Kea

Equipment was over $1000, Supplies (gloves and other items not sold as part of the jewelry) were over $1000; Sales were around $700; COGS were around $550. She also made some jewelry for personal use, but kept COGS (what she called "supplies") separate. No tracking fo equipment use % business (or hobby) vs personal. I am familiar with the various general components of what goes into determing hobby vs business and discussed in detail with client. My question was about the depreciation not the hobby determination. That's why I didn't go into detail as to our determination. I guess I should not have made any comments that since no one example is enough to determine hobby / business. I knew the depreciation would not affect the 2011 return. I was just trying to figure out if I should start tracking it in the software. I decided to leave it off the 2011 return. If / when she continues this as a hobby or as a business, I'll start the depreciation then using the FMV at that time. Thanks for all the comments. I knew about the 3 out of 5 "rule," but did not know the details around it. It's been an interesting discussion.

>>Did the taxpayer declare this was a hobby or did you?<< We discussed the facts and circumstances. It may become a business in the future. But for now, it's just something she's doing in her spare time. She has a "real job" as a computer tech for the local University. It's on hiatus for 2012 due to the new baby. After discussing how IRS looks as hobbies vs. self-employment, we agreed that it was more of a hobby at this time. We will re-assess each year.

I tried marking that checkbox, but I'm still just getting the 8453. I looked back at last year, and I used the 8453 at that time. I didn't send anything to PA and my client never mentioned getting any letters. I'm not sure why the checkbox isn't working for me. Could it have anything to do with the federal already being filed? If I use the 8453, do I have to send it in? (I guess I can research that part more tomorrow, but I'm being lazy) Also, not sure about attaching 1099s since client moved in Jan 2011 so everything had to be split based on date received (INT & DIV). I didn't prorate the 1099Rs since PA doesn't tax them. Thanks

In 2010 client started buying supplies for making jewelry. In 2011 she bought some expensive equipment and more supplies. She started selling a few pieces in October 2011. In 2012 she had a baby and put the jewelry making on a temporary hold. Income less COGS is $150. But she has around $2000 in equipment and supplies. She can't itemized for 2011, but might for 2012. Still may not meet the 2% misc deduction hurdle. Do I need to set up to track depreciation on the equipment that she can't deduct in 2011? Her supply cost is more than the $150, so no depreciation would be allowed for 2011 even if she could itemizie and meet the 2% test. If I start depreciation, does the basis get reduced by the 1st year depreciation even if it can't be used? I've never had a hobby with depreciation! Thanks.

My sincerest condolences. May he rest in peace.

Thanks so much. That's one of my favorite movies. 25 years ago? Now I feel old. So many good quotes that can be used in other situations .... "You keep using that word. I do not think it means what you think it means." (word / tax rule / whatever)

Please consider this a "virtual hug" from me. I am so glad your family is there for you and Don.

My best wishes for you and Don.

Pacun -- I agree if the rules change, the software should be updated. FWIW, I'm using TaxWorks -- but it should still be updated! And, yes, the software did at least pro-rate for the time they lived in NJ. So, at this point we're talking a whopping $20 NJ credit! (But, hey, 20 bucks is 20 bucks.) When I read the NJ publications (general instructions and GIT 6 for part-year residents), I did not see anything about having dependents. I've tried searching for the TSB 300 on the NJ site and a general Google search and I'm not finding it. If they aren't eligible for the credit due to no kids, I'll amend it. But I haven't found anything yet to substantiate Jainen's claim. I'll research more tomorrow.

New client retired and moved to TX from NJ in 2011. Return included W2 wages from NJ self-employed babysitting from TX, 1099R and 1099B (big loss). They were eligible for EIC on the federal return and NJ calculated their credit as a % of federal. Client just got a letter from NJ requesting the following info: 1. SSN cards of yourself and spouse (if filed combined return) 2. SSN cards for your children 3. Your 2011 IRS Account Transcript (Contact IRS at 1800-908-9946) 4. Your federal schedule C or Schedule C-EZ (if you were self-employed) 5. Your 2011 W-2s and 1099s (if you were paid by an employer or were self employed) 6. Statement listing the addresses where you lived in 2011 and the dates you lived at each address 7. Birth certificates for your children Questions: 2 & 7. They aren't claiming any children, so they just attach a note stating that? 4. I put the babysitting on line 21, but also used Sch SE. Should I create a substitue Sch C (for info purposes only) to send to NJ? Or, again, just a note stating it is on line 21? 5. Babysitting income is not on a 1099Misc. I know this is the kind of thing they are looking for. In this case it wasn't earned in NJ but since they just use a straight % of the fed credit, that becomes a moot point. What should I ask them to submit? I'm not sure what documentation - if any - they would have. Thanks

Great! Thanks for confirming.

