jainen

>>Since he did advertise does that mean I can file a Sch C with our return this year and claim the expenses ?<< Based on all you have said, no, he was not in business in 2007. Advertising for future clients for which he would go into business if the facts were different -- that's more in the nature of market research. Well, obviously I hold a minority opinion in this thread. Tax preparers like to push things in favor of the client, and it's often said that if you are ready to go into business, then you already ARE in business. Unfortunately, such a view is not backed by law or regulation. (Tax preparers don't always care about that particular objection, however.) Business requires more than just an intention to find clients and put a rig together. You actually have to operate in a business-like fashion. Besides not having the necessary equipment, you say he hasn't even set up his books yet. Do you have a 2007 start date for insurance coverage, business license, RIAA royalty agreements, or other outside indications that he was truly good to go?

>>Would we file a Sch C<< No, and it is not a simple question. Since he was NOT in business there is nothing to file and no deductions available for 2007. You can begin depreciation when assets are placed in service, i.e., when the business starts. Supplies and other current expenses paid before the first day of business, whether in 2007 or 2008, are generally not deductible at all. However, see a tax professional about making a formal Section 195 election for those, as well as setting up the depreciation schedules. You should also get advice about documenting vehicle, travel, meals and entertainment expenses, as well as general business set-up issues such as separating personal and business records. Knowledgeable help is particularly important if there is a period of time before he starts pulling in big bucks, because IRS feels that music supplies and equipment could have a significant element of non-business pleasure.

>>doing a start-up takes a lot of cash up front<< It's sad that big corporations rule the world, but it's a fact of life. Skilled programmers could write a basic tax program. But getting new approval from IRS is impossible at this stage because it is controlled by the big guys. I almost suspect Intuit deliberately screwed up e-file last April, just to flaunt their clout with the IRS.

>>Can an employer refuse to accept a W4 revision?<< I know good jobs are hard to find, but surely you can do better than a company that doesn't want payroll records to be accurate.

>>are there any other boards<< I go to fairmark.com a lot. It's quite different from the ATX Community, since most of its questions come from the general public instead of tax professionals. Discussions are often controversial, but usually well-sourced and technical. It has separate categories for AMT, capital gains, and pensions.

I just got a call from a local department store--everything is tax-free tomorrow! How can I deduct it on Form 1040?

>>can't wait for things to settle in<< I'm sending out my organizers this week.

>>who knows where<< This is the part that makes me wonder if the investment was in fact a theft. Just because a promise wasn't fulfilled doesn't mean your client was a victim. He gave the money knowingly and willingly, and even if they find the guy there may not be any proof of criminal intent. As you say, who knows? If it WAS a crime, the client may be a co-conspirator since he at least has a ridiculous story about this investment and apparently embezzled the corporation's funds. Without pretty good evidence of a theft, I would probably consider this a capital loss--and, as kc points out, ordinary income. Actually I wouldn't really worry one way or another, because after I told him that, he wouldn't let me do the return anyway.

>>they may encounter problems with the IRS<< I expect the IRS will be tolerant of such double filings, at least when the amendment doesn't show additional tax due. But you don't really have a right to file an amended return, so the IRS could delay or deny a claim that wasn't made on the original return. The basic problem is that you know you are submitting a false return. It's also possible the IRS will sanction a professional who violates standards of practice in this way. I certainly would never advise a client to sign an incomplete return. After all, this is why RALs can be a good bargain (no, I don't provide RALs in my practice).

>>"apology payments" to taxpayers in cases where the IRS harms taxpayers<< Great idea! It should be applied to the entire government. Of course, they'd have to raise taxes to pay for it. Oh, I forgot--they don't worry about details like paying any more.

>>I don't think it was unreasonable that he didn't go and pick up this check.<< Oh, absolutely! Nobody would expect it. But the fact that he was in Texas had nothing to do with issuing the check. It was purely his own decision to be there. If the money was available in December, that's constructive receipt. This thread makes some good points about whether the money was truly available on the date of the check. Apparently there are court rulings to support either side. I hope you can come up with something better than a postmark, which isn't much proof of anything. Lacking any contrary evidence, the issue generally should be resolved by the 1099. The company is not going to re-issue it on just your opinion. If you decide that the 1099 is wrong, I recommend you file Form 8275 to disclose that position.

>>Taxes iz Kewl<< Check out the first word, Janitor Bob, not the third. KEWL is an oldies station down in Texarkana.

>>the money is income in 2008 because that was when it was received<< It is income in 2007 because that was when it was issued. The investor could have picked it up at that time; it was his own choice to have it mailed out of state.

>>with the passing of this new bill, your clients will be O.K.<< How can we say this without first asking what sort of mortgage was foreclosed? There is far too much misplaced joy in the tax industry about this new law. The biggest issue is that it only applies to ACQUISITION debt. The original purchase mortgage was probably non-recourse anyway, so nothing changes there. Refinanced debt is potentially applicable, but that is so often combined with cash-out equity debt that many taxpayers are still going to be hit with taxable relief of debt. (By the way, have you seen any guidance on how that will be calculated? Does the bank write down the equity portion, the refinanced purchase money, or some ratio of the two?) The new rule is mostly for clients who bought a new home in the last two years that has experienced a drop in value greater than their down payment. That is certainly not everyone. Of course, the old rules about non-recourse debt, bankruptcy and insolvency still apply. But note that "unable to pay your bills at the time due" is NOT the definition of insolvency. Paying bills is a matter of cash flow. Insolvency concerns net worth.

