BulldogTom

I have a client who is determined to blow up his 1031 exchange. I think I have stopped most of his plans, but today he calls me and says he is building a studio on top of the garage of the property he exchanged for. Plans to live in it. I think that blows the exchange, but I am not having any luck finding something I can give him that says it is personal use. Help please. Thanks Tom Longview, TX

It is Old people's Pension (as they call it) similar to SS.

I tried to read the treaty, and I think the rule for UK SS is - if it would be taxable to the recipient in the UK, it is taxable in the US. How to determine that? If it is taxable, how do you enter it into ATX? Thanks Tom Longview TX

I would hope that the IRS looks at the calls coming in and the agent I spoke with would forward this to whoever in the IRS programs the computer. That may be too much of an ask, but one can hope. I can see how this happened, the law was passed late, the IRS scrambled to do the best they can, and the Mortgage Interest Credit is not a "big" credit that is on a lot of returns. This is only the second one I have had in 24 years in business. I have not been in Longview long enough to know who my liaison is. And I need to get ready for the upcoming tax season more than I need to spend hours on the phone waiting for the IRS to answer. Tom Longview TX

Finally got on the PP Line and got to an agent. The issue is the 8396 credit. The IRS computers read Sch 3 of the 1040 and did not pick up that it was an 8396 credit so they messed up the ordering rules. IRS agent is trying to fix it now. ATX is correct, but it took us about an hour to get through the CTC worksheet. He kept getting hung up on the line 14 calculation on that worksheet because the computer did not "see" the form in the return. FYI if any of you have a client who got a CP12 and they lost some refund and had a 8396 in the return. This has been bugging the snot out of me since it came up. I am so glad I can tell the client that it was not us or our software that made the mis-calculation. It is not a lot of money, but my reputation is worth all the effort. No charge to the client for my time on this one. Tom Longview TX

Normally I have gotten 5 or 6 calls from ATX by now asking to renew. So far nothing this year??? Anyone renew AXT yet this year? Tom Longview TX

Not in the video. He works out of the Long Beach HQ offices. Tom Longview TX

My son has worked on this project since he started with Spinlaunch while a senior in college. They just proved concept on a 1/3 scale kinetic launch system. Daddy is very proud of his little one. Tom Longview TX

I now live in TX, but I still have my CA phone number. I tried to call the IRS at 7AM local and it gave me the message that the IRS is closed and call between 7AM and 7PM. At 7PM local, I called again and got right through. So I think the computer looks at the area code of the phone and decides the time zone and hours for the messages. I think I am going to get another phone with an east coast area code so I can call in from 6AM -9PM local. Tom Longview TX

Any chance the spouse can divorce and get a chunk of the the retirement in a QDRO? If spouse is truly innocent, a determination that is still up in the air based on what you have posted so far, then a quick divorce with a property settlement that gives spouse half of the retirement assets might keep it out of the hands of the IRS. Tom Longview, TX

They sent me an email on 10/12 telling me how much they appreciate that I renew early every year, so they are letting me renew early again. I just get it out of the way when they send the email. Tom Longview, TX

On this we agree. Tom Longview, TX

cbslee - who is going to make the determination that a preparer is incompetent? How will the OPR get the referrals to investigate? How does the appeal process work? Will you be able to continue to work if accused by a RO or Agent of incompetence until a hearing is held? Our PTIN is critical to our profession. IF the IRS has unfettered ability to revoke without recourse, we lose our ability to practice. I fear that kind of control in the hands of public servants who have shown ethical lapses during my career. Remember when they went after conservative non-profits? Remember when they released wealthy taxpayer confidential information just a few months ago? Why did the Clinton administration have to pass a Taxpayer Bill of Rights to curb abuses by the IRS? I have no faith in the workers at IRS anymore. They don't have the tools or resources, are overworked, underpaid, and the last thing you want to do is give a marginally talented, stressed out government employee is a weapon to take your business away because you disagree with their findings. You may not fear them, but I would much rather see an organization outside the Treasury Department having oversite of preparers. I don't trust the IRS with that power. Tom Longview TX

