted in an earlier post I got my renewal by mail. In checking the price I find it is what it was last year. I renewed in May last year and may have locked the price in. I am usually so pooped by then I likely signed on and do not remember it but not paying more suits me just fine. This area is not flush with upper income folks to say the least and each year presents a problem in replacing old clients who go to the happy hunting ground. I am not too far from hanging it up but I so enjoy the work and interacting with most of those I serve. Although as cb noted I have some "interesting" clients.

I got the same result Gail did hence my forum entry. I'm going with the IRS instructions for Form 1041 wich clearly state no deduction.

A client believes funeral expenses paid by his mother's estate are deductible on her Form 1041. In checking this I got two conflicting reads. They are deductible on Form 706 but she needs no 706. Insofar as I know they have never been deductible on the Form 1041 or final 1040.

I just got my annual renewal notice in the mail. Surprisingly I do not see any discount offered. I have not yet had time to check it against last year's price but if history is any guide they have likely raised it yet again. It would be great if we who are faced with free competition from every direction could do the same.