jainen

>>They do not itemize. Can anyone help?<< They don't need help, since they are already deducting MORE than their actual costs. Fill out Schedule A and print it separately. Stamp it "draft" and include it with client copy so they will understand that you did deduct everything. It might even generate itemized deductions on the state return.

>>we live in CA<< I strongly recommend you find or make time for the H&R Block classroom course. Their emphasis on how the data flows onto the forms, rather than general theory, is priceless. There are any number of self-study courses for the Enrolled Agent exam. Basically they all just give you several recent actual exams with various levels of commentary. You can download the same material for free from the IRS (without the commentary). If you are not an EA, CPA, or attorney, California requires you to register with CTEC. They do not permit self-study as such, but have approved some "interactive" courses. http://ctec.org/qeinteractive.asp

>>anyone that thinks the IRS never makes mistakes is dumb<< How true. But it's just as dumb to think it's always the IRS making the mistake.

>>I just don't understand unless the IRS screwed up<< Somebody is wrong. Could be the client, the preparer, the contractor, the IRS, or the unknown whiner. All in all, my guess (and it is just a wildly unsupportable guess) would be the contractor, in spite of "his letter." Maybe even BECAUSE of his letter--it's a pretty pat alibi; I wouldn't necessarily expect a company to manage it. But I don't mean anything by that. At any rate, I don't think there is anything for the preparer to do about it. Tell the inquiring one that the IRS has all the information about who got your 1099, and it is up to them to investigate.

>>The rest are basis adjustments.<< It really requires a more detailed analysis to do it properly. for example, the underwriting and processing fees are non-deductible costs of financing; they have nothing to do with the property basis. Other costs like the appraisal and flood certification are also lender requirements, although they may in some cases be an appropriate basis adjustment. The prepaid interest is deductible, but since it is already included on Form 1098 it should not be separately claimed. Hazard insurance is a non-deductible personal expense whether paid directly or into an escrow account. County taxes are deductible when paid directly, but could be a debit or credit depending on when the sale takes place.

>>Can someone tell me it in plain terms:<< The only technical term in the sentence is "basis." Everything else has its normal meaning, and even that word is pretty standard. How it all might apply to your particular circumstances is more complicated than the basic theory. Generally I wouldn't recommend you try to define insolvency without some accounting knowledge or help. However, based on what you report, it appears that your liabilities are several times your assets so I wouldn't worry about the details if you don't feel like getting personal help.

>>how am I supposed to get a quart of water in one of those little packets?<< I never pre-mix KoolAid because it goes stale so fast. Besides, you can't offer a choice of flavors that way. Just put a pitcher of water on your desk, and let your clients fill the packets themselves while you sort through their shoe box. If they have children, they should come around the desk and use the keyboard shelf because it's lower.

>>I still feel it the employers neglect<< I wouldn't argue against that. Unless the company has a regular payroll service, the data clerk is probably a low-paid, untrained bookkeeper. One misstroke, and the error disappears into cyberspace until the employee complains and makes them look it up again. But so what? You're still stuck with the result. Another thing to remember is that things DID change. The tax rates (and withholding tables) are indexed for inflation. If she got any kind of raise or bonus, took days off, had a 401(k), contributed to a medical plan, or a dozen other things, you can't predict where that will land on the new tables -- assuming the employer even bothered to buy new tables.

>>anyway that the company be held responsible for the penalty or taxes?<< It is inconvenient to have a balance due, but she is not really harmed because she has had more money to spend each month. She won't owe a federal penalty unless she is $1000 short, and you'd have thought she would notice that big a change in take home pay.

>> the payer has issued a correct 1099 and the client is wrong<< Good for you, OldJack. I am of the same mind. The payer didn't just make up a random number; it reflects something specific. That's why the IRS won't let you do a substitute W-2 just based on paystubs until the employer has a chance to issue the real thing. As a preparer I can accept a client's P&L records in lieu of 1099's but when he gives me conflicting information it must be reconciled in a legitimate way. Claiming expenses or refunds that were not actually made is, frankly, irresponsible.

>> the ultimate solution<< "Ultimate," as in "last or final"? I doubt it. I think this approach would be the gift that keeps on giving.