I am with the "frog" on this one. How many of us think the IRS is going to look at HRB? JH? LIberty? They are not going after the pop ups either, cause they are gone by the time the return is reviewed. The revocation of the PTIN just gives the IRS another intimidation factor against legal preparers. Accept the audit findings or lose the ability to efile (which would shut you down). The PTIN was instituted to protect preparer's SSN. Now it will be a weapon used against us. Tom Longview, TX

Is that the correct way to apply the credit? I think the way we applied it is correct, and ATX did not throw an error or even a warning. If I am wrong I would really like to know why. I cannot locate a source for ordering of the application of credits to tax in this situation. If you are using up refundable credits on taxes that non-refundable credits could absorb, then why have them be refundable credits. Thanks Tom Longview, TX

If something is "voluntary", is it really a tax, and if not a tax is it eligible for deduction? Not getting political, but getting ready, as CA is supposedly got some similar legislation in the works. Tom Sparks, NV

No, this client has the same return every year for the last 4-5 years. Claim their daughter and granddaughter who live with them and whom they support fully. Very simple return. No UI, no EITC...very simple and straight forward return. Tom Sparks, NV

My clients had their return held up by IRS and finally got their refund. It is $380 less than expected. That amount is the ACTC from 8812. The TP claim 1 child under 17 and one adult child. Total CTC is $2,500. Calculated tax before CTC is $2,120. 8812 adds the $380 of CTC back as refundable credit. All the worksheets seem to tie out in ATX. No errors or warning when we filed it. Did I do something wrong or could this be a mistake by IRS? Thanks Tom Sparks, NV

Is this the state's attempt to get around the SALT cap? Tom Sparks, NV

Get the POA, then share your Covid concerns with the auditor. I am fairly certain they will want to do this via correspondence (they probably don't like going to offices where they don't know the people either). Follow the advice above. When I have done these in the past, I will try to know the results before the auditor sees anything. And if something was missed, I lead with that item and agree to that adjustment right off the bat. No sense trying to hide something. I find it buys some goodwill if you admit there was a mistake and it is corrected. Tom Modesto, CA

My niece and I were meeting after church on Sunday. As I started writing the notes that I wanted to touch on with her, I thought it would be funny to put it into a 10 commandments format. She got it, cracked up about it. Not sure I would send this out to a client either (unless they were members of my church). If God does not have a sense of humor, I am gonna fry for this.... Tom Sparks NV

Seeing how this client is related to me and I have been her tax preparer for nearly 20 years, I think I can give her those general guidelines. These were talking points for our in-depth conversation on the phone. I have seen other clients over the years be very good at their trade or profession and start a business. They underprice their services and get lots of business that is not profitable, because they don't understand the costs of doing business. We see it in the tax business all the time, a new tax pro comes to town and starts underpricing. They get lots of business and revenue, but not profits. I wanted to make sure my niece did not do that, especially in the business she is going into. Thanks Tom Sparks, NV

