Corduroy Frog

Seems like June/July is the season for most of them. What are the error percentages? 50% the fault of the IRS, either in part or in total. 40% my customers for not giving me information, or bad information, as in "I didn't know I had to turn that in" or [tee! hee!] "I forgot. Some of their excuses are quite imaginable... 10% or less are my goofs and mistakes. They don't happen everyday, but I admit they do happen. And overall, maybe 10% (at the most) of my clients receive such letters.

Exactly. This is another example of the powers that be are so out-of-touch with the real world. No firm guilty of these crimes is going to comply to begin with. And especially after the application which has hiccuped in fits and starts.

When they had a $500/day penalty with no limit, I backed off, just as the malpractice insurance companies were telling us to do. I referred my clientele to corporate attorneys, and bailed out. I never looked back, and will not.

Have any phaseouts been adjusted for COLA or inflation? I can't think of any. If there are any, I would think the most likely ones are those associated with banking products, e.g. IRAs, Ables,529s etc.

Whatever happened to the concept of LOCOM? (Lower of Cost or Market). If it had been applied consistently, this inventory should have been largely written off over a period of years - not just written off as a huge loss in one fell swoop.

Exactly 20% ?? Issuers commonly ask if tax was desired to be withheld from distributions and if there is no answer, sometimes they will default a withholding. And a 20% withholding is very, very common. From your post, this is not what happened. However, it might be an accidental transformation of instructions to the issuer.

Wonderful explanation, Kathy. Thank you.

In southern middle Tennessee, there was a severe drought. This led to farmers selling much of their livestock, and also USDA issued money to the farmers for Drought Relief. The effect of this causes farm income to uncharacteristically rise. I am trying to deal with Schedule J income averaging. The first entry is for farm income - meaning Sch F and everything else which may attach, e.g. 4797, capital gains, fishing, etc. But the first entry leads us to believe the amount of income is an "election." Question: If the farm income is defined, what other income can be "elected" for the previous 3 years. Election usually implies the taxpayer may have an advantage by making a choice. I've read the IRS instructions and still can't figure this out. Thanks in advance for any suggestions or comments.

Focus on our Tennessee friend Rita B -who was good enough to host a gathering a few years ago. Rita lives in Cumberland County - site of an unusual geological instance. Not far from her is a tiny town of Crab Orchard. Over 100 years ago, an usual sandstone rock was discovered near the town, and was called "Crab Orchard Stone." This is sandstone - so brittle that you can break it with your bare hands. In fact if you handle it, it might even break without effort at all. Geologically speaking, limestone rock is much harder - impossible to break without a jackhammer or something really tough. However, rainwater will dissolve limestone, and leave sandstone intact. This gives rise to limestone caves, such as Mammoth Cave in Kentucky. There are more limestone caves in Kentucky, Tennessee, and North Alabama than in the rest of the world combined. All this to say that the brittle limestone, if sliced by a saw, can cover a frame, and will not break at all. Ever. Crab Orchard sandstone is light reddish, with streaks of light brown, and blue, purple and yellow. In the 1920s, this gorgeous rock was shipped all over the world because of its beauty. By the 1950s, Crab Orchard stone was pretty much mined out. There are more buildings covered with this stone in Cumberland County than anywhere else. Some of it is in Nashville, and a few other towns in the United States. If you get off the Interstate 40 in Cumberland County and take the old road, U S 70, you will see several older homes and buildings with colorful coverings of sandstone. There is probably the most in Crossville at the county courthouse. Not a tax topic - but perhaps a refreshing journey into the Sunny South. If any of you are close to Manchester TN, drop me a message before you come, and I'll take you to a good meal.

Client received a 1099-C from a credit card company (also business related) that he feels he never owed the money appearing on the 1099-C. If he doesn't deal with this, the IRS will expect him to claim the forgiveness as income, and they will not wish to be dragged into a dispute. Any suggestions??

We have from Jan 1 to April 15th, right? But we all know the "rest of the story." A few years ago, IRS moved the due date up to March 15 for almost all "entities." Most of us consider March 15th more stressful than those due on April 15th. An increasing number of taxpayers are investing in securities, and those issuers do not issue 1099DIV and 1099B until February 18th. That takes away the entire month of February from our opportunity. Tax preparers such as we do not have a multi-million dollar lobbyist working to change things. Our only hope is that the IRS becomes strangled with these short deadlines. They won't make an issue unless they can make a case for more revenue.

Thank you to all.

