RitaB

8 hours ago, Edsel said:

I may have been born at night, but not last night.  Me and Rita B.

That's my story and I'm sticking to it till the cows freeze over.

10 hours ago, Cathy said:

I'm afraid he also has some exposure with IRS.  Several years back, I remember IRS telling tax practitioners that many farmers were losing money year after year after year.  If I remember correctly, what they basically said was the tax practitioners could be held responsible for continually showing losses for a farmer(s) if it was common sense to said practitioners that these farmers were either involved in hobbies or plan out stretching the truth.  I was relieved as it gave me a way out.  One of my clients called several CPAs he knew personally before he left my office.  Each CPA repeated my feelings about these type clients.....go somewhere else.

I absolutely agree that a preparer can get sanctioned in cases where an activity (not just farming) is clearly a hobby and you're writing off losses against other income.  (This is a general statement, and I think Edsel can argue effectively that this farmer is really involved in a farming trade.)  Clients don't know what they don't know.  We have a responsibility to explain hobby loss rules just like we have a responsibility to explain commuting miles and just like we have a responsibility to explain that you can't claim your sister's fourth kid on your return just because there is no benefit in sister claiming him.   Not just explain these things, but be the boss, don't allow clients to do what they want, do what is correct. 

One of the two I disengaged from this summer was not even a farmer.  He had a very dismal photography hobby.  He came to me new for 2016 prep.  Three previous returns had five figure Sch C losses.  I convinced him he had a hobby, printed articles and a tax court memo, and we filed correctly for 2016.  When he picked up, he remarked that we were counting the losses for 2017.  Well, you probably will, but Rita won't be doing it. 

Here's one article about preparer due diligence:  https://www.accountingweb.com/tax/irs/hobby-or-business-tax-preparer-due-diligence-part-1

5 hours ago, Edsel said:

I congratulate you if you have your own farm operation and report a profit. 

Well, I could probably lose money if I had to have a John Deere with a cab and AC and a radio like my high maintenance little sister.  I'm good with being a sitting duck for hornets on my cabless Kubota.  She's the baby and always gets what she wants but I'm not bitter or anything.

In all seriousness, I have lots of grass thanks to my daddy, good fencing thanks to my farmhand kids, and cows that grow fat calves.  I am a lucky girl.

I don’t know why driving a tractor to Walmart is funny to you people. My sister would do it in a heartbeat. And my sister in law drove one to the store to get cigarettes when she was 14.

Edsel, my point was that if you lose money on a venture year after year after year, you may have a hobby, not a business.  My guy whose farm I compared to a swimming pool was not lying about the numbers, he was lying about the definition of the activity.  Lying was apparently too strong a word.  My guy was mistaken because it goes on all the time and it lowers your tax liability so it must be good.  You know - writing off the costs of keeping up and enjoying your property against your salary at the job in town.  

Also, the bad joke about driving tractors to WalMart was meant in fun and to suggest that your farmer may have some of this equipment more for personal enjoyment and convenience than for a true business purpose.   That maybe you could minimize depreciation by assigning some of the costs to personal use and not depreciating some percentage at all.  If the equipment he's buying is not reasonable and customary for the activity, he may be buying it because he wants it, which is fine, but it might be more of a personal expense than a business cost. 

I do apologize, my friend, I was excited about wrapping up a like-kind exchange for my own sister's tractor trade, and my comments came across in a way I did not intend.  I never in a million years wanted to offend and I thought I was picking up the tone of your original post where you said his behavior was ridiculous, that he could not justify the expense, and there might be no end in sight.   I'm sorry, I totally missed it.

45 minutes ago, michaelmars said:

Why do you want to minimize depreciation...

If this were my thread, my answer would be:  Because hobby.

I hate these "businesses" that lose money year after year after year and I fired two this summer.  I know, I know.  IRS is not going to get them.  I don't care.  My farm business makes money.  Sure enough.  If you're a grown @$$ man losing money on a farm business, you're lying.  Either it ain't a business or you ain't losing money.  I told one that his farm was a swimming pool.  You're trying to write off your swimming pool.

Sorry, Edsel, I too am off on a rabbit trail.  I don't see any way to minimize depreciation unless you say 50% of the use is personal or something.  Have him drive it to church or Wal-Mart.  All I can come up with.

19 minutes ago, Jack from Ohio said:

And a lot more to charge them!!