>>any expenses associated with the adoption process are qualifying expenses<< That's true for a private adoption, but there's an even better deal for going through the county agency. Most or all of those children are designated "special needs," which means you get the maximum credit regardless of actual expenses.

>>show the difference as an expense<< I disagree. There is no justification for claiming an expense that can't be documented and in fact you know it didn't exist. Although the taxpayer could claim logic or ignorance, the tax preparer can't make excuses like that. What would you do if the 1099 showed LESS, or there was no 1099? You would report the income correctly using the client's own records. That's what you should do in this case too. You can either file a disclosure to explain why you are not following the 1099, or wait for an IRS letter to respond to.

>>The refund was $17,000<< Who called it a "refund"? The 1099 suggests that the payer didn't agree to that characterization, especially if the homeowner kept the equipment as well as the 17K. Sometimes such payments don't come from the actual seller, but from an insurance company to settle a nuisance claim. On another thread in this forum (Tax Fraud Situation), everyone's all worked up that a borrower would report one thing to the IRS and something else to the mortgage company. So, catax, how does your client measure up? Is he willing to back up a claim that the 1099 does not represent income, by informing the lender that the FMV was overstated to the tune of 17K?

>>they would not be subject to oversight agencies such as the state licensing board<< Oh yes they would, if they are holding themselves out as CPAs. However, signing a tax return is not actually accounting, so it might not be an infraction unless the state licenses preparers too. Even then, well, it wasn't actually a tax return, was it? But it was a conspiracy to commit bank fraud, and these days that is a felony being targeted by everyone from the local D.A. to the FBI and SEC. On the other hand, maybe the loan app was accurate and the tax return was fraudulent.

>>read the decree << Actually, I take it back. I don't think payments ever count as alimony if he is still on title to the property.

>>a perfect system<< Remember Dixon? They were a hardware manufacturer, and they had this clever little device that could imprint official IRS forms. It wasn't the most accurate system, and I could never get the fonts to look right, but it was great for "what if" tax planning because it was so easy to make changes with a flick of the wrist. I haven't seen one in years. I think the model was Ticonderoga #2/HB.

>>one for the IRS and one for the bank<< Egads! I won't even give the bank a letter saying my Schedule C client is self-employed! The problem is that if the bank relies on your signature, then YOU might be liable on the loan when the borrower skips town.

>>She says divorce decree states... " Never mind what she SAYS, take a look at the actual document. You're going to need it for your archive anyway. It doesn't matter that he has 1/2 title, and it doesn't matter that she moved out part way through the year. The good news is that it is probably 100% deductible as qualified mortgage interest. The bad news is that it's probably 100% taxable as alimony.

>>The lawyers don't want to get into this fight on both sides, so they will try to get the clients to back off. I have had it happen to me 3 times<< Lodi--I wondered where all the friendly divorce lawyers had gone to live!

>>try to figure out how much of the refi is acquisition debt<< Since we are only looking at new mortgages, you just need the escrow statement which will show the old payoff amount. Hopefully you likewise have a copy of previous escrow statements if this was not the first refinance after purchase. Be sure to ask them if any loan proceeds were used for capital improvements. The regs specify ordering rules, so any payment would have been allocated to the non-acquisition portion. PMI isn't very common on refinances anyway.

>>just the monitor<< Still too much work. I just put a mirror down on the desk in front of the screen.

>>We had to chisel the numbers on the stone tablet<< Yeah, that was a nuisance until they discovered clay. On the other hand, you could pay your whole tax bill with a bag of salt.

>>since all 12 months state provided the support<< Please, mircpa, stop being so logical. It's been years now since the support requirement was dropped. I presume that "in state's custody" doesn't mean parental rights were terminated, so all you need is to determine if the child was actually sentenced to long term or semi-permanent incarceration, or is only temporarily out of the home for some medical (or even judicial) purpose?

>>the Proseries package at that price<< Like all software, ProSeries markets different packages, and has special offers for early renewals, conversion from other brands, and so on. And of course it changes every year--expect great offers from everyone (including CCH) when ATX cuts its users free. Check the websites and download demos of whatever you are interested in. Compare them during your copious free time in February and March, so you can make an informed decision in April.