Client passed away in 2011 while collecting on an installment sale. I know the estate "steps into the shoes" of the decedent. But for the header info at the top of the 6252, do I use the DOD or do I keep the original purchase and sale dates? Part I remains blank? In Part II, for the amounts paid in previous years - does this continue from the client's return or does it now become $0 since the estate had not collected on the installment previously? Thanks.

The large 401(k) distribution was taxed in 2010. I think that is part of why I missed my disability pension error. The 2 year comparison showed a large increase in the pension / IRA line so I guess I just didn't notice that the disability pension was not in there. But it's not too late to send a letter? I wish I had thought to send it with the amendment. Thanks for the wording suggestions. I haven't written this type of letter before.

Client was a postal worker now retired on disabilty. 1099R has code 3 in box 7 and no indication of taxable portion of pension. I did it correctly in 2009 and changed software in 2010. I thought everything had rolled over correctly (because there was some info in the worksheet) and it was mid-April (blah, blah, blah) and they had taken out a large 401(k) distribution. Anyway, I screwed up and showed it as non-taxable in 2010. Caught it in 2011 and amended - agreeing to pay penalties. Now I'm wondering if I should request penalty abatement. I hadn't considered it at first since it is obviously an error. The "increse in failure to pay penalty" is $600. Is there any reason IRS would abate the penalty or would I just be wasting my time? If it is worthwhile to try, what do I put in a letter? Thanks

For me it's always a personal battle when I write. My tendency is to include too much irrelevent info. I try to just put in the important facts. Sometimes I end up overcompensating and not putting in enough. What can I say? I'm a "numbers geek" who doesn't like to write.

The due date was 4/15/12, but we filed an extension giving us until 9/15/12. I "assumed" (I know that's dangerous) that all income would be passed through on K1s so no payment was made with extension. He knows that this affects 2011 and told his siblings to file extensions for their personal returns. (I have no idea if they did or not). But thanks for the reminder - in case I hadn't known or in case it helps someone else.

Will has already been probated. Oldest child is executor (per will and per letter of testementry). Benes are her 3 named children. Perhaps my comment was too simplified. I was merely trying to state that the will (or LOT) didn't state anything about whether the estate or benes paid taxes on an open estate. Unless I don't know how to read / interpret it. That's entirely possible and why I'm asking questions. Executor wanted to use a calendar year.

Thanks - that was the heart of my question. I know the income is taxed, but I wasn't sure if it HAD to be paid by the estate if no distributions. There is a will that just states everything goes to her children. So now I know the decision rests with the executor. (I never assumed it was my decision.) Thanks!!

Just want to clarify. This is my first 1041 estate return that does not close in the same year as DOD. Client passed away in Oct 2011. She had a brokerage account that was not closed until 2012. There were stock sales and dividends at the end of the year. Since the executor did not make any withdrawals or distributions from this account until 2012, I report all on the 1041 and do not issue any K1s for 2011? (Her other accounts were held jointly with one or more of her children and that income will be reported to them by 1099s.) Or, do I pass all income / losses to benes in 2011? (I know I will for 2012.) Thanks

True story. I saw this on one of the other forums I read: >>Some people vote for the greater good of the country as a hole, not just what is best for themselves. There in lies the difference!<< Somehow, I don't think that was the meaning he had in mind!

Thanks for sharing this info. For the size of my practice, I'm really not interested in paying a higher cost than I am through TRX. I guess I'll have to see how their homegrown product is this year. I wasn't impressed, either when I tried it before. I may have to just wait and see.

New client moved from NJ to TX in 2011. He had traded straddles and futures, calls, puts, as well as regular stocks. I know the sales of assets goes on NJ Sch B and the software does pull that in from the federal Forms 8949. But it didn't for the straddles that went on federal Form 6781. Here there is no detail, just the summaries. Does NJ want this info (I assume they do)? Do I just enter a line for "Straddles" or "Fed Form 6781" and show the totals? It would mean "various" for date sold as well as purchased. I don't have the detail to show individual trades for these transactions. Any advice is appreciated. Thanks

Yes, I've had a small handful. On this topic, I have a client who received 3 1099Bs with info for lines 10 - 14 (for straddles and futures trades). There was also info on one of the 1099Bs for futures that were not included in the Line 10 total. I orignally listed this as a separate line item. But that takes me to 4 lines and the software says it can't be e-filed. I plan to add in the info for the non-1099-reported sales with to the line 10 / 13 totals. That will actually give me a lower number (since they were loses). Will that cause any processing problems? (I really don't want to have to paper file.) Thanks

NATP does clarify that business cards are not generally considered "paid advertising" so the disclaimer is not needed in that case. http://www.natptax.com/2012taxseason/Pages/default.aspx I'm hoping ad pens fall in the same category as business cards because I already ordered new pens, with "RTRP" after my name.

Congrats! I knew you could do it!