Eh, I will charge what I charge, they'll just like it better after a few days on the Struggle Bus. 

It's kinda funny now.  After 24 years of this.  We do have the same clients.  I even had a pair come in yesterday who DIY'd and wanted me to affirm that they understood the problem IRS had with Turbo Tax.  Uh, no, you are not even in the same ball park.  I pointed out three errors, one of IRS and two of theirs, without taking a breath, and they had no idea what I meant.  Wanted to know what I would charge to fix this mess that Turbo Tax made.   (That @#$% Turbo Tax).  

I just smiled and started walking them to the door and said, "Oh you can probably handle it.  I'm covered up right now anyway.  Take a shot at it and come back if it you really, really feel like you need me.  Psssshhh, you got this." 

They can't handle it.  They don't got this.  Not in a million years.   It was like the Karma bus let me drive for ten minutes there.   I figure I'll see them again next week. Which is more convenient for me anyway. 

Contributions are withdrawn first in a ROTH IRA. If she converted 25,000 from a Traditional IRA to a ROTH, and that's all the basis, then she owes tax on 5,000 of earnings.  If she was younger than 59 1/2 when she took the withdrawal, she also owes 10% penalty on the earnings. 

It may not be this straightforward. My clients always dink around and forget what they did with their money, what they contributed, what they withdrew, etc.  They are pretty sure it's all in my computer somewhere. 

I wish so much that folks who don't know how to use bookkeeping software just wouldn't.  My new guy with the retail store sent me an income statement to use for estimated tax payment purposes. 

Me:  Is sales tax included in your gross sales?

New Guy:  I don't know.

Me:  See this sales tax in the expenses?  Sales tax is not deducted as an expense unless you've included it in your sales.

New Guy:  Wow, I think you're right.  Why is there?

Education credits / deductions are the WOAT.  (Worst of all time.)  Hang in there!

(Well, WOAT until ACA.)

I can't breathe.

On ‎9‎/‎1‎/‎2017 at 1:58 PM, RitaB said:

Christian, forgive me if I'm being presumptuous, but did you get the part about not double-dipping?  If earnings in the 529 plan escape taxation, they the distribution can't be used for any other education credit or deduction.  You did indicate that the tuition BILLED was more than the 529 distributions, but that could be because there are charges for 2017 in Box 2.  (See if Box 7 is checked.)  Ultimately, they want to know what got PAID during 2016, and whether or not it got paid with after tax funds.  (I think we're talking about 2016, if not, adjust accordingly.)

If I had a nickel for every time I messed up a post, I'd have a sock full of nickels to hit people pitching 529 plans.  Just kidding.  Maybe.

1 hour ago, Christian said:

In any event the client had enough money in basis in his 529 distribution which was paid toward tuition to qualify him for the credit.

I agree with Sara.  She said it all, but since I've been working on this forever, I'm posting it anyway. 

If you're going to exclude the earnings in the 529 distribution from income, you have to use the entire distribution toward this purpose.  Let's say your earnings are 20% of the account and you withdraw $5,000.  To exclude the $1,000 of earnings from income, you have to apply $5,000 of your education expenses to the $5,000 distribution.  You can't withdraw $5,000 from the 529, exclude the $1,000 of earnings from income, and use the $4,000 of basis to pay expenses for AOC purposes.  You'd need $9,000 of expenses to both exclude the $1,000 of earnings in the distribution AND get the maximum AOC in this scenario.

Whew, I hope that makes sense to somebody besides me.  My head hurts.

6 hours ago, rfassett said:

Rita, don't be too hard on that client. The grief associated with losing a parent causes the best of us to put off things that we don't want to deal with.

You are absolutely correct and I apologize for my tone there.  She's actually a step-daughter and dropped off what she thought was everything in February and in a very chipper mood.  On March 1, I scanned and emailed four forms from 2015 that I'm about 100% sure are missing in action for 2016. Circled the phone numbers of issuers.  Went thru the whole thing again getting the extension and making a stab at the payment to make. Today I simply forwarded the March 1 email to her and explained FTF penalty and October 15.  She didn't hear my fist pounding the "Enter" key.  I ordered the discreet model for chickens. (DMC)    I'm 100% sure the holdup is not grief, but I didn't explain all that and I know better, so fair enough.

I don't fire people for being late, but I don't pull out all the stops to do their returns on time either.  I do understand every single opinion in this thread.  I feel you I really do.

