jainen

>>the taxpayer didn't receive any information from the lender<< Just in case he forgot, you might remind him about the receiver.

>>she had no right to use the money/lease/rent<< She had every right to that money. That's why it was available for the court to use it for her own debts. It was all taxable income to her until title was transferred away from her, which apparently didn't happen until the sale. I wouldn't waste any time second-guessing the settlement statement. All in all, it sounds to me like she came through this foreclosure in remarkably good shape.

>>$1150 in penalties & another $450 in interest<< There is no way to abate the interest, and in my opinion you have no professional obligation whatsoever to pay it. That is simply a marketing gimmick thought up by the corporate types at H&R Block. (Frankly I don't think you are necessarily on the hook for the penalty either.) So, what penalty is it? For underpayment of estimates, there isn't much you can do. If part of it is late payment. that's hard to abate. Reasonable cause for late payment means the taxpayer (not the preparer) exercised ordinary business care and prudence to provide for payment but was unable to pay without severe financial hardship. Most likely it is an accuracy-related penalty. Reasonable cause for that includes preparer error if you can explain it in terms of "reliance on professional advice." That requires evidence that the taxpayer provided all required information in good faith, and had no reason to think the "advice" was wrong. An organizer or P&L would be very helpful for that. In fact, it's reasonable to ask the client to provide a P&L for 2007 before you respond. The problem with that, of course, is that an accurate P&L would not agree with the tax return, so how can the businessman claim he exercised ordinary care in signing the return? Still, I see this penalty as primarily to ensure compliance rather than punish. The IRS often seems satisfied if you can demonstrate a good history of compliance and show that specific changes have been made in your procedures (and the client's review) to ensure that the problem won't happen again. Also take a look at potential preparer penalties for understating a taxpayer's liability. The minimum is $1000! These are new so we don't have experience about when they are imposed or how to fight them. They are supposed to be for taking an unreasonable tax position, and I would guess a math error doesn't count. But be careful if you decide to blame yourself. Don't get the IRS irritated with your response. Your letter should be cool, honest, and very complete. Limit it to a single page with attachments. Include copies of the tax return, organizer and other source documents, citations to code and regs, IRS correspondence, and of course a power of attorney.

>>how the United States Government is currently doing business<< I don't quite follow. Which one is the metaphorical government--the hotel, the butcher, the farmer, the feed store, the hooker, or the rich tourist? Or perhaps the narrator?

>>Wouldn't the type of basis adjustments that a client would find for you have already been included in the gain he postponed? << In a sense that is true, but there is no need to trace back further than the purchase of the replacement property. For example original house cost $100,000 plus $25000 improvements, minus $10000 for a casualty loss. He sold it in 1995 for $150,000 ($35000 gain) but rolled that into a new $200,000 home. The basis of the new home is simply decreased to $165,000 by the deferred gain, and we forget about the casualty loss, the improvements, and the original $100,000 basis itself.

>>Cicero - 55 BC What have we learned in 2064 years? Apparently, not a darn thing ! << We know a lot more about Cicero than he knew about us--that's something. In this quote, Cicero doesn't propose any limitation on government spending except cutting off his needy neighbors. So whose money do you think the good Senator wanted to fill the treasury with?

>>The only way you get a first mortgage modification in this district is outside of bankruptcy<< Technically, once the bankruptcy is filed nothing can be done except through the trustee in consideration of all the competing claims. However, it is generally not too difficult to bring reasonable proposals to the trustee. Also, sometimes the reality of bankruptcy will get the bank's attention. When the numbers work out, you can get what you need and withdraw the bankruptcy petition. Probably not what you want, but maybe at least what you need. I'm not saying any of this is easy. It is enormously difficult. But it is possible to negotiate things in bankruptcy.

>>Congress has been extremely reluctant to give the Bankruptcy Court the ability to modify the primary mortgage<< Usually the Court itself is reluctant to modify anything. The judge expects the debtor, trustees, and creditors to present their opinions. While we usually think of a mortgage as "secured," that only protects the lender up to the balance of the equity. In a lot of BKs these days the whole purpose of the proceedings is to escape debt that exceeds FMV. Faced with large losses, banks can be pretty creative in their offers. Negotiate with them.

>>Does the bankruptcy cancel the debt or does the bank take the house? << Generally secured debts get priority in a bankruptcy, but there are many opportunities for negotiation. Each state has different laws and precedence, including homestead acts. If you choose to file without legal counsel, you are pretty much stuck with however the judge feels that day.

>>find someone else to talk to?<< Why bother? Just order new checks that say anything they want--nobody knows or cares about the back story. The k-1s, W2s, and 1099s will of course still show the old name, but that's as common as belly button lint and nobody gives it half a thought.

