BulldogTom

According to my account rep, there will be no printed books (Master Tax Guide, 1040 Answers) this year from CCH. It will all be online only through Intelliconnect. This is another F up from CCH. Those bastards can't shoot straight on anything. Tom Hollister, CA

Not even a twinkle in my daddy's eye yet. Tom Hollister, CA

Catherine, I jspent 3 days at C STAR (California State Tax Agency Representation) this summer presented by the CA Society of Enrolled Agents and we went through this material extensively. In general, CA follows the federal rules, but to a much greater degree of scrutiny. The main issue is control, who has it, even if it is not excercised. Anything that looks like control of the worker's daily activities will probably make them an employee. Providing tools, providing a work space, giving instructions for the way in which the work is to be performed, setting time lines, paying the contractor by the hour and requiring a timecard, the employee not having a business license or professional license. These are all things that would tend to make the worker look like an employee. If you want to discuss in more detail, or would like some of my materials, PM me and we can set something up. Tom Hollister, CA

Smart kids. You should be proud. Most kids don't know anything about how to handle money and finances. A while ago, I had an idea that I could teach a high school capstone class that would run through 4 years of financial life with the students. It would start with writing a resume, filing out a job application, and based on that resume, getting a "job" with a salary. The better the resume and application, the better the pay. Then they would move on to the mundane tasks of life like, filling out an application for an apartment, creating a budget, writing checks for the monthly bills, balancing a check book, filing a tax return, purchasing auto and health insurance, paying rent, and buying and paying for a car. I had all kinds of games included that would throw them curveballs like spinning the wheel of life and coming up with a wife and children, an auto accident, or getting a new job with a raise that needed to be added to their program. Every quarter would end with the filing of a tax return based on the income and deductions they had during the quarter. But, I am not a teacher, so it never came to fruition. But I would still love to see it as a senior class some day. Tom Hollister, CA

Just and update. The CPA called today and said that "there appear to be some errors in the tax return and he will be making the corrections at no charge." Thanks to both of you for helping me understand what I was supposed to see on the return and where to ask the good questions. Tom Hollister, CA

Thanks KC. This is a good piece of news. I just sent it over to our HR department to see if we can implement and FSA for our company. Tom Hollister, CA

Thanks to both of you. Tom Hollister, CA

Jack, You seem to know the most about construction taxation. Do you know what the "lookback" rule is, and what the mechanics of using it for a taxpayer who has used a combination of Percentage of Completion and Completed Contract methods for the corporate tax return. A little background. Taxpayer uses % of completion method of accounting for all work on their books and records. Do not qualify as a small contractor. Average 20MM+ in reciepts over the last 5 years. But they do residential work. On the tax returns for the last 5 years, the CPA Tax Preparer has used a hybrid of POC for the commercial work and Completed Contract for the residential work. It appears this is allowed under the code, but I am still searching for the exact code that allows it. In my research, it seems that when a contractor uses % of Completion on their tax return, they need to do a "lookback" to make sure they did not over/under estimate their costs when determining the POC subject to taxation. If there is an over estimate of costs, then the taxpayer owes interest on the tax that should have been paid in the prior year, and if there is an under estimate of cost, the taxpayer is entitled to interest on the amount of tax they paid that should not have. At least that appears to be how it works. Do I have that right? How / on what form would you see the lookback rule on the tax return? How does one indicate these amount of interest to pay or have refunded under the lookback rules? Are there exceptions that would exclude a taxpayer from being subject to this rule? Should there be some schedule attached to the return showing the calculation? Lots of questions, so little time. Thanks in advance if you can help me understand this a little better. Tom Hollister, CA

Sorry, that was a real hack job on the cut and paste above. What I am trying to say is the bank took the home for non-payment of the mortgage, and I believe the mortgage was non-recourse. Under § 1001 we have a sale or other disposition of an asset. Under §121, the gain, if any, is excludable up to $250,000. But I don't know if I can link the foreclosure to an illegal act (?) or civil violation of a rule of law by the bank for which they paid damages (?) or a civil penalty (?) or just paid them as a business decision to move forward. If that is the case, then I think it is taxable income. The more I type, the more I see the §121 idea as a reach. But I would still like to know if the IRS or Courts have any concrete guidance on this matter? Thanks Tom Hollister, CA

<<Was there an actual sale in direct relation to the foreclosure?>> Well, a foreclosure is a "sale or other disposition" of a property under §1001. <<But was there C.O.D. income, een if excluded?>> I need to go back and check the client file, but if memory serves me, there was no COD income because the mortgage was an original purchase non-recourse mortgage.

