jainen

>>what the government is doing to us through the tax system<< I think it's more about what the news magazine industry is doing to us. A story like this tugs our emotions in several ways, but really the IRS has more difficult issues than diet for a healthy baby.

>>make all baby formula deductible<< Many people have special dietary needs, often related to prior surgery. Should all low salt foods be deductible? Sugar free? Regardless of the mother's condition, the formula is for the child who presumably has no unusual medical conditions. There are multiple sources of food, and even multiple sources of mother's milk. Can anybody explain to me how deductions for condoms or viagra have anything at all to do with the discussion of breast feeding?

>>they accept a divorce decree in-lieu of the 8332 for divorces decrees/agreements signed after 1984, and before 2008<< Thank you for pointing that out. I did not realize that IRS was taking that position. It is of course in direct violation of the current code, so I would not hesitate to advise custodial clients that they can take the exemption if they have not signed Form 8332, regardless of the divorce decree. Anyway, it would be a rare divorce decree that assigned the exemption unconditionally. Two other ways a custodial parent could get around the divorce decree--by revoking the release of exemption, and by arranging for more than half the child's support to be provided through a third party.

Interesting new tax in Oakland, California, this morning--1.8% on sales of marijuana. The dispensaries lobbied FOR the tax on themselves, while the government opposed it. The arguments of course are couched in terms of revenue, but it is really just a new twist on our country's long history of using taxation for social engineering.

>>my capacity as an Attorney?<< Forgive me, Master, I am not worthy!

>>I just have to convince my client << In my experience, $11,000 will convince just about anyone of anything!

>>I might need to punt. << Not necessarily. You can probably handle it, and make a ton of money. However, you will go nuts if the client is too squirrly to participate. In fact, you would have to already be nuts to try, because you are not an Enrolled Agent so you can only assist him for 2003, not represent him under a power of attorney. I would guess that your main plan would be to get a no-change in trade for setting up a formal payment schedule including a lien on his house. I would also guess you'd better have a back-up Plan B. He has a credible story. It doesn't excuse non-filing, but you can soft sell the angle of turning his life around and finally getting everything straightened out. (By the way, don't turn in those other years unless you have to fall back to Plan C or D.)

>>not worth the money for my client to hire a CPA<< I can't say that. It depends on how much money is at stake, and how good a case he can present. There is one thing you can still do for him--read that letter VERY carefully looking especially for the word "days" and see if he still has any time to respond. Even if he does not, the first approach is to get the audit re-opened, either by begging the auditor for mercy or by filing an appeal on the grounds that he did not have an opportunity to present his documents (assuming of course that he has documents to present). Potentially this could start the whole thing over again. My concern is what "the whole thing" might involve. His financial backers aren't going to be gracious to him if they get audited because he took his taxes to some idiot at the mall who screwed everything up. And when they find out you butted in after it was all settled, well, you know....

>>Income Tax Examination Changes<< Last month your client received a special invitation, RSVP. Since he didn't call back, he was taken off the guest list. Now that the party is already over, it is probably too late to show up and ask if there are any leftovers to snack on. Having a designated driver might help a little, except that you don't seem to have chauffer's license. You can't help him. Unless he wants to hire very expensive muscle, his best hope is to stand in the lobby of Jackson Hewitt and yell at the office manager (please, leave the poor receptionist alone) until she agrees to cover penalty & interest.

>>if what you looked at does not appear to be redeemable<< My advice was only partly based on the possibility that you might lose anyway. If all the IRS wants to do is disallow expenses, that's better than having them look at bank accounts to see if all self-employment income was reported. And even that would be better than having them start snooping around the partnership, if you know what I mean. Good question, though. How about a new thread for your second client, jasdim?

>>The return is obviously not accurately prepared. I have my client working to try and pull together all documentation<< It sounds like the preparer didn't have accurate information to work with. Not only is there no P&L, the client doesn't even seem to know what he spent money on. The first part of your strategy is to determine what the audit goal is. You need to make sure the client understands that you can't guarantee success. In fact, if the rest of the return is as flakey it might be best to just take the hit and not let the IRS go asking any more questions. For one thing, this client can't handle the audit on his own and if you have to go for him it's probably going to cost at least a thousand dollars. I recommend an engagement letter to clarify exactly what the client should expect from you and what he must provide. Also, collect a non-refundable advance retainer for five or eight hours. Obviously you aren't going to be able to hang onto all those improper deductions, but maybe the auditor won't look too close if you just explain that they should have gone to Schedule E page 2 (unreimbursed partnership expenses) rather than Schedule C.