My niece is starting a business. I am going to try to get her started on the right foot, so I started writing a document to go over the things I think are most important. Having just come back from church, I thought I would put it in the form of the 10 commandments. Let me know what you think: 1. Commandment #1 - I am your business and Tax Advisor. You shall listen to no hairdressers, contractors or co-workers regarding tax and business matters. You shall not believe everything you read on the internet, hear on the radio, or see in a TV commercial without checking with me. You shall not call an 800 number for advice on borrowing, lending or tax issues. You shall keep me informed of all major decisions related to the business, its ownership, its structure, and its profitability. 2. Commandment #2 – Thou Shalt Keep your business and personal money separate a. Business checking account b. Anything you take from business for personal is recorded in both accounts c. Reconcile your bank accounts monthly d. Get a separate credit card for the business (only charge business expenses on business credit card) 3. Commandment #3 – Thou Shalt Record all your business transactions a. Every single one, every single time, every single day, no exceptions, no whining about it b. You will keep a mileage log of all the trips you make in your vehicle for business. It will not be created at my desk during your tax appointment, but will be kept on a daily basis. You may use any fancy dancy millennial app that you can put on your phone to keep the log, but at the end of the year you will produce a mileage log that I can print out on old fashioned paper and put in my files that tells me where you went, why you went there, what the date was, and how many miles were driven to get there and back. c. You have to do this to follow Commandment #4… 4. Commandment #4 – Thou Shalt Know your costs of doing business a. How much do materials cost b. How much is your office and other overhead costs (electric, business licenses, taxes, etc) 5. Commandment #5 – Thou Shalt Price your products and services correctly a. At a minimum, you need to mark up your material costs by 40% b. You need to have a billing rate for your time i. 40% more than you want to get “paid” from your business ii. If you want to earn $20 per hour for your time, your billing rate is $28 per hour c. You need to add at least 10% to the above numbers for overhead d. You need to add at least 25% to your billing rate and overhead rate to cover taxes 6. Commandment #6 – Thou Shalt Put into savings a minimum of 25% + any sales tax collected from every payment you receive to cover your tax bill a. Sales tax collected is not yours – don’t treat it like it is. Put it in savings until it needs to be paid. b. Federal SE tax rate is 15.3%. This is your SS and Medicare contributions c. Lowest Federal Tax Rate is 10% d. State Taxes – Find out what your tax rate is and add that to the 25% above 7. Commandment #7 – Thou Shalt NOT hire any employees until you do all of the following a. Get an EIN from the IRS i. You don’t want to give your SS# out to every business customer who asks for it ii. You must have one if you ever hire employees b. Get a State EIN - to get a state EIN you need a Federal EIN c. Get General Liability Insurance d. Get Workers Comp Insurance e. Know the Minimum Wage requirements for your State/City f. Know the Benefits Rules for your State/City i. Paid Time Off? ii. Sick Time iii. Health Insurance iv. Anything else any Government Entity requires you to provide to your employee g. Have the ability to process payroll yourself or hire out the process h. Pay your Payroll Taxes on time every time (The IRS takes a dim view of employers who withhold from their employees and does not remit to them – They call it THEFT) 8. Commandment #8 – Thou shalt have the proper local business licenses and follow your local business laws a. States, Counties and Cities can be more brutal than the IRS b. If you have an office in the home, make sure it is allowed by the local government c. If you are a professional, you must have the required licenses to perform the services offered by your business. 9. Commandment #9 – Thou shalt keep your appointments with me a. My goal is to help you succeed in business. You will be busy running the operations, trying to sell and trying to develop new products and services. I know your time is important and limited, you need to recognize that my time is as well. I will do all I can to accommodate your schedule. However, government entities impose deadlines that cannot be missed. Don’t ignore me all year and then show up on April 14th with a shoebox and a flimsy apology and expect me to get your documents ready on time. There is no 10th commandment, since I am not God, but on earth I am your Tax Daddy! Tom Sparks, NV

The law was written so hastily that this aspect was overlooked. The IRS would have had to go back to Congress to change the law to get what might have been the intended result. As it is, I think they made the right call correct analysis based on historical treatment of income in community property states. My guess is they did the analysis and went to the administration to ask if they should ask for a technical correction in some non-partisan bill and the administration looked at who would benefit (voters with under 150K of income) and decided to let it fly as is. Just me looking at the tea leaves and coming to my own conclusions on how this went down. Tom Sparks, NV

Late in the tax season, the IRS agreed that in community property states, the income from UI was community income, therefore both spouses can claim the $10,200 exemption from income, even if only one received UI, provided they meet the other qualifications. It was iffy for a while if the IRS would agree, but eventually (like in late May) they did. So if your Married CA client had more than $20,400 in UI, and you only excluded $10,200, the IRS just corrected the return and gave your clients their refund. Tom Sparks, NV