jainen

>>This interest amount was paid by new lender on behalf of your client<< It's a nasty trick, because he isn't using all the deduction and he can't roll it over to future years when he actually makes the payment. I kind of see the lender's point, as if the taxpayer had borrowed money to pay the interest. But I don't agree with it. Your client's economic position is completely unchanged. He did not refinance or get new loan terms. The rights to his payments were sold, but certainly not "on behalf" of him. The problem is what to do about it. Obviously you will never get a corrected 1099. You would have to recalculate interest paid, disclose the nonconforming treatment of the 1099 interest, and be prepared to support your position in audit--for the next almost-30 years. In my opinion, that is impossible for someone who can't even cover a minimum payment on time.

>>all the points and interest got transferred to new lender<< I have no idea what that means. All loans get sold, but I never heard of a finance company that will give away income they have already collected for themselves! Though we now see that it was not your original question, what some of us thought looked funny still looks funny. Somehow your client paid out more than he took in; we'll take your word for it. But back on the topic, if a client on March 26 told me the 1098 was wrong, I'd e-file Form 4868 and move on to the next one.

>>it looks funny on the surface<< Not just on the surface. The few numbers you give are not possible by themselves, and a tax preparer is required to reconcile such a discrepancy. It's entirely possible, of course, that the client is drawing from investments or has non-taxable income, but I wouldn't assume that without at least asking how he pays his bills. Neg-am or not, he convinced a bank that his income was substantial enough to support a very big house, with all the maintenance and utilities that implies. And you don't usually find Freddy the Freeloader in digs like that, so he is probably flashing a whole lifestyle to go along with it.

>>Ca sch D is not to be used for Ca residents with capital gains<< This is an adjustment form for when Ca gain/loss is different from federal gain/loss. You wouldn't expect that in the case of a resident selling stock. (Real estate and other property sometimes has a different basis due to depreciation or other factors.) Including an unnecessary form should not in itself be a problem, but apparently you didn't make sure all the sales were correctly reported on it. You'll have to make some lame excuse about your software or something, and apologize profusely. With luck the Franchise Tax Board will accept the same excuse (coupled with affirmations of future compliance) and abate the penalties.

>>There is no business<< On the decedent's final return, allocate payments received or earned before death to Schedule C. Anything later is Line 21 Other Income.

>>I am afraid the IRS would be looking for the other part. << So what if they are? You check the 3rd party designee box so you can handle it all over the phone without bothering the client, right? >>don't want to send up red flags<< Who would you prefer to have question your work -- the IRS, or your client? >>Would 121 help?<< Probably. Maybe not. Depends.

>>the standard mileage rate for a motorcycle is .305 per mile<< The GSA can set whatever rate it wants for official government business, but that doesn't change the tax code for the rest of us. The notice you cite specifically points out that IRS rates are not subject to GSA numbers.

>>He does not want to have to worry about the fact he depreciated a portion of the home.<< I guess I shouldn't be too skeptical of this attitude. A lot of people consider depreciation to be some kind of voodoo. It's one of the main reasons educated people with fairly simple returns will pay me hundreds of dollars to put numbers they themselves give me onto standard forms the IRS gives everyone. But isn't this engineer sort of asking if it's okay to pay higher taxes now to avoid lower taxes at some indefinite future time? I mean, is he desperate for Social Security quarters to bump up his retirement?

>>does it apply to the homeowner or to the builder<< Depends on who owns it. If you have a homesite and bring in someone to build your custom home, you get the credit just like if you had an existing home and brought in a contractor to install new features. But if you have your eye on a new planned community and order upgrades, you don't get the credit even though the builder passes on the higher price to you.

>>anything to get a client to the closing table should be deductible<< Unfortunately, the law that allows a deduction for business gifts was not indexed for inflation. It remains at $25 per person per year. Every business person thinks their own situation should be an exception, but no. Once again we need to be mindful that when a deal only makes economic sense if you get a tax break, it is fundamentally not a good deal. Depending on how desperate the taxpayer is, there may be creative ways to stretch the limits. A married couple can get two $25 gifts. The listing and selling agents can each make gifts, and perhaps their brokers can too. Cash or equivalent (like a Walmart card) could be considered a rebate of commission instead of a gift. These strategies should be thought out ahead of time; they make weak arguments after-the-fact.

