jainen

>>I did not get paid<< WHY NOT? [Check all that apply.] a) Client is on hard times, so your pro bono work is a credit to our profession b ) Client is a jackalope, which is as common as jelly beans in our profession so update your business plan to anticipate it c) Client didn't appreciate the value, so update your presentation skills d) You screwed up so you don't deserve to get paid e) Other/unknown, so the old maxim applies--SW3: some will, some won't, so what? In any case, there is really no reason to [check all that apply] a) Waste any more time you won't get paid for b ) Tell the IRS to look more closely at your work

>>IRS could successfully turn the tax preparation community into an uncompensated extension of their auditing function<< What silly nonsense! Show me one place where the IRS ever said you have to verify anything. Not on Form 8867, that's easy to see. But IF you don't have enough information to determine eligibility, then find out. Just by ASKING, not looking at school records or business receipts. And obviously you have to write it down If it isn't already on the organizer--same as basis or property tax or anything else. Do you invent numbers for your clients? Of course not, and you sure don't want the client telling IRS (or a judge), "I never said that--my preparer made it up--now I know why he promised me a big refund." Which happens to be the first thing a client WILL tell the IRS (or a judge). As for data entry, I haven't heard that whine in years. We enter the data so it's accurate, and we don't want some seasonal temp at IRS retyping it.

>>Evaluate whether the information is complete and gather any missing facts. Determine if the information is consistent; recognize contradictory statements and statements you know not to be true<< How is that even a tiny bit different from what you have to do with ANY other issue? Compare it to Circular 230 Section 10.34 Standards with Respect to Tax Returns, "The practitioner may not, however, ignore the implications of information furnished to, or actually known by, the practitioner, and must make reasonable inquiries if the information as furnished appears to be incorrect, inconsistent with an important fact or another factual assumption, or incomplete." In other words, tax preparation is a professional activity, not simply a clerical function of filling in forms.

>>the church wants a W-9 with the assumed name and a FEIN<< Obviously--her own SSN only goes with her own name. Back in the good ol' days it was different. It only takes 5 minutes on-line, so what's the big deal anyway?

>>why are they imposing rules that make it necessary for tax preparers to take away some of that EIC money<< Come on, you could ask the same of any tax benefit. How about net operating loss? Instead of paying taxes, a business owner can reinvest the profits in his own enterprise, perhaps even in the form of a salary to himself. That can generate refunds for years back and decades forward, except of course I'm going to charge for the forms. A great deal of EIC fraud is actually Schedule C fraud, which is generally much easier to get away with than listing extra Social Security numbers. And I would guess that EIC is a relatively small part of Schedule C fraud. I have my own opinions about what are good or bad parts of our tax system, but professionally they are all good for me--it's what I do for a living. I give some price breaks, mostly if the client has very good records or has been loyal. But I don't refuse clients unless it's something beyond my skill. EIC is easy; even the due diligence questions are filled in automatically. Just use an organizer and an engagement letter with a proper interview. IRS is not looking at YOU.

>>won't disclose much about her ex-husband or who lives with her or if she has any non-W-2 income... drops off her folder with a page-long list of her income and expense totals<< Personally, I would not be able to complete these two returns. Not because of EIC, though.

>>Would it be best just to apply for a new FEIN under the wife SS# and avoid all this mess?<< Best? Practical maybe, but you would miss out on all the fun of conquering the IRS automatic match system, not to mention the angry husband. By the way, you might ask the church what exactly they need, because SSN is a perfectly good tax ID number for the W-9.. Lots of places that have had problems will only contract with corporations these days.

>>if they do find fraud they still do not put anyone in jail<< Sure they do--here's a case from your own state, Arkansas http://www.justice.gov/usao/are/news/2012/January/Morrises_IRSVA_sent_012712.html Oops, sorry. That was the preparer, not the taxpayer!

>>why the parents were not claiming the dependent<< I don't understand why I have to pry into family relationships that way. It has absolutely no relevance whatsoever as to whether my client is eligible for EIC. How could I even get a reliable answer? I guess next they'll want me to find out why my client's employer won't reimburse travel expenses so I have to complete Form 2106. Or at least why the college won't give my kid a scholarship to cover tuition so I have to claim refundable AOC..

>>I can not find any inf about this situation<< Where did you look? A great many questions can be answered by simply studying basic references. Instructions for Form 1040, "Were you, or your spouse if filing a joint return, at least age 25 but under age 65 at the end of 2011?" Pub 17, "It does not matter which spouse meets the age test, as long as one of the spouses does."

>>unfinished tax business<< My, my! He was optimistic about almost everything being extended just the way it is. Maybe he was right, because the election left the balance of power about the same. I'm not quite sure how that translates into Congressional action, though.

>> If anyone should have the right to vote, it should be our military<< They got it fixed now, but when I was in the military during that war in Southeast Asia 3/4 of us couldn't vote because we weren't 21 years old. Most of the people who objected to the foreign policy were likewise too young. And of course the vast majority of enemy soldiers were children as well, something that is still true of our recent wars.

>>Lots of good ideas<< Okay, I finally took a look. Not bad, mostly bold innovations like advertise, make appointments, process the returns, and thank the clients. He's enthusiastic about fancy tech, and that is something most of us should probably consider. But the guy sure ain't interested in long-term relationships with loyal clients. I don't even think he likes clients! "Clients bring in their stuff -- that’s the polite word for it." Almost contempt for "messing around with appointments." His big appeal is junk mail--"the best two weeks" starts April 1. Not a word about tax planning. No mention of improving your technical reference material, or even just taking an update class. Not much to say about quality control either, except make sure the scanner picks up every page. “What are my odds that they’re going to get audited?” The tone suggests a mall kiosk.