>>it STARTS on the 4797, it then goes to the Sch D<< She can donate it directly and take the FMV on Schedule A. She needs an appraisal because it is more than $5000. Fortunately there is no depreciation to recapture or other "ordinary income" to mess this up. If she wants some money for it, she can do a bargain sale that will still avoid some percentage of the capital gains tax. There are many other ways to set it up so she can receive some money. She can retain a life estate and continue to receive the rental income. Or she can put the property in a Charitable Remainder Trust with a similar result. Most churches have a lawyer or accountant who can advise her about her specific options.

>>Good one, Jainen!!<< Thank you! I thought it was the best one, but here are my other choices. Prescription label from the bottle of ritalin. Traffic ticket for driving with feet outside the car. Mailing label for Mad Magazine subscription.

>>grandparents have a teenager, how can they prove that this child was physically in their home<< Telephone bills?

>>My practice is focused on Seniors 60+<< I don't want to mislead you, so I will say support CAN be important for seniors. The definition of qualifying child has no age limit if the dependent is permanently disabled. Therefore a taxpayer who lives with a disabled sister may have a qualifying child--unless the disabled sibling provides more than half of her own support, like from Social Security. A senior who takes care of a grandchild for six months may also have a qualifying child, even if a parent or welfare is paying the bills. You should catch up with these new rules. (The rules for claiming a non-relative as a dependent haven't changed.)

>>how do you challenge her filing<< I'm assuming the uncle is your client, and if so I'm not sure how you know what the mother will do. You are considering a number of things that are, frankly, irrelevant. The agreement is probably unenforceable since someone can not legally avoid parental responsibilities that way; at any rate, it has no effect whatsoever on federal tax law. If "in his care" means they lived together, then the boy is the uncle's qualifying child. Support is not a factor. Not a factor. If the mother did not also live with the child for at least six months she is not eligible to claim a dependent, but if she DID live with the child the tie breaker rules will allow it. Support is not a factor, so I don't understand why you mention it multiple times. Regardless of who "files first," if the same SSN shows up on two returns both taxpayers will get a letter from the IRS asking for an explanation, which should be simple enough to answer.

>>all of the country's debt woes would be solved if just all of the EBE and no-income Schedule C returns were audited<< I can tell you, personally, that my own debt woes would NOT be solved if my no-income Schedule C were audited!

>>it would apply to any mortgage debt that is forgiven << No, it is only for ACQUISITION debt. This is another case where tax planning should NOT be the primary factor. Your client is overly leveraged in a declining market; he should seriously consider taking immediate action regardless of whether he can turn to the government for help. I suggest he start by calling the mortgage company. They can't be too pleased about him buying a new home right before walking away from the old one. They probably have no use for another empty house in that depressed neighborhood, so they might not foreclose and may even refuse to let him cancel the debt by selling or refinancing. Since he has other assets they might force him into bankruptcy instead. His new lender is also going to be watching this closely. If he abandons one loan, the terms of his new loan might automatically throw him into default there as well, again with a risk of bankruptcy. There is even the potential to be accused of fraud since he apparently took on the new loan without the ability to make payments. In that case, even bankruptcy won't help him and taxes will be the least of his problems.

>>the taxpayer was a player << This is why I cited TC Memo 2007-368 a few days ago. I confess that I play up my role as a guru, keeper of secret knowledge, a bit. It helps justify my astronomical fees. But I always hold the taxpayer responsible for the underlying facts, even from a K-1 or 1099 or something. I am pleased that the court highlighted the issue of "too good to be true." Nevertheless, I will accept a new client in such a fix. In fact, I prefer working on someone else's mess rather than cleaning up my own mistakes--it's easier to charge more, for one thing! Even if they insist on sticking to their story, I will help them frame their arguments and document their position. Usually we can save some of it with careful prioritizing about what to concede.

This new ruling has some useful insight about "reliance on a professional" as reasonable cause for avoiding penalty. There were several issues. The problem with charitable contributions was deemed to be "procedural" (appraisals and Form 8283) for which taxpayers could blame their CPA. But as experienced business owners they should have known that large hobby loss deductions were "too good to be true," even if the accountant accepted them.

>>requires the relocation of positions, and regrettably the elimination of positions, from the Caribou site<< Some of the user support is moving, but some is being dumped. The down-sized, inexperienced support staff will be separated from the developers who know the program, and the programmers will be separated from the CCH management that doesn't give communication a high priority. Right when the whole system just got shocked by major last-minute changes, too. But don't worry--CCH has a strong commitment to their ATX products.

>>he won't complete the W-9 and will take nothing less than the 800.00 per month. WHAT NOW?<< Now the tenant can decide if he wants to continue to deal with a landlord who obviously hides income from the IRS. It's not like it's hard to find office space to lease these days....