>>the joys of living in paradise<< Don't knock dysfunctional government. I usually buy my new harps from a certain online company out of KC because they don't collect California sales tax. Last week I was visiting my brother in Washington so I changed my delivery address. Hey, that kicked in sales tax--Washington recently joined that multi-state tax group. Dadgum efficient government cost me ten bucks! Oh well, at least my old lady didn't find out, which was my main purpose.

>>it doesn't make sense to split off half her income to him if he has no reason to file a US tax return<< For purposes of determining filing requirements, he is deemed to have U.S. source income because his wife's earnings are subject to community property laws. His own income is subject to whatever rules apply where he resides or is domiciled.

>>According to the divorce decree, each parent can claim each child.<< The divorce decree can not change federal tax law--she is entitled to claim both children in ANY case. I guarantee that court order does not specify she must sign Form 8332 even when child support is in arrears. And even if it did, the tax code still specifically says the divorce decree can't be used to determine dependency.

>>concerning the Federal tax laws and Congress that when they "simplify" anything they really tend to make it more complicated << According to this article, Congress has no intention of simplifying anything or even changing the current law. They are calling for a standard deduction, but they are leaving that up to the IRS so it won't actually be part of the tax code. We can guess it will only be useful to taxpayers whose expenses are minimal anyway. For everybody else, it will probably mean either nothing at all or INCREASED documentation to support higher housing costs. There will certainly be new forms "to clearly identify the portion of the deduction devoted to real estate taxes, mortgage interest, and depreciation." And although they want to ignore de minimus personal use (which nobody pays attention to right now anyway), they are not going to ease the requirements by, for example, expanding the definition of principal place of business or what regular & exclusive means. It's all just the kind of safe political rhetoric Congress puts out when they aren't facing an election next November.

>>unsupportable, _weird_ numbers<< Nice hook. Well, I couldn't resist it at least. Unsupportable, weird numbers almost always means it's time to get out my Quickfinder Depreciation Handbook. You've got several different ways you have to handle basis in your garages. Any chance you gave ATX the impression one car was related to another? What about that "luxury car" pickup? Work through each number on the depreciation schedule, weird or not, and manually VERIFY its accuracy. The answer will pop right out--fifteen minutes, tops!

>>we can claim the first time home buyers credit on the 2008 return even if she didn't claim herself<< I think you can. As you say, there's nothing in Section 36 to the contrary. And you would only be treating the purchase as being 2008 for purposes of this credit. It's not a dependency factor in terms of money spent for support in 2008.

>>upgrades to the forum<< I'll do the best I can. Let's see--haircut, clean shirt. Heck, I'll go all the way and even shake the granola crumbs out of my keyboard!

>>I do not do the parents return<< It is not your problem that the parents filed an obviously fraudulent return. If your client doesn't care, just file his return correctly and deal with the IRS letter when it comes. Otherwise, tell your client to pay his parents their $875 exemption benefit and pay you $100 bucks (or whatever) to amend their return, and then go ahead and take the credit.

>>there is no longer an HR department or even a local office<< If he does not have reasonable access to employee services, he should ask his union for help.

>>How would that be shown?<< Barter is supposed to be reported as a sale at FMV. I think you post it as soon as the barter credit is accrued, even if the trade goods/services aren't received until later.

>>They are giving away a lot of things and getting no money.<< You are going to have to ask some more questions, like WHO is getting this stuff. If they are simply dumping expired or obsolete product, it will be reflected in the closing inventory on Schedule C Line 41. But other possibilities include discount sales, perhaps as some form of barter, and withdrawal for personal use, perhaps as gifts or charitable contributions.

>>-noncustodial-parents<< I suppose the IRS can impose this "only purpose" rule because the code says "in such manner and form as the Secretary may by regulations prescribe." It's kind of harsh though, seeing how difficult some divorces are. You remember when the law was going to allow the divorce decree even if it was not unconditional, but then Congress changed it back before that took effect? Well, California conformed to the first change but not the newest version. For the state return, the divorce decree still determines who claims the kids--that could be the opposite of the federal return. And you know, it's a big part of our practice here because we have a lot of divorces and other kinds of separated parents in California (without even talking about all the different definitions of marriage and parent). While we're on the subject, don't forget that Form 8332 follows the old qualifying relative rules, NOT qualifying child. One way to cut out the non-custodial parent even after signing the release is to simply run half the support through Grandma or AFDC or multiple sources.

>>how would the employee get the money back at year end if s/he does not have a social or TIM to file a return?<< She wouldn't. Obviously one has to file a return in order to get a refund. You say the withholding is outrageous, but the rest of your post suggests the main reason it is necessary.

>>green light to treating replacements as repairs based on proposed regulations & tax court cases<< I suppose if someone were really picky, he might base it on facts and circumstances as well. Actually, the authors of the article you cite suppose the same thing--not exactly what I'd call a green light.