Corduroy Frog

I haven't had unprofessional experience with IRS auditors either. When all the facts came out, they were usually more correct than my clients, who often were less than forthcoming with me when reporting their income or expenses. Like CBS, my worst experiences have been with State Unemployment auditors, who were definitely more hostile and wrong than IRS people. I've had to go to supervisors to get proper relief a couple times. But we are speaking of the IRS as it exists now. Not of the IRS when they receive regulatory powers. My guess is the regulators will not be the same people as the auditors.

Thank you for your help. Ironically Lion's Link to the CCH article meets Abby's criteria for being non-IRS publication.

Trying to read IRS publications to figure out how to depreciate leasehold improvements. Not having any luck. Can anyone point me to a reputable source? At some point I believed that Leasehold Improvements depreciate over 3 years or the term of the lease, whichever was longer. Is there any better or more recent information than this? Thanks in advance.

Apologize, ILLMAS, but Abby is correct. I didn't read deep enough into your post to ascertain that some of this money would never result in income.

I may be the only one to disagree, but I think the IRS has bigger problems to deal with - like the ones addressed by Olsen every year in her review. This doesn't mean I support bad preparers or bad tax returns. None of us do, and I wish they weren't out there. Especially shifty-eyed Sam across town who will deduct anything or lie for his customers. But Sam would be most likely to be shut down by increased audit activity than regulation. The problem with regulation of any industry is the enforcers pick and choose who to scrutinize. They are quick to go after low-hanging fruit to justify their jobs, but are not so anxious to tangle with difficult violators who can effectively throw up roadblocks. In other words, they could shut me down for accidentally failing to sign a return, or a failure to observe a petty regulation in Cir 1230. But a very bad preparer in a nearby town some 30 miles away has been spewing out inaccurate returns for 30 years, but is married to a Federal Judge. Big companies support regulation and in public relations campaigns they decry bad practices in their industry. Regulators can eliminate small competitors by shutting them down, but if a regulator knocks on the door of a Fortune 500 company, they are told "Our lawyers will be in touch" and that will be the end of it. I don't expect "like" emoticons from the group, but this is where I stand.

It is commonplace in some states that Grants from Federal Govt are Exempt for Federal Purposes and Taxable for State Purposes. Conversely, in these areas Grants from the State are Taxable for Federal Purposes but Exempt for State purposes. Sorta a reverse flip. This is true in Alabama, but can't say this is true everywhere - I haven't filed everywhere and even so, I dunno. I'm dealing with a Kentucky customer who received a $32,000 economic (COVID) grant from the City of Louisville. Can anyone tell me where to look in the IRS code to determine whether this is exempt or taxable? If I know where to look, I'll find out for myself. For what it's worth, I'll have to file Kentucky taxes for this person as well. Kentucky website confirms the taxability of such a grant will follow the Federal. Thanks in advance.

Thank you sir. Looks like my calculations were correct.

I was told earlier this year that the COVID credit (on the 941) would be to cover employees missing work due to COVID plus the federal payroll taxes. All of this is subject to limits, but this discussion is meant to leave the limits out of our thought process. I've done a number of these things, and follow the 941 Worksheet. I can recover the amounts paid to employees who had COVID plus medicare. But I can't recover the FICA expense attached to the COVID pay if I follow the worksheet religiously. Can someone unravel this for me? Have I missed something on the worksheet? (There are more than one worksheet, but I have not dealt with the "Family Leave" worksheet) Does the credit cover FICA as well as Medicare?

Illegitimas, my opinion is that this very thing is what cash basis is all about. Report as revenue in the year received, rare issues not withstanding. Same thing would apply in reverse. A large deposit paid for unfulfilled performance would be deductible. There may be exceptions, but in general I think this is what you get when you choose cash basis.

Good conversation. The biggest potential pitfall apparently occurs when a Traditional IRA already exists. If basis in the Traditional, taxpayer cannot pick and choose when to relinquish the basis. Basis must be eliminated pro rata.

Talk about unnecessary complications in the tax code. Incomes over a certain level do not qualify for a Roth IRA. So those in the high income bracket simply open up a conventional IRA, deduct it, and then recharacterize the thing into a Roth in a couple days or so. So why doesn't the tax code simply allow for a Roth to begin with, regardless of income level? Does it have anything to do with not allowing the conventional to be deducted at high levels? Doesn't seem to matter, the taxpayer can designate the whole thing to be non-deductible, and then he (she) will have a basis when recharacterization occurs.

