jainen

>>being deducted somewhere... is all that matters<< I can't go quite that far. Do not for example, pile everything on one property to avoid a non-deductible passive loss. And do not use arbitrary percentages, like half and half. Insist that the client make a reasonable estimate. Besides the factors I gave, KC offers two more. Almost anything will work, as long as it is real.

>>but usually these expenses are very minor << If it doesn't make any economic difference anyway, why ever would you draw IRS attention to the return by taking a non-conforming position on it? Just list all the expenses on a spreadsheet (I would use pencil and lined paper), with a column for total and each property. Don't lock yourself into an arbitrary percentage. Ask the client to make a reasonable allocation based on time, importance, difficulty, or some other reasonable measure. The whole thing shouldn't take more than a few minutes.

>>Does the 6K count for the EIC?<< If it is reported on a W-2 and she includes it as taxable on Line 7, it counts as earned income for purposes of EIC.

>>the Preparer also added in Sales Tax << I'm skeptical about this kind of question. Too sparse on detail of how and why the return was prepared and then reviewed. I suppose it means the sales tax was shown as "other tax" on line 8. On this forum we generally think of "Preparer" as a professional, but the original post doesn't say who signed the return. Perhaps the preparer had been confused by an update class or news article about the change for 2009. SunTaxMan is one of our solid members, so I accept it as far as it goes. I'm always skeptical anyway. I just think we haven't been told everything.

>>just put 1/2 of the expenses on each building.<< I prefer this way, though not necessarily equal portions, unless it's too much work. Setting up a dummy property to post expenses is usually a reasonable alternative, but rental expenses should not be shown as non-passive. Allocating the expenses gives a better picture of the true economics of each property, helps in calculating passive income/loss for carryovers, and can protect against improper expenditures.

>>scanned all client documents<< Scanning is fantastic! No longer do I have to resize copies so I can fit several docs on a page and still have boxes filling every corner. But before I scan, every key number on every document has to get a red checkmark and a blue checkmark, matching marks on the worksheet or form printout. Of course, it's important to use software with very powerful error-checking features too. I just would rather pay the money for top notch tools than P&I. On the other hand, I haven't been satisfied with OCR entry yet, scanning W-2's directly into the tax return.

>>what Denne "has" to do is governed by the engagement letter<< Perhaps my last post was too cold. But in three posts over four days, Denne STILL hasn't answered the question so I presume there is nothing from which to form an answer. It's a common enough shortcoming in tax practice, but in my opinion it is unreasonable to then turn around and hold the client responsible for guaranteeing the accuracy of the data entry. Tax and accounting professions are under a lot of scrutiny from government, news media, and our own clients. Good and even extra service is important because we have little room to compete on price. In my opinion, good service starts with good communication so the client knows what to expect from the engagement, including what her own responsibilities are and how future problems would be handled. Look at what has been said in this thread. Is Denne really supposed to blame the client for signing the return, and only pay the minimum to keep her from bad-mouthing? Heck, she doesn't have to bad mouth anybody--just tell the truth.

>>sometimes its not a legal question<< In my opinion, that's an odd thing to say when our livelihood consists entirely of applying the law in a professional context. There is a reason our industry's ethical standards have had to be codified and we are under such pressure to submit to further regulation. If it is your policy to not stand behind your work unless the IRS considers an actual penalty to be necessary, I believe you should disclose that prior to accepting payment. Regardless of how the client took the return, there is no doubt in the original post the tax preparer made an egregious error that should have been caught with the most basic checking procedure. To blame this on the client herself and later decide only to cover her damages for a marketing advantage (if at all) is, in my opinion, not very cool.

>>I don' see any place for me to sign it<< There is no place for you to sign. You can use the federal form instead, if it lists California forms as well. Fax it to 916-845-0542 and wait five working days, then call.

>>What is your secret for a happy and blessed<< I've chalked up 35 years. Anybody who knows Eileen understands that I got no secret. Anybody who knows me--well, she must have a really big secret 'cause nobody else ever figured it out!

>>read the president's return<< How come he doesn't e-file?

>>she feels it is entirely my fault<< Well, I agree with her. It would seem your quality control procedures have a fundamental weakness. If your engagement process is similarly weak, you have not limited your liability and therefore have unlimited liability for the results of your work, including additional assessments from the IRS. So what is your answer to SunTaxMan's question? Have you addressed this subject in your Engagement Letter?

>>the tests will not be on the type of returns that she prepares<< Pacun recently posted this link, My link. It's an article that explains that so far the IRS is not interested in testing preparers for the work they actually do, although IRS will be thinking about starting to commence some kind of statistical studies at some time in the future.

>>I will be filing out a long form<< "Long form" most commonly implies itemized deductions, as in your usage. In my experience, employee expenses alone are rarely enough to switch from standard deduction. It is therefore entirely possible that you will be taxed on the extra $15 per day while getting NO extra deduction for anything. I agree with Chief--see a professional.