I'm sending another reminder to the apparently very busy young lady handling her deceased father's final 1040.   She has very nice business cards,  but I think that's about the extent of her business acumen.   I really thought the world of her daddy and recall what a sweet gentleman he was as I pound out this email with the help of the new equipment Abby introduced to us in "this could come in handy for certain clients".   My goal is to scare the crap out of her, but if she doesn't take swift action, it's her inheritance she's wasting.

Ordering one now.  Thanks.

On ‎8‎/‎30‎/‎2017 at 2:56 PM, Christian said:

The summer has been blissfully uneventful until now. A client has a daughter who has been in university for three years. I computed the American Opportunity Credit for him as I have done for the prior two years.

47 minutes ago, Christian said:

We are sending them a copy of his Form 1099-Q and a cover letter.

On ‎8‎/‎30‎/‎2017 at 8:34 PM, SaraEA said:

You can't double dip--expenses used for the education credit must be deducted from the "qualifying ed expenses" used to account for the 529 distribution. 

Christian, forgive me if I'm being presumptuous, but did you get the part about not double-dipping?  If earnings in the 529 plan escape taxation, they can't be used for any other education credit or deduction.  You did indicate that the tuition BILLED was more than the 529 distributions, but that could be because there are charges for 2017 in Box 2.  (See if Box 7 is checked.)  Ultimately, they want to know what got PAID during 2016, and whether or not it got paid with after tax funds.  (I think we're talking about 2016, if not, adjust accordingly.)

3 hours ago, jklcpa said:

 

• Second, I'd be very careful with any amendments since you said that your predecessor was in big trouble to the point of his computers being seized. When you prepare an amended return, you are signing with the jurat stating that to the best of your knowledge and belief, that the return is true, correct and accurate. This is the reason that many preparers will not amend a return that was not originally prepared by them.

This one.  Right here.  Nailed it.  I don't know how I'd ever be confident that I could arrive at a correct return.  I would assume other things were missed besides depreciation, and I'm thinking they helped the taxpayer, not the IRS.   I don't think they seize computers because your clients overpaid their taxes.  I think I'd have to start from scratch.  And if the taxpayer can only come up with two tax returns, well, scratch seems unlikely.

33 minutes ago, Elrod said:

Me likem evybody on dis here board....

Amen.  Best family ever. 

19 hours ago, Elrod said:

Hurry Tom....Post another howdy doody, and I will like it....

Yes, the pain of stopping short is worse than the pain of falling short.  -  My Preacher Buddy

26 minutes ago, Abby Normal said:

It's not just paper and toner, it's also file folders, manila folders, sharpies, labels, sticky notes, etc. Our office supplies dropped about 75% or $3k per year by going paperless. Obviously, we're bigger than a 'mom and pop' organization.

Abby, you know I love you.  And I'm just a "mom" organization.  But I love file folders, sharpies, labels, sticky notes.  I also spent a good chunk on hum dinger presentation folders and it makes me happy.  It makes me happy to pull out a file when a client comes in with a question, and I can show them my notes of the phone call we had a month ago that might as well have been with Kim the Young'Un cause they recall ZERO of what we discussed.  There's room for all us.  Merica.   

(I'm also not deleting my data files and am not sure how that rumor got started...)

17 hours ago, JohnH said:

I'm going to start doing all my paper returns in cursive.  They don't teach cursive in school any more, and hardly anybody uses it, so most thieves wouldn't be able to understand the info well enough to steal any identity information anyhow. Now that's REAL security.

Plus, thieves are too lazy to get my files out of the cabinets.  It's a lot of work.  They're cumbersome.  Cursive is a brilliant extra measure to safeguard against that one go getter with a strong back.  Nice, John.  I love it.

1 hour ago, Abby Normal said:

What if they steal your paper copies? What if you have a fire or flood that ruins your paper copies. What if you can't find your paper copy because it was lost, tossed or misfiled?

Sorry but the new ways are better. Plus you save a ton on toner, paper and labor.

What if you tell them you work till 3:00 and they stay in your hair till 3:10?  Can I toss paper at them?  How about ink?   Wow, I am so lazy in the off season I am totally hijacking this thread right now and then going home.   

23 hours ago, Jack from Ohio said:

A paper copy will have no functionality if you need to investigate/check/change the return.

Respectfully, I investigate paper copies every time a new client hands me a prior year return.  If I find a error, I can fix it.