jainen

>>it wouldn't surprise me if their hostility extends beyond religion<< Unless you can cite some background for this idea, it rather looks like YOU are the one with hostility.

>>calculate the Alternative Minimum Tax<< My friend who is in law school set up an LLC for that so I am not personally liable! He said that since it is a church and technically owns the house I can deduct all my utilities and food etc. as charitable contributions, which are also allowable under AMT! The best part is that he says a church is not even required to file a tax return, so I am actually audit-proof! Of course, I don't allocate all my income to the church because I still have to support my three kids, which according to the IRS tables for EIC takes $12600. They are actually my girlfriend's kids but she doesn't need to file because she gets welfare. I am very honest so I am not claiming Head of Household. In fact, I give her a rent receipt so she can claim Head of Household on her Food Stamp app. Since the rent is less than the utilities I don't need to report it because personal losses aren't deductible anyway. We have to change for 2011, though. My girlfriend turns 18 and will start getting her trust money, so no more welfare. We are going to say the church runs a day care program for the three kids. She will donate $12600 and the church will issue a W-2 for employee wages which are eligible for the EIC. Then I can take Head of Household for my higher income. This is all perfectly legal because my friend knows someone who has done it for years and never had any problems with IRS.

>>Its not likely the IRS would know what to do either. << Well, I don't know for sure about that, but I'm absolutely certain that Tax Court doesn't have a clue. Now leave me alone. I'm on holiday.

>>3 1/1% Sales price to FTB << Income tax, and as expected (3-1/3, I suppose). That is, Californians expect it. You may be surprised to see that the withholding is applied against the entire gross amount of the sales price, in total disregard of actual taxable gain or even loss. FTB is the agency that collects income tax. Sales tax goes to the Board of Equalization (which in my opinion is the very finest name in the whole country for a taxing authority).

>>Its pretty clear when it says... << Dag blangit, OldJack! You got me so worked up, and I was feeling charitable anyway to know that for the first time in my life I am actually part of the federal debt, I decided to take you at your word and check out the bona fides of your citation. Before I could say "Rapid Refund" I was lost in some judge's meandering thoughts as to whether there even is such a thing as IRD described anywhere in the law, and whether it means just whatever was owed on the date of death or whatever might come in later. The question of what tax might apply if it did exist, seemed beyond a distant horizon. So let's split the difference. I'll agree that the son has to pay SE tax on those earnings, if you will agree that any other heir, such as a 501c(3) corporation, would equally be required to pay SE tax.

Oh my God--I don't owe anything! I try to tell myself that I am always open to new experiences, but I am totally unprepared for such psychological trauma. What do I do now?

>>can I just go forward 'as if' I had it?<< California posts withholding online! With taxpayer permission, go to FTB. Another reason I don't think it was sales tax is that it was withheld from the seller, not the buyer.

>>He has since moved back to MO<< This is one you should probably refer to a colleague who specializes in non-resident issues. If Missouri thinks there is enough money involved to take a stand, they WILL win. That is because even though the taxpayer moved to Texas for a period of time, it was only in connection with employment. He did NOT cut all personal ties to his former state, and eventually moved back to Missouri. That is the quintessential definition of domicile, so in my opinion he does indeed owe tax to Missouri on his Texas earnings. It sounds odd, but it is entirely possible to be a resident of two states at the same time. However, he can only be domiciled in one state which does not change until a domicile is established elsewhere. Also remember that a lien has been filed. That probably means the tax has already been assessed for what is now a closed year, taxpayer notified at last known address, time for appeal expired. Since you had to ask the question, it looks like you don't have the background to fight this. Get some help.

>>their computer is set up to reject any W2 that has withholding in excess of taxable comp<< I don't see how that could be true. How would an employer handle withholding on taxable fringe benefits that exceed cash payment? How about insufficient wages to cover withholding on tips? On the other hand, I recommend you don't try any unusual methods--I mean, why not ask the tenant to do the withholding? Come on, you have to deal with payment of SE tax anyway so just make ES payments and pray for grace.

