jainen

>>I sure don't want to sit here and confirm for myself each one of the receipts<< You do not have to verify the documentation if the client's statements are consistent and otherwise credible. In the original post, Terry faced a very different situation. His clients admitted they did not have records to support their deductions, and "after further questioning" he learned that the expenses were not incurred during the tax year. By the way, in my opinion an employee expense can be deducted as ordinary and necessary even if not verifiably required as a condition of employment.

>>I am not doing an independent verification of their information and therefore any information they give me that they "say" they have the documents... << In my opinion, our industry relies far too heavily on this cop-out. We love the line in Circular 230 which says, "A practitioner advising a client to take a position on a tax return, document, affidavit or other paper submitted to the Internal Revenue Service, or preparing or signing a tax return as a preparer, generally may rely in good faith without verification upon information furnished by the client." We are not so fond of the next sentence in that paragraph, "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."

>>IRS notice 95-50, which states that the $75 rule applies to travel, entertainment, gifts, and listed property<< No, it does not state that. The notice only states that the IRS intended to amend the regulations relating to that issue. The actual regulation, 1.274-5, came out as "documentary evidence, such as receipts, paid bills, or similar evidence sufficient to support an expenditure, is required for... Any other expenditure of $75 or more except, for transportation charges, documentary evidence will not be required if not readily available." That's why your CPA says vehicle expense is specifically excluded from the $75 rule. And even if you somehow read that as saying "receipts, paid bills, or similar evidence" are not required, it does not change the overall requirement for a contemporaneous record such as a log book.

>>Does the surviving spouse sign everything << Is he the executor of her estate? In any case, he can't "testify" for her, only what he knows himself. Her story becomes hearsay from now on, which unfortunately requires even better documentation to corroborate it. Not to sound cold, but there may be new strategies to take advantage of. At least make a fresh plea for a reasonable settlement reflecting the uncertainty and unfairness of the situation. That probably won't count for much in Tax Court, but you have to raise every issue in the examination or you lose the right to even try it in court. You could also ask that everything be put on hold for 120 days. Maybe in the meantime a different auditor will get assigned.

>>HR 4646 has been replaced in the New Congress<< So what? They haven't even passed a BUDGET since 2009. What are the chances of a total restructuring of our entire tax system this year?

>>revenues and expenses net to zero<< Exactly zero? That sounds odd to me. Anyway, Schedule K-1 (Form 1065) is a required part of the tax return. The instructions to Form 1065 say, "Attach a copy of each Schedule K-1 to the Form 1065 filed with the IRS."

>>I should think that lodging would be a completely reasonable position<< Oh, I agree--completely reasonable. How is that relevant to Terry's question about income tax deductions? ALL INCOME is taxable unless specifically excluded by law. If you can't find an applicable ruling on such an indirect medical expense, how could you possibly support it? Everything says over and over again, lodging is ONLY deductible when directly related to services by a licensed medical provider or facility.

>>being proposed and passed around to various committees<< Get real! "Google" is not a legitimate source for tax research. This bill is NOT before the current Congress, and died in committee in the prior session. The same can be said for hundreds of bills sponsored by both parties without any intention of passing, to score some political points but mostly to distract political opponents from genuine legislation. I can tell you never paid any attention to what H.R. 4646 really said, because it would NOT have been "repealed after 2017." That was the phase-out period for the current income tax and AMT system, eliminated entirely by applying a 100% credit for any transaction fees paid.

>>$500 per month... for ten years... on the original $20,000... still owed $17,000<< Pardon my skepticism... my interest rate calculator can't even guess with those figures. Anyway, it is not the same situation at all. A tax lien normally does survive most actions to cancel debt, even bankruptcy. Your client was trying to incur new debt after welching on his prior debt. Lucho's client is trying to liquidate assets for the sole purpose of paying down his tax bill. The IRS prefers that arrangement.

>>staying put until it sells<< Remember that gain attributed to depreciation BEFORE 1997 can be excluded under Section 121.

>>27.5 years or 27.5 minus the years rented in the past? << I think you can do it either way, because starting over would be a longer depreciation schedule than continuing the original one. Suppose the original basis just happened to be $275000. After 15 years they had recovered $150,000 and the adjusted basis was down to $125,000. You can continue to deduct $10,000 per year for 12.5 years. In addition, you can take the remodels as a new asset over 27.5 years. If that is too complicated, you can lump the $125,000 adjusted basis with the remodels, and start the whole thing over. IRS doesn't mind, because the annual deduction is a lot less when you spread the $125,000 over the longer period.

