BulldogTom

I am not using the CCH website. I have another vendor. Tom Modesto, CA

Reviving this topic. If I am creating a .pdf of the taxpayer's 8879s out of ATX, and they want to e-sign them, can they do that? Do I have to have a special software when creating the .pdf or does my client have to have a special software on their computer that allows them to modify the form by signing it. I am so ignorant about technology, so please be gentle with me. I got the portal this year so we don't email docs to the client any more. And it was working great. Then I did a return and the client wanted to upload their docs from their phone and it did not work well. Then a client wanted to sign the 8879 electronically. I feel like this industry is passing me by and my knowledge of taxes is unimportant, because if I don't have the latest and greatest wiz-bang technology, I am looked at as a dinosaur. If I am going to survive, I think I need to know more about these things but with a full time job and a part time tax practice, just keeping up on the tax laws and the tax software is all I can handle. Maybe it is time to hang it up. Tom Modesto, CA

Not to beat a dead horse if you think you got this...but.... I have a client who works for Tesla. They get quarterly awards of stock options. Tesla is very good about giving the worker all the details of the awards, so it is just a matter of hunting for the award date and the amount of income that was included for that lot when it was awarded. Just finished that return last week. From your original post above, it is not clear that the client has "sold" the stocks, just exercised the right to purchase the stocks. If that is the case, then there will not be a 1099B. At the point of grant (not exercise of grant, but the grant of the options), there is generally no reporting, because there is nothing of value that has changed hands. The employee has the option, but not the requirement, to purchase the shares at a given price (the option price). If they don't actually choose to purchase, they have received nothing from their employer. This is what it sounds like happened to your client. Then, when she was leaving the company, she exercised the options, purchasing shares at a discount to the FMV on that date. The amount she gave the company (the option price) is basis, as well as the spread between the option price and the FMV on the date of exercise of the option. The spread is the portion that should be included in the W2 at ordinary rates. This is also the amount you need to hold on to for the actual sale of the stocks when it happens, because the broker may or may not have the correct basis reported on the 1099B. If there is no 1099B, then there is no sale. Double check with your client that they did not receive a check. If she got a check, she should also get the corresponding 1099B. In a lot of cases, the grant, the exercise and the sale all happen on the same day. Even in this case, there should be a 1099B. It generally results in a small CG loss due to the broker commission (as Judy said above). Back to your original problem. The real question is: Did she sell? If so, make her get the brokerage statement. If not, then ask her where the stocks are held right now, because she owns them and some broker is holding them in an account with her name on it. Hope this is clear as mud for you? Tom Modesto, CA

The client has no employees. It is just him. Last year when we implemented his SEP, he went to his personal broker because he was comfortable with him and it was the first year of the SEP. This year, he thinks he wants to go to Fidelity to make his contribution. He did not say he wanted the prior year contributions rolled over to the Fidelity account. He just said he felt too concentrated by having this with his personal broker. I am not concerned that he will over contribute. Thanks Tom Modesto, CA

There is a gun range in Reno that allows you to shoot machine guns....fully automatic frikken machine guns...for as long as your credit card can take. This was simply an awesome birthday gift. One more item off the bucket list. Tom Modesto, CA

Don't you hate it when you are busy and that one client calls for a "quick question"? Especially when you are driving down the road, in traffic, trying to get away for your birthday weekend. And then you are supposed to know every answer to every question off the top of your head, while in traffic in Sacramento. I can have as many brokerage accounts for my SEP IRA as I want, correct? Client feels his investments are too concentrated and wants to contribute his SEP to a different brokerage house this year. I am traveling this weekend and I don't have my reference materials on me. Can someone confirm or refute? Thanks Tom Modesto, CA

That is not an unreasonable price to pay for a good suit. Even a cheap suit will run 200-300 at JC Penny. A good silk sportcoat will go for $300-$500 at a good retailer. I would not be surprised that someone who dresses well would pay nearly $1K for a nice suit. But then I am in CA, so maybe that makes a difference. On the other hand, Goodwill will charge about $50-$100 for that same $1,000 suit. Tom Modesto, CA

Actually, do what Abby says. I was just trying to be funny. Tom Modesto, CA

Act like a very "high brow" accountant, have your assistant do the data entry, and then "charge them to the nines". If the IRS questions the donations on their return, "charge them to the nines" again for your defense. Tom Modesto, CA

The banker should be sued by the farmer. They knew the requirements of the law and put the farmer in harm's way by intentionally circumventing the law, and asking the farmer (unknowingly) to do the same. I deal with this issue every day in my day job. We go through annual training on Anti-Money Laundering and the Bank Secrecy Act. Every bank teller is required to go through the training as well. They knew what they were telling the customer was against the law, and they should be held responsible for their actions. It caused that man harm. Getting down from my lofty tower now. Tom Modesto, CA

I think Lion hit it on the head. I believe that the requirement to pay self employment tax is contingent on the attempt to earn a profit from an activity. And the IRS rules for what is a hobby, generally used to reclassify losses in what is represented as a business, cut both ways. Go through the factors that the IRS uses against a taxpayer to determine if the activity is a business or a hobby. Based on your answers above to my questions, the analysis will most likely come out that this is a hobby and not subject to SE tax, but included as other income. The biggest factor, even though the IRS says none are controlling, is the profit motive. I think you need to document the initial contact from the company and your client. You will need that, because this is probably going to generate a letter. But if you can reply with all the facts and your analysis of the law, it should go away. Prep the client for the probability that a letter will come and be ready to reply when it does. You should be fine. The position you are taking is supported by the law, and the tax courts. Tom Modesto, CA

