Sara EA

In this case I would definitely not deduct travel as the beneficiary will directly benefit from her expense. Now I question whether the estate should reimburse her, which it can do because it still owns the house. Doing so, however, will lower the amount available for the estate to distribute to both beneficiaries when it closes. In other words, her sibling will be paying for half of her travel to a house she is inheriting. Ask her if she really wants to do that.

When the owner of our CPA firm died, many clients went into mourning with us. Some sent US flowers or goodies. No, they didn't show up for the memorial service (usually attended by family and close friends), but that didn't mean they didn't care. As for firing clients, raising fees rarely does it. I had one client who was such a PIA that I kept raising his fee a couple of hundred a year, but he kept coming back. (I stopped at $1500, for maybe a $600-$700 return) because at that fee I figured I was getting compensated for the aggravation. Best to just fire them. Every year we send a letter to some clients stating that our business direction is changing and their particular needs will be met better elsewhere. Every year a few of the recipients beg to stay. Sometimes we agree but not always. We also have too many clients and really need to cull the list.

Legal and accounting fees, taxes, etc. are specifically allowed by the Code and are fully deductible by the estate. It can reimburse whomever paid them and take the deduction. Travel is a little iffy. It is not listed among administrative expenses in the 1041 instructions. See the instructions for Line 15a, "other deductions," which states that costs that would normally be incurred by someone who owns a property are not deductible unless allowed under other sections of the Code (e.g., taxes). Sect 67 of the Code only allows "Deductions for costs paid or incurred in connection with the administration of the estate or trust which would not have been incurred if the property were not held in such estate or non-grantor trust." If someone owns vacant investment property and travels to check on it or prepare it for sale, travel is not deductible because there no longer are misc itemized deductions. (Different if it was rental property.) The beneficiary can be reimbursed, just as she would be if she paid for the funeral, but the estate can't deduct either cost. Does this estate have so much income that it needs the deduction?

She can charge a fee if the will permits and/or Probate approves. The amount will be taxable income to her, not subject to SE. To claim expenses, she'd have to report the income on Sch C, subject to SE. (And since she's not in the business of administering estates, Sch C is just wrong.) Why bother? Just let the estate reimburse her out of corpus.

She is not donating! The estate can reimburse her travel, so she is made whole. The question is whether the estate can deduct the expense from its income. Since she is a beneficiary, I think not. For example, estates commonly reimburse beneficiaries for funeral expenses they paid out of pocket, but funeral costs are not deductible on the 1041.

Something doesn't add up here. Take a close look at the IRS notice. It seems to have information that there was a $145k withdrawal, not $99k. And they seem to think $45k was repaid--does that match the return you filed? The notice should list where their info came from. Was there another 1099R you haven't seen? Your client paid tax on $33k in 2020, check. In 2021, $33k was repaid so no tax due for 2021, check. If the client repays $66k in 2022, no tax will be due and 2020 can be amended. Did the client elect for the 3-year-plan? Another thing to check.

It may depend on whether the executrix is a beneficiary. If her travel was to get the house ready for sale, and she will share in the proceeds, probably not deductible. Take a look at Sect 20.2053-1(b). The estate can reimburse her travel, but I'd be reluctant to deduct it on the 1041.

I find it very difficult to work with emailed docs (especially when they send piecemeal so you have to go back through ten emails to be sure you got everything--a portal would help here). It's not a big problem when they just have a couple of W2s and mortgage 1099, but when you start getting multiple brokerages or eight 1099Rs, I really have to print them out to put them in reasonable order. When I am done with a return, I manually add up all the W2 income, bank interest, withholding, etc. and check it against the return, then put a check mark on the original doc. I find it impossible to run this check on 25 helter-skelter docs. How do others work with emailed docs? Don't get me started on phone pictures of docs. Our client letter states in all caps NO PHONE PHOTOS. Never can read them, often can't print them or send to electronic file cabinet.

Job description: Answer 1,000 phone calls a day. Deflect 989 of them from callers who want to speak to their preparer by asking how you can help. Help them. Get the deluge of mail. Open the mail. Direct the mail to the appropriate person. Make 100 appointments a day, or if you're not taking appts or there are no openings, take abuse from 100 callers. Have lunch when you get home at 9PM.