Hi Max - Since we have posted per above, I have had two more business clients who have received threats to levy from the IRS, each of them claiming the IRS has "previously" contacted them regarding unpaid taxes. Knowing these two, I seriously doubt they were contacted previously, but according to your protocol above, the liability was first calculated in the audit division before being sent to collections. The liability is also something cryptic (doesn't make sense) on one of these, and the other liability is for a 941 and could be valid. Some of the CP notices (I've had about 10 this summer) also don't add up, even by IRS own calculations. Max, I will direct this to your attention, but will post for all to read. Maybe other members of the board will tell they have had similar experiences. I need to know whether I'm going crazy and need to quit.

Thank you Lion. Excellent information.

What is the penalty (per partner) on a 1065 for late filing nowadays? Since there is usually no tax, any such penalty would have to be assessed based on # of partners as opposed to tax liability.

Indeed they do. So much, in fact, that I would spend the rest of the evening reading about it. And the internet is full of articles which don't necessarily give the answers desired. I'm wondering if the wages for an employee to get tested for antibodies is a legitimate reason to accumulate such a credit.

At least thru the 3rd quarter, Employers get a credit for employees who miss work because: They have COVID They leave work to go get vaccinated They have a reaction to the vaccination They take another family member to get vaccinated. They cannot come to work because they are under COVID quarantine. Specifically, what about missing because they go get tested for antibodies? Any other reasons we can think of?

Max, thanks for your corrections, if indeed they are as you say. I don't mind admitting when I'm wrong, and it sounds like I am wrong in a number of assumptions. However, I do have a client who took exception to an audit finding via correspondence, and two weeks later received a collection notice to levy or seize assets. Correspondence is slow, snail paced, but there is indeed a problem communicating with the examination division. You cannot call them via phone, get their attention with a fax, or communicate with them in any other fashion. If you have a suggestion based on your extensive knowledge, my client and I would appreciate some advice.

Good article that explains it very well. Thanks, Judy.

Ran into this from someone no doubt smarter than me, and referred to section 469(g)(2) as well as Pub 925. If I understand this lawyers' language, upon death all the disallowed losses are released, except not to exceed stepped-up basis in the property. As usual, the only way to get this into my pea-sized brain is to illustrate. Assume rental property with original basis of $100,000, and disallowed losses built up to $45,000. The FMV at time of death is $130,000. If I read this correctly the "step up" is only $30,000, so the amount of losses released can only be $30,000, not $45,000. I don't know what kind of basis is passed on to the beneficiaries. Anyone care to chew on this one??

One interesting possibility might be to conjecture whether IRS will "forgive" excessive CTC payments which were not justified.

Agree with Abby Normal 100%. They create the Pro Version, and use the same calculating engine to equip Turbo Tax, and then tell the customers its free. They also tell consumers if they have Turbo Tax they'll be as smart as a CPA. Is there no credibility left?

Thanks Lion. The "collection hold" sounds like good strategy. However, the collection hold must be communicated. Calling the IRS at the number on the client's notice or the Practitioner Priority Line is not a viable strategy these days. Your response is appreciated, as usual.

The collection division at the IRS has not suffered the lack of funding and diversion of priorities which has plagued the rest of the IRS. Historically, the audit division would propose adjustments, and if the taxpayer ignored repeated notices, then the adjustment would be turned over to the collection division for action. The general position of the collection division would be that the taxpayer had ample opportunity to address the situation when it was tied up in the audit division, and that the taxpayer would simply have to pay up. They would not refer the matter back to the audit division. At least that was their general position. Things have now changed, it seems like. Taxpayers ARE responding to notices from the audit division, but the IRS is so bogged down with stimulus priorities, advance child credit priorities, and general lack of funding that they are simply not addressing correspondence or anything else from taxpayers. But the delay does not stop the collection division from aggressively pursuing money, whether the taxpayer owes it or not. Can anyone recommend a good strategy to deal with this on behalf of taxpayers who are legitimately trying to get their accounts settled while being beat up by the collection division?

Thanks Margaret. The trust in question has no such provision. In addition, it is not a simple trust, having no provision to distribute all income currently.

I've raised the issue about taxation of capital gains in Trusts, and have understood that the Trust pays the tax on Capital Gains rather than allocating the income to the beneficiaries. However, Schedule D (Form 1041) has a Part III, which has a column allocating some or all of the capital gains to the beneficiaries. If the above is true, how is this possible?