>>due date of the 2008 return was over three years ago<< Understand that the IRS can examine pretty much anything they want. They may not be able to make a late assessment, if taxpayer records are mostly in order, but you are a long ways from that point. If the "huge loss" was more than 25% of his income, the statute of limitations may be SIX years. If it was fraudulent, there may be no time limit. That's why invoking the statute of limitations is technically difficult. You might trigger a fraud investigation. Just saying. Other than the nuisance factor, is there some reason the taxpayer can't support what he claimed?

>>museums for the companies<< Assuming the museums are established as private operating foundations under 501( c)(3), (which of course we can't simply assume), FMV is probably allowed according to the rules for donations of appreciated property. See Pub 526 for details. As to what FMV is, I suggest a bit more clarification than "he believes." I wouldn't worry too much about it though, since he's only claiming an average value of ten or twenty dollars. Remind him to take photos and get acknowledgements.

>>Wages paid to qualify for Unemployment = taxable wages on all levels.<< Nonsense--the laws are different. Perhaps the most common example is employee contributions to a 401(k) plan, excluded from gross income but still covered by UIB and Social Security. Many fringe benefits are treated differently under the various laws. Payments to family members would not always earn your equal sign. All sorts of excluded military and government and foreign wages may qualify for UIB even if non-taxable. And the equal sign is supposed to go both ways, but obviously there are lots of taxable wages that don't qualify for UIB. So I would say the idea is not logical at all.

>> the state has three different sets of rules<< Well, I didn't mention our other one, what they follow at Employment Development Department. See, their rule is that only employees can apply for Unemployment Insurance Benefits, so if you apply that proves you were an employee. Their other rule, for continuing benefits, is that you can only get UIB if you can't find a job, so if you are getting it that proves you can't find a job. We know this is reliable because workers who don't get benefits, after they run out, can always find a job right away. It's a very fair system, pretty much like a flat tax except in the other direction.

>>It snowed in CT, so definitely below 32 degrees last week.<< Counting last night, the old rain gauge reports almost half an inch since October. At last I can ease off watering (except, of course, the annuals I just planted). Now come the weeds!

>>federal and state are two different governments<< I very much agree with this. That's why you need a Virginia labor expert to fight the claim. For example, here in California one of the formal factors is whether the worker believes he is an employee. You can see that filing for UIB might indicate that. And yet the federal status would still have to be determined separately on other factors. California law also holds that unskilled or semi-skilled labor indicates an employee relationship; Perhaps this applies to the construction work in the original post, but the IRS isn't going to use it even if Virginia does. KC observes that states more readily take the employee position. It doesn't necessarily mean they are tougher, just that the laws are different.

>>the overpowering facts<< You know it's not that simple, OldJack. The IRC just refers to "the usual common law rules." To my mind, the financial arrangements strongly suggest an employee. You say hourly payment is irrelevant, but in Pub 15-A the IRS warns that it "usually indicates that a worker is an employee." This particular worker doesn't seem to have any exposure to profit or loss. If materials are stolen, it's not his problem. If there is an efficient shortcut, it's no benefit to him. Unless he is providing significant equipment or transportation or something, I don't see that he has much investment in his work. What the IRS does consider irrelevant is the lack of supervision. "Even if no instructions are given, sufficient behavioral control may exist if the employer has the right to control how the work results are achieved.....The key consideration is whether the business has retained the right to control the details of a worker’s performance or instead has given up that right." In other words, if the worker got drunk would he still get paid when he sent his drinking buddy to cover for him? None of these are "overpowering facts." Neither is having multiple employers. Neither is the lack of a written contract, though it would certainly look a lot more like a separate business if it were conducted in a business-like manner. I think the client will have trouble proving his point, and because the ruling may well roll over into other areas, he really needs to be transferred to someone who knows what's going on in the Virginia Employment Commission.

>>check with the Service<< The original post is about Virginia Employment Commission, not IRS. There may be technical or procedural differences in defending against the claim. The client should be referred to a professional, most likely a labor attorney, who already knows how to handle the issue. An early error could lead to expensive state and federal audits with even more expensive results. This might go beyond UIB to Social Security, Worker's Compensation, and more. In my opinion, the original post describes an employee relationship. It refers to the worker as an employee of others, and the worker was only paid for personal service time rather than job results. There is no mention of the worker having a separate business, or even a contractor's license so employee may be the only legal relationship. My guess, supported only by the level of compensation, is that the client knew and intended to take advantage of the fact that he was not hiring a contractor. If he whines about the consequences, remind him how lucky he is that the construction worker was not injured on such an informally supervised job! Jack from Ohio thinks the worker is trying to freeload. I think the employer is trying to freeload.

>>Will the 1099C (going in to the trust) trickle down to the kids on the K1's?<< Read the trust document! Does it require income to be distributed to beneficiaries? Does the trustee have a choice about distributing income and/or paying the tax? Read the trust document! There is no other way to even begin answering your question, which may be why nobody began.

>>If I help fill in the blanks for someone, is that practicing law?<< Depends on what you mean by "help." As long as you are not giving advice or determining the client's rights and obligations, you are not practicing law. Simply filling in the blanks of a standard form is called "scrivening," which is different from "drafting" a document.

>>we sometimes push clients into the setup that WE think is best<< Not me. I NEVER recommend a choice of entity. It is beyond my expertise. In my opinion, it's too close to practicing law which can easily backfire big time. I only provide general definitions, even though clients often want to focus on a particular point. I insist that tax implications are not the most important factor. They wouldn't believe me anyway--for some reason my credibility is less than their hair stylist. So I don't give them a chance to misinterpret my advice.

>>the driver can't be charged with harming his attacker<< Right--the only witness can't testify, so he gets away with it! And what a great insurance scam!