>>it is IRD and subject to the same tax treatment... Code Sec. 691(a)(3)<< I promised myself not to look up any tax code today, but I don't think it's true. IRD retains its "character," i.e., ordinary income or capital gain. But what TAX it may be subject to depends on the taxpayer. SE tax is a personal matter that can't even be allocated to a spouse in community property states. Suppose the heir had been a corporation or charity? I have a client who receives insurance residuals from policies her late husband had written, but it is not earned income for her. An even better example is royalty payment for books--Schedule C for the author, Schedule E for the heir. Speaking of self employment, I'd better get my own return on extension before the electrical grid blacks out.

>>she was in the former home 5-out-of-8 years<< Make sure she actually had an ownership interest in that former home. A quitclaim does NOT necessarily mean she had any claim to quit. In some cases, one spouse retains the home after divorce because it was separate property from the start, and the quitclaim is just a formality to clear the title.

>>CA sales tax on the settlement sheet<< I would guess that is income tax withholding, not sales tax. For out-of-state owners, California requires withholding of about 3% of gross sales price. You get it back when you file the non-resident return. It has no affect on reporting sales price or basis, but does count for taxes paid on Schedule A.

>>The church can NOT withhold FICA/Medicare.<< This only applies to her work as a minister. Unless the church itself has elected out, it deducts Social Security on other employees such as teachers, office staff, and community organizers. Often their work is similar to the clergy, so maybe she can come up with a plan. I still think it is dirty, though.

>>collecting approximately $1,100/mo on SSI<< SSI is proof of permanent disability and is a needs-based program similar to welfare which is considered 3rd-party support. That makes the 40-year-old a Qualifying Child even if the mother does not support her. SSDI is part of the same insurance program that pays retirement benefits based on work history. A qualifying relative is good for HoH, except in the special case of an unrelated person who is a QR for dependency under the old member-of-household test.

>> get a part-time job for the next couple of years to earn the remaining 7 credits<< Of course that's the answer! Obviously since she no longer believes in the tenets of her faith, she will no longer be serving as a minister anyway....

>> she needs "7 more credits"<< It's hard not to be cynical about such hypocrisy. The exemption is supposed to be for clergy who are conscientiously opposed to public insurance benefits, not to paying taxes. Oh, I shouldn't say that. Maybe she just had an epiphany. Advancing age will do that. Well, Congress has from time to time allowed the election to be revoked, but the last time was eleven years ago. Details are in Pub 517.

>>info he received when calling the IRS did not constitute substantial authority<< While such a citation is not enough to support a position in tax court, it probably IS "substantial authority" for purposes of assessing penalties.

>>I guess I can't fix it and must paper file it<< Serves you right--no self-respecting tax preparer should ever file before the due date. The industry standard is October 14!

>>only if prescribed by physician?<<

>>just mail in this W-4<< I like, "Don't look at ME--I warned you to make those quarterly estimates I set up." Or my favorite: The IRS punishes you for having two incomes--your wife could stay at home if you were a REAL man! [Okay, I don't actually say those things out loud.]

>>For 2010, this entity was dormant<< He can only deduct expenses incurred in the OPERATION of a trade or business. Any carrying costs while dormant must be capitalized, until the entity is disposed of. What he "hopes" for the future is irrelevant.

>>Use the worksheet to calculate the taxable gain<< The worksheet in Pub 537 is for a reduction in selling price, but on page 11 it specifically says not to treat a disposition of the installment obligation that way. Instead, simply apply the original gross profit percentage as if the note had been paid off. The text explains how to determine basis for this purpose. >> Dad... will have some interest income and some capital gain<< I don't know where to look that up--do you have a reference? I'm pretty sure an investor who buys an installment note does not report it the same way. I think it is more like OID in his hands.

>> I will only include the $15 refund on the 2010 return<< Based on what you have explained, that is an intentional disregard of rules that could subject you to a $5000 preparer fine.

>>Is there a credit available for businesses?<< Who said anything about a credit? The invoice is quite correctly referring to the energy efficient DEDUCTION, which applies to doors and windows of commercial property.

>> they were by no means used in farming<< I have some historical items in my office, like an original 1913 Form 1040 and a 1970's Kleinrock guide. I don't actually use them in tax preparation as such, but I still consider them to be appropriately classified as business assets. But my wife is not a tax preparer, so when I go her only interest in such collectibles will be in how much she can sell them for as an investment. In my state she gets a full basis step-up that eliminates any depreciation recapture.