>>I have started having all my clients sign a 2848 as a precaution<< What are you being so precautious about? Do you expect all your clients to have a sudden need for representation, so urgent they don't even have time to stop by and sign a form (not to mention signing an engagement letter after telling you what they want from such representation)? You are already authorized to handle basic questions during the current tax year by checking the 3rd party designee box. A POA carries specific legal obligations that you should not accept without additional instructions and an overall plan (not to mention an additional fee).

>>I wonder why the W-9 still has a place for the SSN.<< I wonder why anyone would WANT to give their SSN to their business associates.

>>I can really not sleep tonight<< Tonight is Easter, when we celebrate the victory of forgiveness. Hey, what do you know about how the compensation was structured? Some things are not taxable but still get hit up for SS, and some are taxable but escape SS. All you care about is the income tax. You should of course alert the client to the possible error in his SS record, and it is nothing more than a possibility at this point. Any shortfall must be made up by the employer, not the income tax preparer. You can sleep in peace (of which we also celebrate the victory).

>>How do you see MFJ, MFS or Qualifying Widower.<< Marital status wasn't explained until a later post. Clients expect me to read their minds and make correct assumptions based on nothing, but I'm always bothered when tax professionals are like that.

>>if he is supporting her 100%, maybe she is dependent too<< Not in Virginia, where it's against the law for an unmarried man & woman to live together.

>>I want at least a 73 inch 1080P monitor<< It's no use. Hopeless. I started doing tax returns on a 10" screen. Over the years I went bigger and bigger, but every time the darn tax forms got bigger too, so they still completely filled the screen. Then I got a second monitor, and THAT one's filled up with tax forms too. In fact, it's filled up with LAST year's forms, which I always figured should be history, since that's what "last year" means. I guess it's not a total waste. At least now when I splash enchilada sauce on the screen I can still see around it. Frankly that would be more useful to me as a keyboard feature, but keyboards seem to be getting smaller and smaller instead.

>>You could try "paper filing" return with a letter of explanation... << Come on, folks. The whole point of the new qualifying child rules was to eliminate this kind of nonsense. The kid can only be a qualifying child on one return at a time. There are special rules in the case of separated parents, but it's still only one return for any given benefit. So I wasn't joking when I said have a new baby. Different kids is the only way to put the same benefit on both returns. But go ahead and paper file with a letter of explanation, for sure. The IRS gets so many millions of returns, anything we can do to get them to focus special attention on our own client has got to be a good thing, right?

>>I am thinking of HH but want to double check<< I recommend you double check the instructions to Form 1040 as there are a number of qualifications you haven't addressed in this thread. Two things you have addressed are whether the mother is working and whether the father supports the baby, but neither of those facts has the least bit of relevance to filing status.

>>How do both claim the exclusion?<< ... not much hope for 2007, but there's still time to have a new baby in 2008.

>>What is his filing status.<< Based on all you have told us, his filing status could be Single, MFJ, MFS, Head of Household, or Qualifying Widower.

>>she quit claimed all of these condos to her son with no money<< She made a gift , so file Form 709 showing FMV. The donee carries the same adjusted basis derived from the exchange with additional depreciation, allocated among the five properties. He also continues the same depreciation schedule (unless he takes one or more houses out of service).

>>They withdrew money from an IRA to pay some of the cost<< For purposes of Exception #09 on Form 5329, which exempts the first $10000 from the 10% Early Distribution Penalty, a first-time buyer is someone who has not owned a principal residence for at least two years. I suppose that applies to building a home that will be a principal residence, but it doesn't buy much lumber. Also, it can only be used once in a lifetime, so it would be better to call him a first-time exceptionator.

>>they could reduce there wages to $1<< Don't fall for goofy ideas. Ask your clients if they seriously want to be in compliance; they will say no.

>>report as wages as in the past<< Right or wrong, they have established an accounting system for their compensation, and can't change it without permission from IRS.

>>No one has responded to my last 2 posts<< I read your posts, jasdlm, and learn from others, but I'm not comfortable with internet numbers detailed to the penny. I just can't respond well to that level of detail without holding the actual document in my own hands. Your previous post about the basis of ESSP is even more so. There is no level of detail that will help me take anyone's word on stock basis. I just gotta see the papers for myself.