As long as everything in the trust is listed in their SS#s, that's true. When a grantor trust has to file a 1041 is when income-producing assets are reported in the trust's EIN. This can be bank or brokerage accounts or rental properties that get 1099s with the EIN. Your clients may title their assets in the trust's name but as long as they use their SS#s, they are indeed indistinguishable from the grantors. If that brokerage acct is reported in the EIN, IRS matching computers will be looking for a 1041.

schirallicpa, EAs have to take two hours of ethics annually because THE IRS SAYS SO. Best ethics course I ever had was run by an IRS agent who began by saying she knew she was preaching to the choir. The worst I ever had was run by Karen Hawkins, then head of the Office of Professional Responsibility, who hated tax preparers. She spent the entire two hours reading Circular 230 to us, especially the juicy parts about monetary fines and sanctions. Interestingly, the ethics courses for CPAs are not eligible for CPEs for EAs, and vice versa. What do they teach you CPAs that they don't want EAs to know, and vice versa?

Tell him to look for a new preparer. He has to know that campaign expenses aren't business expenses. Telling instead of asking you what credits he's entitled to is another sign that this is not a desirable client.

I just took my annual ethics CPE today. I now know what the answer is! You do too, even if CPAs only have to take four hours of ethics every three years. We EAs, being the most ethical of the professions, have to take two hours every single year. (Or do we have to take more because we're the least ethical?) Gets old fast.

If not available for rent, it's not a rental but is out of service. He can deduct property taxes on Sch A, and mortgage interest if he doesn't already have a second home. He could have made an election to capitalize the carrying charges, but he would have had to do that the first year it became an investment property rather than a rental.

If the trust has more than $600 of GROSS income, then yes, a 1041 must be filed and K-1s issued to the grantors. This would be the case if income-producing assets like bank and brokerage accts, etc. are titled to the trust using the trust's EIN. If rental properties are titled to the trust, rental and income and expenses go to the trust. What are your clients putting into the trust? Does it have an EIN?

Do they need all that depreciation? Opt out of bonus and use just enough 179 to offset operating income. You don't mention guaranteed payments, but I believe they are always subject to SE because the partner actually received that money.

There may be a 1041. It depends on what assets are placed in the trust and whether tax docs are reported in the trust's EIN. If they are, the trust has to file. There is an election on the 1041 to report everything on the grantor's return, so instead of a K1 there is a statement showing income and expenses. Filing is still required though, or the IRS computer matching programs will discern a mismatch and generate a letter.

PA has an inheritance tax, and I'm not sure if revocable trusts that become irrevocable at death escape it. Find out why they are considering a trust. Did they go to one of those seminars that convince the attendees that they need to pay the lawyers a big chunk of change for essentially no benefit to them or their heirs? I have seen many people who really don't have much set these things up and really can't afford the 1041 annual tax filings. This is a legal decision though and you are right to refer them to an attorney. Just make sure s/he doesn't offer seminars.

Is half of their combined income over 400% poverty? If so, it all gets paid back in most cases, or they are eligible for a tiny subsidy.

The SSA usually keeps the SS# active until the final return is filed, then they deactivate it. Once they do, there is no way to reactivate it. You will have to mail the amendment. If they are due a refund, warn them to expect it in a year or so. If they owe money, no problem.

You are correct that if the properties are treated as one enterprise, actual and suspended losses on one stay suspended until all are sold. That's one reason I never make this election.

Doesn't sound like a partnership to me. Your client was merely an investor. The money received on his investment is cap gain. He put in $1.09m (58%), partner put in $775k (42%). Client is getting more than his share of the sales price.

The trust doc provided more info than the original post--lesson learned that we must see it! Still confusing though. If the wife had power of appointment, she could do whatever she wanted with the assets, yet the trust doc said she could only withdraw up to 7% principal each year. Rather than drown in the legal terms, just include it in her estate since she won't being paying estate tax anyway.

None of this goes in the wife's estate because she did not own the assets, the trust did. This is an irrevocable trust that gives her the right to income (I think, not clear from the info given) and a limited amount of principal. Upon her death, the assets owned by the trust go the beneficiaries and the trust dissolves. The 1041 will have three beneficiaries--the wife's share of income received before death and the two children's share of income each received after her death. If the assets have been distributed, you can put the property distributions on the 1041 at the trust's basis to zero it out. No income there--the 1041 is an INCOME tax return. Are you actually filing a 706? The wife would have to have $12 million in assets to necessitate one.

You have to enter ALL the divs reported on the 1099 and then back out the ones received after death. Otherwise the computer matching will result in a letter from IRS.