>>They want to change the name<< They don't really need to involve the IRS. They can leave the tax records the same, while conducting business under a D.B.A. filed with the county.

>>should I use 4852?<< Yes, looking strictly at the worker's tax position a substitute W-2 will get the job done. It carries some risk of examination, however, so you should prepare a good backup file including such things as time sheets and work schedules if available. The company might find it awkward, and if that is a concern of your client you should probably continue discussions. You may need nothing more than a sample W-2C for their guidance.

>>Did they file a joint return<< I don't quite follow your position, Tom. Even in community property states separate income and deductions are still included on the joint return. It doesn't mean those are HER deductions, just that she's reporting jointly.

>>Employer never corrected their records acordingly.<< If he is planning on moving on anyway he should just let it be. A previous employer couldn't touch him. A current employer might demand he repay his share, or might even just withhold it without notice. It's the sort of payroll thing that when it happens, it is really nice to have a union shop steward nearby.

>>His profession is "physician"<< I agree with that, but I'm still not convinced. In my opinion, we have not been given enough information to determine if he in fact is away from his tax home for a temporary purpose, or has moved to the new city.

>>fill out Form 8919 and amending the return. Is this correct..?<< No, at least I don't think it is correct. According to the instructions for Form 8919, it is only used for employees who are misclassified as independent contractors. Your client was correctly classified as an employee and paid on a W-2. She has absolutely no obligation whatsoever to pay Social Security taxes on her wages. The only obligation is for the employer to pay them. If the employer didn't collect the tax, that's his problem.

>>She is looking at the Divorce Decree<< Hey, Joan. I'm just being ornery as usual. I hope you realize that everything I said about the divorce decree is irrelevant. Anything in it only applies to itself, not her tax return. So, regardless, if you DON'T let her take that credit we would all think less of you, and I would feel particularly guilty and, well, lousy.

>>her name was never on any of the paperwork after they did get married<< No kidding! Heck, I would have thought it would at least be on the divorce decree! And if the guy's lawyer was any good at all, her name is also on a Quitclaim Deed filed in the county courthouse--but then, why would he need to get one of those?

>>can he deduct the rent on his apartment and all his groceries and dining out? << Sure, he can deduct all those things from his checking account. But unless he can establish that he is away from his "TAX HOME," this patient has no pulse.

>>didn't get anything from the divorce with the house<< Do you make this statement based on your client's explanation, or have you read the actual divorce decree? It is common for courts to consider, for example, that because a year and a half of mortgage payments were made from community property funds the wife had at least some community property interest in what otherwise would have been separate property. The divorce decree would show the property division as trading such an interest for additional cash or other marital assets. If that is indeed what the divorce decree says, then she had a "present ownership interest" within the last three years and is technically not eligible for the credit. In my opinion, this is a pretty good question first thing Tuesday morning!

>>the average VA hospital<< I don't know what "average" is, but I reckon that means some are better than others same as private facilities. I can personally vouch for the VA hospital in Palo Alto, in which I spent a lovely 8 hours just last Wednesday. There are certain things in which they have far more experience than everybody else put together, and as it happened I was in need of that very thing. But I was not only absolutely and totally satisfied with their technical skills, I was overwhelmed by the hospitality and friendliness of the entire staff from reception to recovery. If that is the model of government health care, you need not worry.

>>Obama is doing all kinds of weird things lately<< He sure is! Why just this morning he stood up to the A.M.A.--how weird is that? Like, nobody in the world has ever done it before. The way Obama talks about reform, it's hard to ignore the fact that EVERY other industrial nation in the world, including some very anti-socialist ones, protects the health of their citizens.

>>did the client get confused over the sales tax?<< Now you got ME confused. Is there a rebate for sales tax? Tax credits for energy-efficient cars have been available for years. Regardless of the color, did you ask what model he bought, and what date?

>>taxpayers who buy a new motor vehicle this year are entitled to deduct state or local sales or excise taxes<< Oh yeah, this will get the economy going for sure! The first thing my county did was just bump up the sales tax rate 12% more. I'm thinking of buying my next car on Amazon--I can combine it with something else so it comes to more than $25 and UPS ground shipping will be free!

>>ensuring uniform and high ethical standards of conduct for tax preparers<< In my opinion, the mark of a professional is high ethical standards of conduct. Our industry is dominated by a chain store clerical image on one hand and a secretive accountant's loophole mentality on the other, both of which serve us and our clients poorly. We are no different from other businesses--if we can't get it together to regulate ourselves, the public has every right to ask the IRS for help.