Client got a settlement in the mortgage fraud debacle from the bank that foreclosed on her personal residence. The note with the check said they would be issuing a 1099 MISC for the payment. My first thought is this is a legal settlement and it should be taxable income. Then I started thinking that maybe it should be a continuation of the "sale or other disposition" of the home, and might be excludable under §121. Have any of you dealt with this issue and is there any guidance on these payments from the IRS or courts? Thanks Tom Hollister, CA

And don't forget the biggest benefit, that our clients will be coming back to us because we have the info they need to e-file. A client asking for last year's AGI will be a huge tip off that they are looking to go elsewhere. You can get a few extra bucks from them for a prior year return reprint. Tom Hollister, CA

Julie, I think this is an area best left to a financial planner. I know a very good one in the Sacramento area. He is the best I have ever met. You know the issues with the company, and can be valuable as a resource to the financial planner, but I think that is all you should do. I would not go very far with the clients down that road except to make a referral for a planner and offer to be a resource to the planner. Just my 2 cents. Tom Hollister, CA

Did I block three - I thought it was only 2. And you would never be blocked by me. I appreciate you way to much, even if I don't agree with your political views. And I am not a haybaler, but my son is.

Thanks Elrod, I read that. But it is too generic for what I am looking for. Appreciate the post. Tom Hollister, CA

It is actually a tax thing. For GAAP, you must use the Percentage of Completion method for your books. Not a problem there. I have always understood that. However, if you are a small contractor (generally under 10MM revenue for last three years), you can use the completed contract method for your tax returns for long term contracts. There is an exception for large contractors working on "residential" property. They can use the completed contract method as well. I need to know what the legal definition (case law) of "residential property". The generic definition is a building with 4 or less dwelling units. I need to know the legal definition of a "building" and a dwelling unit (again, tax case law). I have also found that AMT kicks in for using the Completed Contract Method. You have to calculate profit based on Percentage of Completion and make an AMT adjustment if you use Completed Contract and are a large contractor. I need to know more about case law on this point as well. There is also some kind of funky hybrid method that I need to take a look at. Thanks for the post, but I don't think it helps much. But I do appreciate you chiming in. Tom Hollister, CA

Do any of you have a good reference guide for using Completed Contract method of accounting for a Corp Tax Return? I know very little about it and I need to get educated in a hurry. Thanks in advance. Tom Hollister, CA

Thanks Catherine. He interviews tonight at 5:20PM. According to the blogs Elrod provided, the acceptace rate for those who interview is 12.5%. For those who don't it is 2.8%. I think he has to do the interview to even have a chance. Appreciate your time and input. Tom Hollister, CA

Is the Brookhaven OIC office closed during the slimdown? I have an offer in that the agent asked for documentation by a certain date. I provided the requested documents, but I have not heard back. Made a call to the agent's direct line and got a generic "I am on the phone or away from my office" answering machine. I left a message. Just wondering if anyone knows the status of this IRS unit. Thanks, Tom Hollister, CA

Thanks Elrod. Those are good blogs.

Catherine, My son has his interview set up for this week. Any tips you can give him about what to expect in the interview? Will there be questions like "If you could be any animal, what would it be?" Just wondering how he should prep for this interview? Thanks for your time. You have been invaluable as a resouce on MIT. Tom Hollister, CA

Can I block a moderator? Tom Hollister, CA

I really don't care what you do Eric. Since I found I can block the source of my irritation, I don't get pissed off at anyone anymore. I don't post much anymore for reasons that most people know about on the board, but I will start contributing again now that I don't see anything from the one person, IMHO, who has been the cause of all of this consternation. We had a civil, respectful, sometimes rowdy board for a long time here. Jack from Ohio was never seen as a problem until "someone" showed up and became the most posted newbie in history. But now that I don't see that "someone" on the board because of the blocking feature, I am certain that things will return to the way they were. One big happy family without "someone" screwing it all up. Thanks for creating the blocking feature Eric. It has made the board readable and enjoyable again. Tom Hollister, CA

Thanks, did not think to look in the Payroll program for the form. But unfortunately, I am looking for the forms for my day job. Try to keep my tax and work business separate. I could do it for them from my tax software, but would rather just get the forms. Tom Hollister, CA

Hi all, Do any of you have a source for forms 1099C? I have to complete one this year for my company and I don't see them listed on any of my vendors. Thanks Tom Hollister, CA