>>president Obama had a desire for a hamburger (seems personal to me)<< Perhaps he was checking on the fry cook's availability to serve on some HEW commission! At any rate, I believe the President has a legitimate business purpose in staging publicity for his role as First Among Equals. And since he telecommutes (that is, his employer does not provide a separate office so his principal place of business is in his home), going to photo-op job site was 100% business and not a taxable fringe benefit.

>>That's not always so easy<< True--but in Lucho's case it IS easy. The client has been paying $500 per month for two years. That's all the credibility he needs. When he tells the IRS he has a buyer and they get all the money, they will agree. Unless he's trying to trick them by selling it to his brother or something, but they'll spot that scam right away. No appraisal needed either; the IRS has an entirely different way of deciding if it's a good deal.

>>they are related to the home modifications<< You would have to find extraordinary circumstances to pull that one off. In almost any case that would be a frivolous position. "Lodging" is only allowed when traveling to obtain medical care from a licensed doctor or facility. Construction of a capital asset might be deductible, but alternate housing would not generally be included in the basis of a capital asset. You might find such an argument in some "Pay Zero Taxes" publication, but don't rely on it without reading the exact ruling for yourself.

>>he has being paying (and he still is)$500 a month for the last 2 years.<< Just call the IRS tomorrow and tell them what he wants to do. With such a good payment record, they will easily agree.

>>it is highly unlikely that any of those operations will ever be found<< The IRS announced today they have found and are taking action against 100,000 of them!

>>I learn more here in this forum than on any conference I attend<< I recommend a conference on study habits. The ATX Community is a great resource, but much of it is at least incomplete if not erroneous. And there is little guidance about what is trivial or important here. A good conference should give you a solid reference manual and the tools to use it much more eficiently than surfing on the Internet.

>>on or after July 1, 2011<< Don't forget to put a dividing line on your ceiling. That way, when the client looks up there to find their total mileage, they can tell you how much was in each half of the year for the different rates.

>>it would be easier to file the MFS<< Yeah, easier for the auditor! So show him that it would actually be easier to file MFJ. There is only a single metric involved--how quickly he can get the case closed. Instant agreement with payment in full--what could be simpler than that?

>>How far back can a return be amended?<< I assume this question comes up in the context of collections from 2002. Take your proposal (including already-completed return) to the Collections Officer with an offer of full cooperation. Otherwise, the IRS has no obligation to accept an amended return, especially if it is related to tax avoidance or delay.

>>the issue is whether it matters to IRS who pays<< It matters. Who pays is every bit as important as how much and what it's for.

>>get it reimbursed from my business<< If your business is anything but Schedule C, no, it's too complicated. Even for a sole proprietorship, it can never be real clean. If you operate at a loss, commingling personal funds adds to the argument that it is a personal hobby, not a business. At least have the business pay its own charges separately instead of using one personal check and getting reimbursed. And keep really really good records, more than just receipts.

>>No further questions asked. << I doubt that. You signed a lot of papers at closing, and one of them asked for permission to pull your 2010 tax return directly from the IRS. That's standard with FNMA and other buyers in the secondary market, so unless you are dealing with a portfolio lender (of which there are precious few these days), you'd better make sure what you file is what you said you were going to file.

>>the IRS is hestical<< From context, I think you mean this in a pejorative way. But I'm not sure of the precise meaning. Is "hestical" a euphemism for some unspeakable concept, an accidental misspelling of soft c where a hard c is required, a poetic substitution of a rhyming word, a new word for something that exceeds anything ever described before, an ancient word for something that hasn't been seen in ages, an anagram for list ache, simple fantasy, a drug-induced hallucination, or some other verbalism?

>>Are these stylist employees or contractors? << Depending on specific circumstances, they could be treated as independent contractors. Notwithstanding a shared schedule, as personally licensed practitioners they may not be subject to much control over how they work. Other factors might include how they are treated under state or licensing laws, local industry practice, whether the company had a ruling under an SS-8 or audit, and details of their contract with the salon.