jainen

>>they had a taxable event<< That's a pretty bad story. Can't you find any more to it? Can they document incorrect advice from a qualified financial advisor? What instructions did they give the two companies? How sophisticated and knowledgeable are they about investment strategy? Do they have an excellent history of tax compliance? Are there any other records such as a will or a family letter that show how they expected the annuity to be treated? Did they actually "cash" the distribution instead of simply endorsing it to the new company? How much time was between the distribution and the new deposit? Can they show they never needed or wanted the $20,000, rather than changing their minds? In other words, can you document that their economic situation was and is the same as if they had done the intended rollover? They will probably lose unless they have a convincing story, so the bottom line is--are they willing to pay the costs of fighting it, or would they settle for getting penalties abated?

>>any contractor that does not provide a tax id << Sounds like the feds have already figured out that he is hiring illegal aliens.

>>All of the money withdrawn from their NY 529 plan was used to make payments for college expenses.<< As you found out from Pub 970, using the money for "college expenses" is not in itself enough to exclude earnings from taxable income.

>>e-file using the telegraph<< Abate the late filing penalty for reasonable cause -- Jesse James cut the lines!

>>Wife keeps new house and husband keeps old house<< I think both spouses must qualify for the credit, and obviously one of them did not acquire a new principal residence.

>>So I ask how is it he received a letter saying he didn't qualify for it if they never received it??<< Great question! What was the answer?

>>does she have to prorate the loss to personal use and business use?<< Two years is generally long enough to satisfy the requirements, assuming it was actually rented at market rates. However, the basis for gain or loss is the LESSER of FMV or adjusted basis on the date it was converted to rental. I would guess the value dropped significantly from 2005 to 2008. Yes, your client MUST get an appraisal or otherwise support that figure; if she didn't value it as a business investment then the loss is not deductible. Now reduce basis another 7% for depreciation already deducted, or even more since you apparently used the original purchase price.

>>Is the accuracy penalty mandatory or discretionary?<< The auditor has a lot of discretion, which is why it is so important to establish a respectful, professional relationship during the audit. The accuracy penalty is imposed by statute, but can be abated for reasonable cause. So tell us--why did your tax prep so greatly understate your client's actual tax liability? Can you show that your client made a bona fide effort to comply with the tax code?

>>article from NC State Board of CPA Examiners<< Thanks, jlewis, for a short article packed with important advice. One point it brings up is that a CPA is entitled to reasonable costs of copying and witness fees. In my area certified copies run 40 cents a page (maybe 25 if there are very many and they are not difficult). It also warns against a general fishing expedition, which is likely when the subpoena calls for a "complete file." I would guess that records of the corporation have proprietary information that is of no relevance to the circumstances of the auto accident. Still another point is that there is no standard subpoena. Original post says the client was "involved" in the wreck. Does that mean he is a defendent in the lawsuit? Is there also a criminal case? Was the subpoena issued by the judge?

>> call the number on the form your client received, honestly tell them you don't know why the taxpayer didn't respond, and ask what you can do now to avoid court.<< Do not do this. Do what Tom and David say. If you call, IRS will simply tell you to send in the information for further review. Meanwhile they will NOT suspend the Notice of Deficiency, so the deadline will pass and the tax debt will be locked in. You MUST file the Tax Court petition. Then like Tom says it will be referred back to the Appeals Division, and everything will work out fine.

>>Checking with his attorney is the best way to go.<< It is up to his attorney to challenge the subpoena on behalf of the individual and/or corporation. But lawsuits sometimes go sideways when people blame the messenger. If you have E&O insurance, ask for instructions. If you don't have insurance-, ask an agent for advice anyway.

>> the home office of an employee of a company<< Generally, an employee can not deduct expenses for the corporation's use of the employee's home. It should be deducted on the corporate return, so an accountable plan is the normal method.

>>dad only had an income interest<< To the extent Mom owned the stock as non-marital property, which is not detailed in the original post, it would be included in her estate and get the basis adjustment when she died. According to Taxman's quote, Dad had the right to receive PRINCIPAL as well as income from the trust. If Dad was a trustee or otherwise controlled that right, I think that it was included in Dad's estate and therefore got a second basis adjustmnet (subject to the special rules if Dad died in 2010).

