jainen

>>From what he _tells_ me, he assets are nothing but a 7-year-old car << It may be so, but I'd still like to see the actual financial statement. If true, he has no way to make a lump-sum offer so the best he can do is set up a payment plan anyway. Can you identify any reason why the IRS would want to compromise a bill they can just as easily and quickly collect through a common wage levy? Generally to be "a good candidate for an offer in compromise" one must have something to offer. The key to a successful OIC is to find money that the IRS can't otherwise touch , so the offer exceeds what they can collect in the normal way. For example, the ex-wife might agree to participate to clear a tax lien against marital property she controls. or to avoid a wage levy that would cause her source of support payments to lose his job.

>>hoping for advice on presentation rather than documentation<< Those two words are pretty much the same thing, in my opinion. By all means, write up a nice story about how he's struggling to pay his baby's hospital bill. Then go back and make sure you can prove every single dollar and date you tried to avoid. Don't just say he's in a tough spot now. The IRS wants to know about the next five years and if you are clever you might sneak in some favorable history. Anyway, you can't determine whether he's a good candidate, and this is another of my opinions, until you have a complete financial statement in the exit tray of your copier.

>>its an upgrade<< The regs don't mention "upgrade" as such. There are three tests as to whether an expenditure must be capitalized. 1) It prolongs an asset's life, 2) It substantially increases the asset's value, or 3) It makes it suitable for a different use. I don't see how a cosmetic change in a plumbing fixture constitutes a capital improvement.

>>I need money. Get it any way you can<< If quoting the actual law doesn't carry any weight, you can refer this person to the IRS website which still has all the announcements from last year. Don't push the point too hard, though. Your client has been through a terrible time, and the matter is confusing. Maybe even you forgot, but there WAS a special form for late filers just claiming the stimulus payment -- a modified Form 1040A. Unfortunately (and please find a more tactful way to explain it) it now exists only in memory. Time has moved on.

>>my way or the highway<< It really has nothing to do with your way. The Advance Refund was authorized by Congress in the Economic Stimulus Act of 2008, which specified that, "No refund or credit shall be made or allowed under this subsection after December 31, 2008." However, his NOL can be carried back for a refund of the tax liability that would have generated the Stimulus Payment (or equivalent amount in an earlier year).

>>a $3300+ Jado swan-sculpture faucet with crystal knobs<< How would that extend the life of the property or, other than being somewhat nicer to look at, provide new functionality?

>>I leave it to Jainen to examine other cases....<< I'll wait for the answer to taxbilly's excellent question.

>>Jainen, you have such a way with words....<< Thank you, Marilyn! What do you think about my argument against amending a return [in Margaret's thread, "Our IRS at Work"]?

>>he has all of his mileage down to the last .10 of a mile<< Sure, he has his DEDUCTIONS down pat. He doesn't roll 500 feet without writing it down. But INCOME, not so good. Even though he apparently made as much money in tips as his basic fees for the most recent month, he conveniently forgot it. Not exactly what I call "honest, if nothing else." Still, it's a done deal and the IRS examiners don't seem very interested in it so far. Now you recommend he "do the right thing" because of a nonsensical discussion he had with a collections officer who doesn't know beans about what income is what. I know you mean well, but based on what you have explained I wouldn't say the situation calls for amending anything yet. First I would want to explore how his detailed record-keeping could have got so far out of whack, because maybe it didn't. Maybe the mistake was made when he talked to the IRS instead of when he talked to you. So I would want to understand more about this odd IRS contact in which the amount of balance due became unreported income. You see, I do the best I can in preparing the return, but I take a different approach in responding to the IRS. When the IRS has a problem with something on a return, there is a due process they follow concerning the matter. If they don't follow that process, it is perfectly reasonable to assume they don't have a problem. So why make up a problem? There will be plenty of time to amend the return later if necessary. The tax code does not require your client to correct an honest mistake.

>>I know of no way to get that money back now.<< I wouldn't say NO way. There certainly are SOME ways. For example, if he elects a fiscal year he can claim his estimated payments for the current short year. A variation of that is to die; his estate can file a final return for immediate refund.

>>I know of no way to get that money back now.<< Take a turnip and squeeze it. When you get the blood out, you will get the money from the IRS.

>>the client does have a "legal requirement to actually file an amended return" once he becomes aware that he filed a return that omitted taxable income<< In legal terms, an amended return is an administrative convenience that the IRS may accept, reject, or ignore. I'm not aware of any code or regulation that requires an amended return to be filed.

>>He had already mailed it back to IRS<< Please don't take it personally, but my reaction to this anecdote is skepticism. It is such a wildly unlikely scenario that I must put it with the very large collection of Internet stories about something somebody heard from somebody else that doesn't seem to have any actual documentation whatsoever.

