BulldogTom

Lets say you show up on a Sunday and do some light bookkeeping, W2's and 1099's for them at the end of the year. You don't expect to get paid but they pass the plate and give you a "gift" of $500. What would the IRS say to that? Just because it is a church giving it out does not make it tax free. Tom Hollister, CA

While I love ATX, it is not as robust in the diagnostics as other software packages. I don't know how long you have worked with ATX, but I learned a long time ago that it does not have many bugs, it does however have many ways for the operator to miss a check box, entry date, or question that needs to be entered to make the software calculate correctly. It is my opinion that this is the reason ATX users are better preparers than other software users - we have to be to make sure the answers the software spits out are correct. Just my humble opinion. Tom Hollister, CA

My oldest is in a JC and the government is paying for all out of pocket costs via the AOC. Next year San Jose State (we think). About 10K per year tuition and fees. My youngest has dreams of MIT, UC San Diego, Embry Riddle or Cal Tech. I don't even want to know how much that is going to cost. Tom Hollister, CA

My CPE this year seemed to have alot of those kind of questions as well. Poorly worded questions. Questions that after I saw the answer I could see how anal they were. Tom Hollister, CA

Or what do you do when you buy a heavy duty truck and take the original bed off so you can put on a specialized bed. The old bed is scrap metal and that is all to you. Tom

IF (note the caps on IF) the purchase was made with the intent to demolish the home, the purchase price should be allocated to the land. The 20K of demolition costs would be added to the land in order to make it servicable for the new structure. New construction would be allocated to the home (provided that all the demo costs put the land in position to build on). Basis of the land is 270K and basis of the home is 400K. Depreciation for rental purposes would have to be determined at time it was placed into rental service. Lower of FMV or 400K. If sold, we would need to know the intent of the buyer at the time of purchase. IF it was purchased with the intent of building a personal residence, 20K non-deductible personal loss. IF it was purchased with the intent of building a home for immediate sale as an investment, 20K loss deductible as an investment loss. IF I knew more, this would be my humble opinion. Tom Hollister, CA

Notes to the financials say "books are maintained principally on the accrual basis. Revenues from fixed priced construction contracts are recognized on the completed contract method. However, for purposes of these financial statements, revenues from long-term construction contracts are recognized on the percentage of completion method." Tom Hollister, CA

I am finishing up my CPE for the year and came across something I did not notice. The FTB is asking for all sources of non taxable income on the Child and dependent Care Credit form (3805 or something like that). So I went into the software, and there is a tab for those items to be included. Funny thing is, no matter how much non-taxable income I put in (I went to 250K of child support), it did not affect the credit. And they do not appear anywhere on the form. I went through the instructions, and while the instructions call for the information, there is no place where those amounts are mentioned as a qualification for the credit. What is the FTB after? Are they just being "big brother"? Is this just a free audit item that will give FTB the right to deny based on incomplete information? I don't get what the FTB is searching for. Tom Hollister, CA

Reviewing a tax return for a construction company. At first glance, everything looks OK, but presented kinda funny. But the numbers seem to tie out to the financial statement (prepared by the CPA as well). Then I start looking at the M1 and M2. There is no correlation between the Book Income on the FS and the M1. There is no book tax depreciation difference noted (and there is a big difference). He gets to the same income number on the tax return, but I have no idea how. The M2 is more of a mystery. Book Retained earnings are 40K. Tax retained earnings are <780K> Sched L is off by same amount as retained earnings. Any idea what would cause this Retained Earnings discrepancy. Asking the CPA is not an option as the taxpayer is looking to check up on him. Tom Hollister, CA

I always look at who is on the board when I come on. Right now, there are 32 guests and Google on the board. That looks really weird. Tom Hollister, Ca

Good idea. I will claim the credit on behalf of the client and reference Jainen as the tax preparer relied upon for making the claim. Will you please sign the tax return? Tom Hollister, CA

I was hoping for some magic bullet like "if the adoption is substantially complete" or "if the child has lived with the parents for XX months". Too bad. Tom Hollister, CA

I think the deadline has passed for the special needs enhancement of the Adoption Credit, but I thought I would ask. Taxpayer's grandchild is a total loser. Gangbanger and sent to prison. Has a girlfriend who is just as bad. They made a baby. Then he thought they made another baby, but it turns out he was not at the conception like he thought he was. She is a druggie. When they both end up in jail, my client steps in to adopt what she thought was her 2 great-grandchildren. The state placed the children with her in Jan 2011. The adoption was final in May of 2012. Because of her income level, the state paid all the adoption costs. The state has declared the two children "special needs". If I am reading the requirements correctly, the adoption had to be final by 12/31/11 for the enhanced credit for adopting special needs children. Is this correct? I would like to get this lady a nice credit if the opportunity has not passed. PS, I understand because of all the fraud that these tax returns are taking forever to process. I get that. This is definately not a scam. Thanks, Tom Hollister, CA

