jainen

In a Ninth Circuit ruling last week, Ordlock v. Commissioner, the taxpayer had been granted innocent spouse relief under Section 6015. She asked for her share of previous payments to be refunded, pointing out that 6015 says, "Any determination under this section shall be made without regard to community property laws." The IRS replied, and the Appeals Court agreed, that the "determination" was only as to whether she is ELIGIBLE for innocent spouse relief. The statute does not say to ignore community property in terms of the ACTUAL relief. So they kept her money anyway.

>>Do I need to get register with Ca?<< I don't know. There is no way to enforce it except to refuse the returns. A couple of years ago there was a big fuss when they tried to say out of state preparers were conducting business within California. Accountants fought it and the state backed down, at least regarding CPA's properly licensed in their own state and doing only a few California returns.

>>So which is it?<< Both. An employee is exempt ONLY if they work for an EA, CPA or attorney who signs the return. If they work for someone who is not an EA, CPA, or attorney, or in an office where others sign the return, the data entry clerks must also be registered even though they themselves are not signing the returns.

>>He had to pay back the insurance company<< You can not directly offset the income. See the discussion of repayments on page 33 of Pub 525. http://www.irs.gov/pub/irs-pdf/p525.pdf I assume you mean the insurance payment was taxable in 2007, and that he is now getting Social Security Disability based on a work record (not SSI which is non-taxable).

For more than a decade California has required independent tax preparers (other than EAs, CPAs, and attorneys) to register and take continuing education. A new law extends this to employees of regular tax offices unless an EA, CPA or attorney personally signs the return. The new rules regarding registration apply to anyone who enters tax data, even if they are only an assistant who does not sign the return.

>>her portion of the parent's home<< I'm always uncomfortable about this kind of thinking. She doesn't HAVE any portion, although perhaps she may in the future IF his final will says so and, of course, if she outlives her father. There are several legal issues that could end in a family fight, so I would suggest she talk to an estate attorney. I suppose technically she might have taxable income for the sale of something like a quitclaim, but most preparers would say it looks more like a gift, even if it is calculated as an interest-bearing annuity.

>>don't let your choice of software keep you off this forum<< I have not used ATX for many years. Most of the posts on this forum are about tax regs or work procedures, and there is none better anywhere else. I simply skip any threads about software.

>>MSNBC.... it is where I understood the 4 Billion was going<< Well, it might not be what is understood by the people who get to skip the propaganda campaign and actually decide what to do. Not only does the law give them free reign in the matter, the state machine doesn't even have to let the local guys in on it. Turn off your TV and use the Internet to read the actual document. My guess -- hey, this is just another guess, not intended to fool anyone -- is that most of the four billion with a B will go to so-called administration of so-called non-profits established specifically to grab the pork in the name of so-called housing.

>>ask for a conference with the audtors supervisor<< Also request a copy of the auditor's workpapers. Give them only a few days to respond, keeping an eye on any time frame stated or implied in the audit report. When you meet with the supervisor, do not discuss any tax issues, only the procedural ones including your right to appeal and the lack of due process for 2007. Likewise if you end up filing a tax court petition, include only the minimum request without explaining your position until you get a regular hearing. In everything you do from this point, watch the calendar carefully. Like bureaucrats everywhere, IRS auditors are usually fairly predictable. When they act irrationally, you have to assume something else that you don't know about might be going on. It could be something as ordinary as the employee mentally collapsing under her impossible workload, it could be extra pressure from higher-ups for any number of reasons, or it could be a special study or investigation. In any case, you will not be treated fairly until you get beyond this office, so don't bother trying to convince the supervisor that it isn't a hobby.

>>to use for low income housing programs<< I'm not aware of any restrictions on what can happen to these properties once the government money is channeled to the private parties. And anyway that's only a little more than 1% of the money that will be go to the owners of Fannie and Freddie (which, like the Federal Reserve, are PRIVATE corporations). Whatever happened to the idea that conservative leadership would get the government out of our business and let the free market work?

>>more understandable than most<< I can't understand it. The article is about "The ability to maximize the utilization of more daylight." Well, that might be fine for someone else, but personally I'd rather maximize the utilization of more moonshine!