>>I am working on my MS in Accounting. In 2 weeks, I will be half way through. I plan to sit the CPA exam next summer. I am just finishing my financial reporting class. Next up - cost accounting. << Wow, that's way too ambitious for me. Come to think of it, all I want to do right now is trim the roses, lift some iron, and finally learn the whole fretboard. I even cancelled cable TV this morning, and this screen isn't helping. I'll check in again around update time.

>>having to paper file may be the kick in the pants the client needs to stop gambling<< My, my! To hear such a statement from a tax professional supporting e-file--unthinkable just a few years ago!

>>the limit (for the IRS? for ATX?)is 30<< The IRS publishes e-file requirements for each tax year. According to their list of acceptable forms at My link, W-2G is limited to 30 copies. Don't try to "combine" forms--matching information returns is what the IRS does best of all. And you may have noticed they are paying a LOT of attention to e-file requirements and preparer services lately.

>>wouldn't a POA allow the daughter to access the money NOW<< A lot of banks would not honor a power of attorney like that. Why couldn't the mother just do it, perhaps by transfer to a smaller joint account when needed? As Kea said, it would be part of the taxable estate (even if no probate or estate tax return is required) so stocks would get a basis adjustment if mother died.

>>would it make sense to report the cost of the insurance on the 1120S reducing income<< No, it wouldn't make sense for the corporation to take a deduction for an expense that the corporation did not incur. Why did you put it on the 1040 in the past?

>>most of the tax treaties are about the same<< That is not my impression. There are many common provisions, but not so common that you can assume they apply in any given treaty. I'm going to learn Quickbooks 2009 and some estate & trust stuff.

>>I don't want a letter saying the W-2s don't match the return.<< You'll probably get one anyway, but it will be easy to respond. Did you include the estate's TIN?

>>Did you manually adjust it on Line 52 in hopes that it would pass<< Don't you do that for everything? If you hope the law will change, that should be good enough.

>>I don't see that exception in the pubs I've been reading<< Did you try the pub called, "Community Property" at Pub 555? It has a whole section on Community Property Laws Disregarded. Wisconsin doesn't follow that completely, however. It uses a more comprehensive rule similar to the innocent spouse laws, including the concept of "had no reason to know." See Wisconsin Pub 113 for details. California has such complicated income tax laws that we have to take extra CPE to cover it. But we also have a whole set of reference books available so in some ways it is easier to research. You can't just use our rules about community property, though, because every state is different. For example, California allows spouses to keep income from their own separate property; Wisconsin makes them share. California says the marital community ends whenever the spouses decide; Wisconsin makes them wait for the judge's decision (or at least the next tax year).

>>The CODE says you have three years from the filing deadline<< Keep reading. Section 7503 says, "When the last day prescribed under authority of the internal revenue laws for performing any act falls on Saturday, Sunday, or a legal holiday, the performance of such act shall be considered timely if it is performed on the next succeeding day which is not a Saturday, Sunday, or a legal holiday. For purposes of this section , the last day for the performance of any act shall be determined by including any authorized extension of time; the term “legal holiday” means a legal holiday in the District of Columbia." Reg. Section 301.7503-1 further explains that "Section 7503 is applicable only in case an act is required under authority of any internal revenue law to be performed on or before a prescribed date or within a prescribed period. For example... the filing of a claim for credit or refund of any tax."

>>they will process those amendments, since their own instructions say to<< Instructions aren't much authority, especially when they conflict with the tax code. It will be interesting to see if the IRS actually issues a refund based on amending a 2005 return in 2011.

>>favorite bit of UBF info<< I've always enjoyed the cantrap of the Master Philologist, though it has never been any earthly use to me. "At the death of Adrian the Fifth, Pedro Juliani, who should be named John the Twentieth, was through an error in the reckoning elevated to the papal chair as John the Twenty-first."