Of course you have pointed out the weakness in the argument. The post above does not say that the taxpayer questioned the treatment of the payment, nor did the preparer give them advice that it was non-taxable. On the other hand, the placement of the item on the form with other items of income distorted the clarity of the item, causing the oversight by the taxpayer. Also, as the payments started a new phase of the taxpayer's life with new forms and third party reporting documents with new areas to look for data for the tax return, and the tax treatment of those items was new to the taxpayer, it is understandable that they were unable to pick the error out of the amount shown on the tax return. It is also possible (given that these were retirement payments) that the taxpayer's mental facilities were impared by age, causing confusion over the tax treatment. Not saying that is the case, but it COULD be the case. Tom Hollister, CA

Sure - I learned it when I was taking a class on IRS correspondence. But if you feel so inclined, you can make a payment on my student loans that I am still paying to help defray the cost of learning this little trick. (just kidding- of course). Jainen sounds almost like the professor I had teaching that class. If the purpose of penalties is to ensure compliance, and the compliance was attempted, then the IRS should not have a reason for imposing a penalty, so long as corrective action was immediately performed. FYI - it does not work on the Republik of Kalifornia. They view penalties as revenues that cannot be lost by the state. Tom Hollister, CA

One thing that I like to put in letters is "The error was not an atempt to circumvent the revenue laws of the United States, but merely an oversight while dealing with the complexities of the those laws. The taxpayer has a long history of timely compliance and immediately remedied the situation when the error was discovered." Generally works for me. Tom Hollister, CA

<<< suppose I inherited a kilo of cocaine? ...its FMV is upwards of twenty grand.>>>> I don't know how you know that, and I am not sure I want to know why you know that. Tom Hollister, CA

In CA, if you fire an employee, you have to pay them immediately (and that is not the next day, it is before they leave the building). If an employee quits, you have to pay them within 3 days. No withholding on the final check unless you have a signed agreement to take the money. Example - Employer loans employee $1000. Employee agrees to pay $50 on each of next 20 checks. Employee quits. Employer is only allowed to take $50 on the last check as that is all the agreement stipulates. If the amount outstanding is unpaid, you have to go through collection process to get it. Y'all in Arkansas are just too easy on your employers and to harsh on your employees. Welcome to the Kalifornia Republic way of doing liberal government. Tom Hollister, CA

Sorry to go all Bible on you, but there are many morals to be learned from that parable. Most people concentrate on the fact that your Father in Heaven will always take you back when you repent. The final one is a warning to those who do the right thing. You should be as joyful as your Father in Heaven is when one who was lost is saved. This was the lesson to the good son. Tom Hollister, CA

MSNBC - Keith Oberman and Rachel Maddow - nobody watched them so the government gave them a welfare check in the form of advertising on their show. Tom Hollister, CA

Don't have my bible with me, but I am guessing that is the prodigal son? The shepard will leave his 99 lambs to go find the one that is missing? Tom Hollister, CA

We can believe in....or change that we have left? Tom Hollister, CA

KC, thanks for the kind words. But the truth is there are millions of kids out there doing what your grandson and my kids are doing. They just don't get any publicity about it. It is always the "troubled youth" that everyone focuses on. I was at a conference one time where Mark Cahill was the speaker, and he had a great message for kids who don't have a troubled background - "your story is better than the guy who screws up and then fixes it. You are miles ahead and don't need to make up for lost time. Your story is a story of good choices leading to success." Tom Hollister, CA

My oldest is in college and he has a 3.6 taking subjects like calculus, physics, engineering thermodynamics, and classes like that for engineering students. He tutors calculus at the college and was just hired by one of his professors to grade algebra 2 homework. Youngest son is a Junior in high school. Has a 4.12 GPA and is taking 5 AP classes this year. Knows he needs to get a 4.5 to get a sniff from MIT, CalTech, or Embry-Riddle. I worry that all the pressure to get good grades will get to him. We shall see how he does this year on the AP exams. Tom Hollister, CA

It is just a pain. My kids cannot get any type of Government grants or scholarships (because of income level and lack of special group status), but they do qualify for private merit scholarships administered by the schools (because they have high GPA's - yes, daddy is braggin' in his kids). But the schools still want the FAFSA completed or they won't let you apply. It is big brother at its worst. Tom Hollister, CA