>>clearly, the correct thing to do is to file a 1040X<< I'm not sure that's clear. According to Circular 230, the practitioner "must advise the client promptly of the fact of such noncompliance, error, or omission. The practitioner must advise the client of the consequences as provided under the Code and regulations of such noncompliance, error, or omission." Is there any requirement for us to do anything besides give this advice? And is there any legal requirement for the taxpayer to actually file an amended return?

>>the college his kids go to counts it as income and it puts him over the edge for financial aid/scholarships/grants<< Personally, I doubt this is true. There are precious few private scholarships around these days, and they are all applied very subjectively. The vast majority of standard financial aid uses the standard FAFSA application with standard federal or similar guidelines. Any family eligible for EIC need not worry that their income is too high for this purpose.

>>From the 2008 Quickfinder pg. 5-5<< There are TWO mutually exclusive deductions available. Quickfinder, published before the new law was passed, is describing the election on Schedule A to deduct sales taxes in lieu of state income taxes. The definition includes "compensating use taxes" complementary to a sales tax, so leased vehicles are counted for this purpose. The original post concerns the 2009 Recovery Act, which uses a different definition for "qualified motor vehicle taxes" that are deductible as an itemized or standard deduction. I haven't seen any analysis that leased vehicles are covered. However, like new laws in general, this one raises lots of questions about how its limits are to be applied. Presumably the IRS will publish clarifications or regulations when it gets around to it. Meanwhile (in my opinion) we should be cautious of going beyond the plain language of the law.

>>How can a leased vehicle be a purchased vehicle?<< Often an auto "lease" is really a form of financing. A capital lease is considered to be a purchase if it provides an equity interest, i.e., some of the risks and benefits of ownership instead of just the right to use the property. This is usually indicated by a buyout at the end of the lease that is only a nominal amount or less than fair market value. When the lease term exceeds 75% of the car's useful life, or the present value of the payments exceeds 90% of the FMV, it is also considered a purchase.

>>helped the chicken by rethinking its physical distribution strategy<< For all the fancy squawking, the real reason was probably nothing more than this. Chickens have a particular sort of "physical distribution" that is best to get away from after a while.

>>I really could lose it today.<< I hope you are okay? It's been more than a week since you told us you were thinking about standing up naked at a Christian retreat.

>>As best as I can tell<< It shouldn't be hard to identify the rebate as an exact multiple of $300, but in any case the IRS has sent your clients letters explaining their changes. I think your reason for the unexpected refunds is rather unlikely.

>>US tax requirements for income earned from renting the home in Bermuda<< I have no idea what you mean by "dual residency," but a U.S. citizen is taxed on world-wide income in the ordinary way. You might find something in the British tax treaty on the IRS web site.

>>the only thing still in doubt is on what terms he can settle the bill<< [i guess I was wrong about all the answers I expected.] I don't mean he has used up all his options. Now he has many MORE paths to resolution than before. These include major categories of compromise, installment payments, tax liens, non-collectible status, bankruptcy, and perhaps a few others, all with lots of variation and ways to customize the deal. He no longer has to argue tax law (which apparently he wasn't very good at anyway), and can just focus on how much he can afford. If he cooperates he will find IRS Collections surprisingly fair and accommodating. Of course, that means honestly revealing his assets, but he can probably drag the process out indefinitely while he rebuilds other opportunities. It won't be comfortable but it need not be painful.

>>they are going to comply with the request<< Is that because it's such a small amount anyway, or do they know what this is really about? You see, it could be just a routine computer-generated letter when some numbers (generally more than one) are outside statistical norms. But it could also be an outrider to some other investigation. Let's have some speculatory fun! Maybe the IRS is interested in a partnership our friend has invested in, and needs a cover story to initiate contact. Or maybe the true target is somebody else, and they are looking for the restaurant tab that proves a connection. Maybe they want to learn some things about the employer's expense accounts. Paying the tax without further documentation might be the best plan for any of these scenarios.

>>Has anyone ever seen this nonsense before? << You mean the nonsense of a professional casually discussing an easily-identified client's audit with an outsider? Well, I don't see why the IRS shouldn't audit a high income taxpayer. Probably a small 2106 deduction is unusual at that wage level, and they may wonder what it means. Apparently the taxpayer himself has some issue with the deductibility of unreimbursed expenses, the tax preparer thinks it's a matter of special note, and even you find the setup surprising. Did your confidential source say how they would respond?

>>I have the "permission to talk with preparer" box checked on both returns (the '07 with the notice and the already-e-filed '08).<< That '07 permission had expired on 12-31-08. I'm sorry, but I understand the IRS agent's position on this. It was unreasonable to ask her about the CP2000 without a power of attorney.