Sara EA

No. This is a donation of a partial interest in property. See Pub 526.

Most likely there is a lot more to this case than just failure to file. CI investigates major crimes like fraud, money laundering, narcotics--things that land the perpetrator in prison. The only failure to file cases listed on the website as part of their duties are those jerks who claim income taxes are illegal. I've sat through several presentations by CI and learned that these people carry guns, often work with the FBI, and mean business. That said, do not discuss the case further with your client. If you do and she is called to testify, anything she tells you is not privileged as it would be with an attorney.

It can't. Just report the income on the estate return, noting "Reported to xxx-xx-xxxx." If there was withholding, then you'll want it reissued. Let the retirement plan trustee decide to whom it should be issued.

It depends on how the assets are titled. If the trust has an EIN and bank accounts etc. are reported to that number, the trust has to file a 1041. It can choose to pass all income and expenses to the grantor via a statement attached to the 1041.

Scholarships are generally nontaxable if used for qualified expenses. (Only those used for room and board, travel, etc. are taxable.) You don't have to report anything. If the AOC had been claimed in the prior year and reduced the qualified expenses, you would have to recapture some of the credit, but that isn't the case with your client.

Definitely read the trust docs. You might even end with the A-B trusts that used to be the way to go when the estate tax exemption was small.

Some states don't require payment if you owe less than $1 to $5, depending on the state. I don't think that's true of federal income tax.

As long as the distributions to charities come from income and are specified in the trust document, they are deductible. I cannot imagine why the trustee would want to pay the taxes for the beneficiaries, who may end up receiving a lot less than if they paid the taxes at their own rates. The only way to do it would be to make no distributions, pay the income tax, and then pay the beneficiaries the next year. Does the trustee understand his or her fiduciary duties?

We have had clients who brought some situation to us and we advised them to see their attorney. They admitted they didn't want to pay an attorney, which is why they called us!

The tax code has always changed frequently, so nothing new there. (Remember the year the ACA was introduced, the same year the expense/capitalization requirements were changed? For experienced tax pros, that was almost like starting over again.) Preparer requirements have bounced around a lot too. I think what has kept me engaged is that I have always worked for a firm, never self-employed. No worries about E&O insurance, ordering supplies, IT security, etc. Of course I pitched in with some of the tasks of running a business, but for the most part I was able to focus on tax research and preparation, planning--you know, the skills we acquired to enter this business in the first place. I like taking courses (an academic at heart), so required CEs were never a burden. The biggest complaint I can think of is the long hours during tax season, which repeat as Oct 15 comes around. That said, I have finally retired! Time to have some fun and read more books. I will eventually volunteer for VITA or AARP, but first I want to get organized around the house and do some things I always wanted to do. I will depend on this board to keep me in the loop so my tax knowledge doesn't fall by the wayside.

We don't usually charge for answering questions unless the response takes more than a half hour. It's difficult to set a hard and fast rule. One client has a $2k return and I don't charge him for responses that take time. Other clients are needy and contact me several times throughout the year. I bump up their tax prep fees. Some attorneys are now charging their time in 5-minute increments. (And 6 minutes = 10 minutes billing.) How could anyone keep such exact track of their time and still get any work done? I saw an estate bill once where the attorney charged for 10 minutes opening mail. It probably took him two minutes to track and record that blip of time in his day.

Isn't that boring?

Our local TV news is out of DC, and last night the rolling list of cancellations showed that federal government offices would be closed today. Remote work was in place for those who do it. The snow didn't stop until very late in the PM so I guess they still had to clear roads and walks. Try again tomorrow. Remember that Thursday Jan 9 is a National Day of Mourning in honor of President Carter so federal offices will again be closed and no mail.

I don't think this is government overreach, just one of many attempts to stem abuse of the charitable donation deduction. Remember before charities had to provide 1098C for car donations? People would take the blue book value for donating an old car that had been sitting rotting in a field for ten years. I recall that in the year the form was required deductions for cars dropped something like 80%. Conservation easements are another area of rampant abuse that is in focus. And we all have a lot of clients who say "same as last year" or pick a number off the ceiling when we ask about their donations. We don't get those answers so often now that we remind them they have to have receipts.

The credit has been based on a max of $3k in child care expenses per child (up to two) since 2001, so you are right that it hasn't kept up with inflation. Actually, it didn't cover the cost of care in 2001 either. A look into the Congressional Record shows that there were (and are) policymakers who balked at adjusting the amount because they believed that mothers should stay home to care for their children. Well, that worked in 1901, and maybe 1951, but here we are in 2025.

You don't have the type of clients I have. It takes me that long just to sort most of my clients' docs, longer if I have to open the envelopes. Why, oh why, can't they at least open their mail? Especially annoying are the ones where you have to fold this flap first, tear here, tear there, tear your hair out.

Doing returns in front of the client makes a clean desk mandatory. You can't have a scrap of paper with another client's info on your desk when someone else is sitting there. Maybe we all should schedule one in-person client a week to force us to clean up those desks (like when company's coming). You have to be careful when you have a monitor for the client's viewing. When I worked at Block, any client notes you wrote last year came up when you opened that client. One preparer had written "This client is a PIA," and that's the first thing that showed on the screen.

Two monitors work for me. One for what I'm working on and the other with prior year or reference info. In an online class, one to see what's going on and the other with the text. My son, who works in IT, has six. Sorry, I'm not that good at multi-tasking!

Paid by the inch? And just how did you calculate that? Reminds me when our dad used to pay us for each dandelion we pulled out of the yard with the puller gizmo. Who counted when we each had a bushel basket filled to various heights? We lived in a rural area, so money didn't mean much anyway because there was nowhere to spend it.

Why did your clients sign up for the Dependent Care FSA if one spouse doesn't work and was available to care for the child? I find the credit to be extremely valuable for working couples. With one child, only $3k of child care expenses can be used to calculate the credit. By taking the Dependent Care FSA, $5k is not subject to income or employment taxes, which saves a bundle. With more than one child, they get that benefit plus another $1k to calculate the credit.

She should be eligible to deduct a theft loss on Form 4684 and Sch A. I had a client in the exact same situation. He didn't admit to me what happened until his financial situation became dire. Once he did, he felt comfortable enough to admit that it had happened twice. IRS accepted the first submission with no problem but questioned the second. He eventually prevailed. Still, all he saved was the tax, which would have been an added burden on his depleted bank account. He never got his money back and had to sell his home and move in with his children. The part of me that wants to think there is good in all people is facing the fact that there are many exceptions.

Way back in the day when I worked at Block, I found you could get on your hands and knees and beg clients not to go for a bank product, usually to no avail. I'd point out that for the exorbitant fee you could buy a couple of weeks of groceries or a tire for the car. (That really was back in the day.) Maybe a few really did need the money now because the rent was overdue, but I think the majority were EITC recipients and the refund was free money to them so it didn't matter if they got $3k or $2700 because either amount made them a lot richer than they were.

My hunch is that since the home was in a revocable trust, the decedent was considered the owner and got to take advantage of CA's generous cap on property taxes. Once she died, the trust became the new owner and a much higher (long-delayed) tax was calculated. Most likely taxes are exempt from the statute of limitations. If a CA attorney says it's legal, this is probably the case.

I thought the clients have to file, not the preparers.

The OP did prepare the original return, so no biggie to amend it. We have occasionally taken back fired clients. For the most part they were grateful and changed their ways once they realized they had crossed a line and we meant business. It won't hurt to amend the return, see how it goes, and then decide if the client has improved his attitude.