gfizer

Actually the farm was gifted to the wife from her mother by deed so the wife's basis would be her mother's basis, correct? But her mother inherited from her parents back in the 40's and they had inherited it from their parents way back when. So, I believe that the wife's basis is the very small amount that the land was valued at when her mother inherited it in the 40's. It is unimproved farmland with no buildings. Their principal residence was located on the farm but they had the house and 30 acres surveyed off and they retained this portion for themselves so principal residence exclusion doesn't apply.

I have this little old couple who have been clients for several years. He is in his 90's and she in her 80's. He is a veteran and legally blind. They have struggled financially for many years and finally couldn't deal with it. They were going to lose everything and wanted to avoid bankruptcy so they sold the farm that the wife had inherited from her mother, who had inherited it from her parents, who had inherited it from their parents and so on. Of course they never bothered to consult with me before making the sale. They sold the farm which had practically no tax basis for $260,000.00 of which all but $2,200 went to pay off the mortgages against it and the closing costs. They were thinking that since they only got $2,200 of the money that that would be all they had to pay tax on, which we all know is not the case. They owe nearly $40,000 in federal and state tax. I feel sorry for them. I mean they are living on social security and a va pension and all they have is their home a few acres they retained from the sale. Anyone know anything that I might be able to do to help these folks out?

Same problem here. Returns I sent on 4/8 and after still show "Validated by EFC."

Thanks, Booger. I looked on last year's W-2 and that's exactly what it is.

Okay, at the risk of sounding stupid I'm going to ask this question. I am doing a return for a new client who finally got tired of being robbed blind by Block. In looking over the copy of the 2006 return and there are no figures on lines 57 through 62 of the 1040 but I see an entry on line 63 of $5 for total tax. Beside the line are the letters "UT." Maybe my brain isn't working as it should this late in the season but for the life of me I can't figure out what "UT" stands for. Any ideas?

Thanks. I was afraid of that. Glad to know I'm not the only one. Thankfully the client is a close friend so I'm sure he'll be understanding. You can be sure I'll be much more careful in the future.

Yes, this is correct. It is only necessary for one of them to be under 65.

Yes, for 2007 returns you can choose to deduct either state and local income tax or general sales tax.

I had a client in to sign returns. While he was here he wanted to do some tax planning as he will begin drawing his ss benefits this year. I plugged in his projected ss benefits on this year's return so we could get an idea of how his return would be affected (yes, I know this was stupid but I was in a hurry). I guess the automatic backup feature saved the return before I closed it and now I've efiled the return with the projected figures for 2008 on it and not the 2007 figures. Is my only option to amend the return? Or can I somehow retract the efile before it is accepted?

I have a taxpayer who paid a lady a total of $1055 for 2007 to do some light housekeeping. No federal income taxes were withheld. My understanding is that if wages are less than $1500 that no W-2 or schedule H is required to be filed. It doesn't seem fair to me that the employee will have to report the income as self-employment income when the employer is willing to pay the ss and medicare. Is there some other way to do this or is there something I'm missing here. I'm sure this is probably a simplistic question but I just got back from a week long mission trip in Mexico on Saturday and I'm not functioning at full speed yet. Thanks for your input.

Her earned income is so low that she gets very little EIC but on the other hand if he uses the dependency exemptions for the kids and claims HOH it makes thousands of dollars of difference in his refund. Again, my goal is not to maximize their refund at any cost. I simply want to do the returns correctly. As I understand the rules, whenever the kids can be qualifying children of more than one taxpayer then the taxpayer with the highest AGI would get to claim them. "If a child is claimed as a qualifying child by two or more taxpayers in a given year, the child will be the qualifying child of: the parent; if more than one taxpayer is the child’s parent, the one with whom the child lived for the longest time during the year, or, if the time was equal, the parent with the highest AGI; if no taxpayer is the child’s parent, the taxpayer with the highest adjusted gross income (AGI). " Am I understanding this correctly?

The mortgage is in the male taxpayer's name and he pays most household expenses. The male taxpayer also pays the childcare costs for the two kids.

Uncle Sam is alive and well here in our part of Kentucky as well. I kind of feel sorry for the poor guy. Maybe he and the teenagers they hire to dance around in front of Little Ceasars pizza advertising $5 pizzas should get together and form some kind of union....