A minor child has income resulting from a sale of securities, $10,000 minus cost of $9,000. Gain is $1000. For purposes of having to file, he must have "unearned income" over $1300 (among other possible requirements). In the above example, is his "unearned income" $1000 or $10,000 for filing requirement purposes?

You will find entry fields for exempt dividends on your software. As a general rule, funds for municipals are exempt for Federal, and include issues from state and local governments. Where the difficulty comes is dividends from federal agencies. Depending on the state, such dividends can be exempt. Maybe Margaret's link can provide an exhaustive list of exempt dividend issuers.

Also bad: Clients think they can take a picture with their cell phone. Always blurry, crooked, dark, and impossible to read. Forbid they should attach a .pdf file.

Time for my tax season gripe. It starts with the issuers of information returns (W-2s, 1099s, 1098s etc) send this message to taxpayers: "We have wonderful news!!!! You can now access your information ONLINE!!!" I think the only "wonderful news" is for the issuers. They no longer have to send things in the mail, pay postage, or even print anything. So when we ask for these things from our clients. "OK, I've got the information right here on my phone! Let me show it to you. {scroll, scroll, scroll, . . . scroll} for a W-2, then again {scroll, scroll, ad infinitum} for a 1099. "Can you print these out for me?" "Oh no sir, I don't have a printer that works anymore" For what it's worth, I insist on hard copies for any document that has tax withheld. so we are protected if ever questioned. Thanks for reading this rant...

The Illinois Tax Seminar was originally for farmers, and was adapted by all the "land-grant" schools in every state. For Alabama, this means Auburn U, and I have been going down to Birmingham three years to attend this thing. For Texas, this probably means A&M is sponsoring the seminar. The textbook is pretty good, but doesn't have much about farming any more. If you stand to read IRS material, Pub 225 is pretty good and is strictly for farmers.

Thank you - and you are correct.

Yes, but it was a "net" because of her loss, and it was a joint return for 2023. Does not appear Drake tracks the QBI loss separately going forward to 2024, although there were in fact separate Sch C's.

Andy and Becky have been filing joint returns for years. They both have Sch C business. Becky's business has had losses, and she has accumulated losses for purposes of taking the s. 199A deduction. Andy's business has been profitable, and he has no such accumulated losses. If they file separate returns, will Andy's s.199A deduction be free of Becky's accumulated losses?

Judy, worked like a charm. Don't know why no one at Drake could answer this. They should pay you for their own Customer service.

Thank you Judy - Drake has not figured out how to populate Schedule 3, Part II, Line 13(b). Don't know what's up with them.

Wrap your arms around a list of depreciable assets. Farm equipment is expensive and depreciable. Also breeding cattle are depreciable if they were paid for. A bull is nearly always paid for because a calf raised to be a bull will have cross-breeding problems and can sire out very sickly calves. Farmers have some advantages with respect to treatment as a "hobby" that other businesses don't have. To begin with, IRS will be deliriously delighted when farmland is ultimately sold. as the gains can easily eclipse the total of all previous losses. Also a landowner must do something productive on his land or else it will grow up in ruins and barns will dilapidate. (Timer would be an exception). And there is also the profit motive. A "farm" with 8 acres and one cow is a hobby. Make sure all income is reported. Payments of $7000 for feed and only $1500 in calves sold is a warning sign, unless the calves are being held over the winter for sale in the spring. This practice is not very common since it is horribly uneconomic to keep livestock in winter months. I do around 25 farms in Tennessee every year. Most of them do have losses that i feel are legitimate, and some have profit. Some of them have small losses and occasional profits. Many of them move from losses to profits when their expensive equipment becomes depreciated.

Thanks to Terry and Judy. The choice of a credit was not explained, and that will result in a better situation. In Tennessee where there is no income tax, it is somewhat rare that people can take the standard deduction. Even though they may itemize $29,301, they only get the benefit of a $1 deduction.

Client became disabled and received $35K in a lump sum payment from Social Security. He received a form SSASM-1099 (not a SSA-1099). After he received the money, he had to pay this back to his insurance company, who was paying him sick pay. Bos 4 (repayments) shows zero. Drake input screen has no allowance to enter anything for Box 4, but it has a comment (inaccessible) which states that a repayment will cause the benefits to not affect the tax return. Drake representative told me the repayment should be shown on Schedule A as a "miscellaneous" deduction. That does little good as the client would not be able to itemize. Anyone using Drake tell me how to get rid of the taxability of Social Security on my client's return? I appreciate any help. Don't believe this is a tax issue, but a software issue. Messy situation. Thank you in advance.