>>it takes two reads to determine the validity of the answer<< I can't help it. Both the question and the answer were clearly speculative, written in future tense about something that everyone knows has not been approved yet. The topic was interesting and appropriate to the board. The detail in my answer had an ironic tone, but was an honest attempt to suggest the parameters of the issue in a good-spirited way. That's as valid as it gets.

>>Any chance Congress will screw up the wording and we get a double dip?<< By definition, Congress can't screw up. Whatever they say, is the law. In this case the law will say you can't base the new deduction on taxes used to determine AGI under Section 62(a), that is, business expenses. Now it's down to President Flip-Flop, who said he would veto it before he said he would sign it.

>>he shouldn't do that, at least, without some type of disclaimer<< I labeled my post "a wild guess" in the final sentence, which is the most prominent line. Still, although I meant it humorously, I do believe it is a reasonable prediction. I believe there WILL be a new checkbox on Line 39c that will point to a worksheet for Line 40. I believe it will not be available for 1040-EZ or 1040-NR. I believe there will be software glitches that make manual filing necessary in some cases, and I believe there is an opportunity for tax planning.

>>how IRS will put this into the tax form<< You'll have to complete Schedule A(PT) or Schedule A(PT-MFJ). These are actually just worksheets that do not get attached to the return. This will break out any taxes allocated to office in home or other non-eligible costs including credits for tax paid in escrow instead of directly to taxing agencies. Carry the result from Line 72 to Form 1040 Line 40 and mark the new checkbox 39c (or comparable 1040A lines--it isn't available on Form 1040-EZ or 1040NR). Write "Sec. 63(c ) (7) Property Tax Deduction" at the top of the return, which isn't eligible for electronic filing. For tax planning purposes we will now have to consider "bunching" the standard deduction where it might affect non-refundable credits. Of course, all this is just a wild guess because the bill has not even been signed into law yet.

>>tell this client to either find a sensible IRA trustee or else find another preparer interested in fooling with this nonsense<< I recommend the second choice. He should find a tax advisor who can alert him to this common problem before he invests this way.

>>what Jane Austen would have done.... you can find a solution<< Jane Austen never found any solutions. She made up a whole bunch, but they were all fiction. Of course, that description also applies to most of MY tax season creations. Anyway, it's a good analogy. I'm quite sure she would have failed without chicken nuggets and Chinese takeout. Anyone who stays up all night with pencil in hand would.

Help!! My elected representatives just banned trans-fat which is the main ingredient in things like chicken nuggets and Chinese takeout. How am I supposed to get through tax season?

>>use the innocent spouse rules<< Neither that nor the QDRO can work since they were never married. Use Form 8275 to explain why you are not reporting the 1099-R on the tax return. If you get an IRS letter about undeclared income, respond immediately. IRS is very concerned about identity theft. They have a pamphlet, pub 4535, and the Taxpayer's Advocate has reported to Congress that the issue is of the highest priority.

>>She'll go someplace else next year<< We can't tell from your post, Lion, whether you are pleased about this or not.

>>It did not increase the value of the property, nor extend it's life<< But it did make the property suitable for another use. I'd capitalize it as a leasehold improvement.

>>"lease" the right to use his advice<< Yes, this is the correct way to handle it, just like software and other "intellectual property." The client isn't actually buying anything, but only has the right to use your information. The license must be renewed annually. (I hope nobody is taking these posts seriously. I mean, you can't unless you pay me a fee.)

>>several years ago that the vehicle had to be new in order to take the sec 179 deduction<< That was the rule for the special 30% and 50% bonus depreciation allowance under Section 168 prior to 2005. Section 179 has no such limitation.

>>She reported the sale, basis and profit on her account.<< Using the normal appeal procedure as shown on the letter, submit a copy of the mother's return (with permission) proving that the sale was already reported by the income recipient. If that is not successful, you will need to amend both returns. That is not desirable because the daughter will owe two years of interest (presumably she can get the penalty waived by showing that the mother claiming the sale was reasonable cause for the daughter to not claim it).

>>The previous tax preparer did not have the owners pay the self employment tax on the taxable income<< My first question is always why aren't they going back to the previous tax preparer, especially when they have such an untenable position. Section 1402 defines Self Employment as including ALL of the distributive share of partnership's business income. However, as Michaelmars suggests, it should be easy to allocate a substantial portion to rent. For that reason I wouldn't worry much about the past mistakes, just set things up properly from now on.