Okay. Here is my situation in a nutshell. I have two taxpayers. They are unmarried but live together, share all expenses, and have two minor children together. Female is self-employed and earns approximately $7000.00. Male has income from employement of approximately $50,000. This is the first year I've done their returns. Female stated that she usually claims the two children on her return and claims head of household status and that he usually files single with no dependants. If I understand the rules, the correct way to file would be to show her as single with no dependants and to file him as head of household claiming both children. Incidentally, filing this way nets them the biggest refund but that's not my goal. I just want to do it right. What do you all think?

I've efiled several returns with no problems. I noticed today that two of the Kentucky returns show "Form 8453 required" under the PIN status column. I've never had this problem before. Anyone else experiencing the same thing?

I got mine today as well.

Don't be so sure. Kentucky law allows a husband to be held responsible for his wife's debts.

I did the exact same thing last year on the ONLY 1040A return I do. Unfortunately I didn't catch the mistake prior to efiling but you can rest assured that the IRS did so I got to pay the penalty and interest on my client's behalf. Stupid, stupid mistake that ended up costing me more than I charged the client to do the return. It won't happen again because I won't use the 1040A anymore.

Yeah. I had the same problem. I'm working on my own this year instead of through the law firm I've always worked for so I called ATX and gave them new billing AND shipping address. It's funny that they got the billing part right but my software shipped to the law firm. Go figure....

A taxpayer has asked me to respond to an IRS examination report on his 2005 return which he prepared himself. As an unenrolled preparer, if I understand correctly, I can only be appointed as a representative if I prepared the return and it is under examination. Is there any other way I can respond on his behalf other than preparing the response for him and having him notify me of any correspondence he receives? Thanks.

This question arose because the IRS is questioning the taxpayers deductions for alimony on his 2005 tax return. The taxpayer prepared the return himself which probably wasn't the wisest thing but is water under the bridge at this point. In a nutshell they are disallowing everything except for one $2000 maintenance payment he made by check. His mediation agreement which was entered as the parties' separation agreement and incorporated into the final decree stated that he was to pay his ex $2000 a month for 24 months months for a total of $48,000 in maintenance and a $22,000.00 automobile allowance. He was also to pay her health insurance premiums for a period of three years and was to pay her $7000 which was to be applied toward her personal credit card debt. The maintenance payments were to begin in October 04 and the balance of the $48,000 (less payments already made), together with the auto allowance (less any payments he had made if she purchased a car prior to the sale of the home), was to be paid to his ex from the sale proceeds of the marital home. The home sold in February 2005. She had already purchased a car (in October 04) prior to the sale of the home and he began making the payments on it at that time and then the balance of the $22000 was paid from the sale proceeds. He paid $2000 maintenance in January 05 which they are allowing but they are saying that the balance paid from the sale proceeds of the home are property settlement and not alimony. He is willing to concede this because he understands their reasoning but believes he should be able to deduct the amounts he paid for her health insurance premiums, the $7000 payment and the car payments he made for her prior to the sale of the home since these things meet all the requirements to be considered alimony. He wants to go on and pay the amount they say is due ($25000+) in order to stop the accrual of penalties and insterest and then argue with the IRS about these things. Would it be wise for him to do this? I'm assuming if he does he would need to mark his payment as "paid under protest" or something of that nature. As a side note, regarding the recapture issue, if the balances of the $48000 maintenance payment and the $22000 auto allowance paid from the home sale proceeds are excluded as the IRS proposes then his payments for the other things over the three years will be fairly equal and may not trigger the recapture.

Would it really eliminate them or would he just be subject to the recapture rules?

Taxpayer was obligated to pay the following items to his ex-wife pursuant to their divorce agreement: $48000.00 lump sum maintenance $22000.00 automobile allowance (i.e. he had to pay for the purchase of a car up to the 22,000 limit) Health insurance premiums for three years or until she had employer provided coverage, whichever was earlier. Would all three of these items be deductible as alimony on his tax return? The agreement does not specifically call them alimony but it also does not say they are not alimony payments. Any thoughts or suggestions? Thanx!