Wow, this brings up a million questions. Is he self-employed and is the testimony related to that work? Is he employed in the same field his testimony related to? I think I have a problem with you saying there was not a profit motive. Someone called him up and said "you wanna make a few bucks testifying?" and he said "Yes". That is a prima facia profit motive right there. Would he have done this work out of the goodness of his heart because it was a cause he believed in? A factor in your favor is he has never done it before. But will he do it again? That would change the analysis. He is obviously an expert in his field - so that is a factor against you. He probably did not run it like a business - so that is in your favor. Does he have significant other income so that this can be shown to be casual and not something that improved his economic condition? This is a tough one. Lots of questions, no answers. Good luck. I will be one of your sounding boards if you want to continue thinking this through. Tom Modesto, CA

MFS doesn't work in CA for lowering student loan payments very often because it is a joint property state so you have to split the income equally.

Put it in with your medical expenses (reduce them) and then put your medical miles in. Treat it like a refund of insurance premiums. Tom Modesto, CA

Here is the email from the California Tax Education Council opposing this measure. NEW LEGISLATION WOULD DISCRIMINATE AGAINST CALIFORNIA REGISTERED TAX PREPARERS (CRTPs) Dear CTEC Registrant: A bill is currently in the California legislature that would significantly increase your obligations as a CTEC Registered Tax Preparer (CRTP). This bill, AB1140 (authored by Assembly Member Mark Stone), would apply to CRTPs only. It would not apply to a much larger portion of the tax preparation community that includes: Certified Public Accounts (CPAs); Enrolled Agents (EAs); and attorneys. This bill, if passed in its current form, would require CRTPs to provide clients and potential clients with two disclosures, one before preparing the tax return and one after preparing the tax return. Notice Before: A written notice would be required before preparing a potential client’s return that includes all of the following information: A standardized disclosure statement informing a potential client with income below sixty-six thousand dollars ($66,000) that they may be eligible for free online tax preparation services, and that an individual with income below fifty-six thousand dollars ($56,000) may be eligible for free in-person tax preparation services through the IRS’s Volunteer Income Tax Assistance (VITA) program. The statement shall also identify the IRS’s internet websites where an individual may find additional information on each program and the Franchise Tax Board’s CalFile internet website. A list of costs and fees charged by the CRTP for usual and customary tax preparation services, including, but not limited to, California Form 3514 and federal Schedule EIC (Form 1040). The CRTP’s federal PTIN number. Notice After: After completing a tax return, a CRTP would be required to provide a written disclosure signed and dated by the CRTP including: The total cost charged by the tax preparer. The CRTP’s contact information and federal preparer number (PTIN). Whether others were involved in preparing the return, their names, contact information and PTINs. Both statements must be signed and dated by the client and retained by the CRTP for a minimum period of three years. A CRTP who violates these provisions more than once will be subject to a $750 penalty issued by the California Franchise Tax Board. The full text of the bill can be found here ---> AB-1140 Tax Preparers - Disclosures If you have concerns about this legislation, please contact your local representative and let your voice be heard.

One of my clients has been getting advice from the internet. He set up a Delaware LLC without telling me. Now he wants me to file the returns for him. As far as I can tell, he did no business in the LLC in 2019, just set it up to get it ready for business in 2020. He is a CA resident, and all the business will be in CA for the foreseeable future from what I understand. I have no problems with the Fed return or the CA returns. I just don't know what I need to do for DE. Can someone give me a quick primer on DE LLC's with references on where I should go to get educated in a hurry? Websites, publications, etc. Thanks in advance. Tom Modesto, CA

Why would I want rentals that are throwing a loss to be qualified? Tom Modesto, CA

No clue. Seriously, I never really looked. I just have always included the A in the federal return so that my info shows up on the 540CA and let it fly to the EFC. I will check the next time I send one. Tom Modesto, CA

Probably a lot. Have you seen the commercials where they are bragging about their up-front pricing model? Sounds like CA just thought that was a good idea and wrote the commercial into the law. Wonder if they will go after CPA's and make them follow the same rules, since the state licenses them as well as CRTP's. Probably the AICPA would pay enough bribes (oh - I mean lobby enough) to stop that from ever happening. Tom Modesto, CA

CA does not have its own Sch A. Never has that I can remember in the 20 years I have been practicing. They use form 540CA (CA stands for California Adjustments) and they add or subtract income and deductions on that schedule. They did introduce a new worksheet that you use to add in deductions that were eliminated in the new tax law that CA did not conform to (Employee business expenses is the big one). Tom Modesto, CA

Interesting. I just leave the A in the federal return when I take the standard deduction on the federal side and Itemized on the CA return. It seems to be working and the Federal return shows the std ded. Am I doing something wrong? Or is there something different about DE that makes you go through that process? Tom Modesto, CA

Time for me to brag. Both my sons - Age 27 and 24 - itemized this year. They still tithe even after going out on their own. Nice to see that some life lessons we taught them stuck. Tom Modesto, CA

Is it just with the Sch E, or is it when both a Sch C and a Sch E are in the return? I got that error when I was checking a return with only a Sch E, and of course I deleted the 8995 because there was no QBI for that return. But one of my best clients who is coming in soon has a both a C and E on his return. Would appreciate if you would expand on exactly what is causing the problem. Thanks Tom Modesto, CA

He is a resident of the state and CA taxes worldwide income of its residents. No workaround for last year. Still has time to move this year though. Tom Modesto, CA

I did one this weekend and it flowed perfectly. Just hit the boxes on the Schedule C and it was all on the 8995. No issues like you describe. Tom Modesto, CA