>>Yes. It's an excellent short video representation<< No. It's an outrageously prejudiced hit piece, full of misused definitions and statistics, full of fearmongering with visual and verbal symbolism and cliches. [The video discusses increased Muslim populations in western countries.] For example, in a segment about the wave of Muslim immigration, it makes a big deal that 1.2 million of Canada's 1.6 million population increase is from immigration. But the truth is hardly any of that is Muslim, a minor religion in an overwhelmingly Christian country similar to the U.S. in its embrace of ethnic diversity. Heck, according to the Wikipedia article on Demographics of Canada, there are 15 times as many atheists as Muslims! THAT'S what we Christians ought to worry about.

>>the cost has just become too much<< Lacerte is trying to bump prices as much as 25% this year, but they will back down somewhat for a long-term client if you really really scream at them, so try that first. Second thing I would recommend is grin & bear it. You aren't going to be satisfied with a switch. I use both ProSeries and Lacerte. ProSeries 1040 is very powerful with reasonable accuracy and good diagnostics, but it isn't in the same class with Lacerte. I haven't looked at ATX in years, but judging from the complaints and awkward work-arounds and outright missing features reported on this forum, I would guess it's even farther down the scale. You don't have such a big practice anymore, so it probably doesn't support as much peer consultation and CPE as it used to. With Lacerte you know you can flawlessly handle any odd thing that comes up. (Unfortunately tech support is universally lousy throughout the industry so you need something that is extremely reliable!) Plus its data entry and processing is two or three times faster than other programs, which should be especially important on your biggies. But hey, the demo versions are all free so spend a couple of months playing around. Those K-1's are a good test--how does each program handle some of the less common lines (if it even does at all)? The relative cost of Lacerte is high, but the relative value is even higher. That's why it's the favorite. The extra price is covered by the ability to do an extra return or two, or to take an extra day or two time off. (Ten minutes times 70 returns is twelve hours!)

>>No more over your head return prep<< In my opinion, the registration program is just intended to establish bureaucratic control over the industry. I expect the actual tests to offer minimal assurance of preparer knowledge. I think the analysis for "whether the returns that tax preparers do fall into the category for which they have been tested" will NOT provide any useful information about unskilled preparers. Instead, it will only help identify gaps in the testing program, that is, whether for example they need a test for payroll tax or Form 1120. In my experience, that's the way bureaucrats think--the principal purpose of the registration program is to expand the registration program. If you read the quotes in the linked article carefully, you will notice that's pretty much all the IRS official had to say about it.

>>I don't have time to look this up<< In my opinion, a quickie answer pulled off the Internet will not meet the needs of your mother or her heirs. I'm not sure what you mean by "life time rights" but such non-standard terminology could cause you a whole lot of grief. In my opinion, you should get some genuine estate planning advice. Medicaid and income tax have different rules that sometimes conflict. You assume your mother might need Medicaid, presumably for a nursing home. But when she moves out of her home, you may lose the basis adjustment. Now, those income tax rules are currently scheduled for a dramatic change at the end of this year, but there is a lot of speculation that Congress may make further changes. Your timing might well be more important than the actual decision. You need to make some serious assessments about potential capital gains tax and your mother's likelihood of needing Medicaid within three years, as well as many other factors. You may be able to accomplish your mother's goals by, for example, setting up a trust or buying the property now. You say you don't have time for this, but what could be more important? I don't mean to be morbid, but for all you know you might have a lot less time than you even think.

>>Page 17 of: http://www.irs.gov/pub/irs-pdf/p527.pdf<< According to this citation, not-for-profit rental income is reported as Line 21 Other Income, with expenses (not exceeding income) in one of more places on Schedule A or L. I don't see anything wrong with the original post. In my opinion, it's appropriate for the tax preparer to make this determination, presumably in consultation with the client. I hadn't considered it recently, but the pub gives a definition of for-profit that does NOT require the owner to charge fair rental value. (In my opinion, the tenant would have to not be a family member for this to apply.)

>>They have applied for and received credit. << I don't think the credit depends on who files first. She should discuss this with her housemates so everybody agrees on what is fair. They should be willing to deal with her, because otherwise they are going to get audited by the IRS.

>>There is no equivalent of the 982 for CA<< I suggest you use the federal form and mark it "California Only" the way you do with Schedule A when federal has the standard deduction.

>>this amount is not carried to box 4 of the K-1<< Because it's not subject to SE tax?

>>As would be the case with most contractors, right?<< No. Generally professionals are, well, professional. The purchase price for purposes of the credit is the adjusted basis on the day the constructed property is first occupied as the principal residence.

>>The ordinary income reported in box 1 on the K-1 is already net of the health insurance premiums paid for the partners.<< It had better not be.

>>extrapolating out a few days rent to what it would cost to rent for a year seems to really over-weight it << Oh, sorry, I see what you mean now. Well, I don't think anybody is asking for "what it WOULD cost." Aren't they just asking what it DID cost?