OldJack

>> legal same-sex marriage<< But from a Federal tax standpoint is there such a thing as a legal same-sex marriage?

I agree with KC. Not to worry about losing this type client as you would probably be much better off without him. I dumped several such clients years ago and my life was much better with more time to give better service to better paying clients.

>>are you *REQUIRED* to report it.<< NO.

Report it if you think as a licensed preparer you are an agent/employee of the IRS.

>> I don't calculate any gain or loss for each member on their respective K-1. << Correct. Each member determines their tax status with regards to loss deductibility. Unpaid Loans due members should be treated according to instructions from the partner. Normally you would expect the member to want the loan applied to the capital account, however, if the loan is a well documented loan the partner may want to treat it as a business bad debt on his personal taxes.

Basically in simple words, assets may be distributed in liquidation at the LLC's tax basis to the partners which become the partners tax basis in the asset unless the partner has an outside tax basis. The 1065 would show liquidating distributions as distributions rather than a sale. Such distribution would reduce the partners tax basis. Ideally the balance sheet of the LLC would be zero after liquidation, however, that may not always happen due to possible non-recourse liabilities unpaid. The K1 should show the current year operating income/loss regardless of the equity account balances and such is reported on the 1040. The K1 should show partner ending accounts as zero, negative, or positive balance. Negative usually means the partner has income to report [Recapture of losses at-risk Code Sec.465(e)(1)(A)]on his 1040 due to over deduction of losses unless he has tax basis other than what is shown on the partnership books (outside basis) or he has not deducted the losses. Such loss recapture is determined at the individual partner level per the at-risk form 6198 attached to the 1040. Positive partner account means he has a deduction as he did not receive all his equity on liquidation (could be ordinary or capital loss depending upon partner status). edit: Forgot to mention that unpaid LLC debt may be taxable income, under forgiveness of debt rules, to the LLC entity, thereby increasing ordinary income on the K1.

>>If so, where is this entered in the ATX program and where does it get reported on the K-1?<< Maybe you didn't get a clear answer because YOU didn't give clear details. Multi-member K1's are issued from LLC's taxed as partnerships and S-Corps. Liquidating distributions are different. Which are you talking about?

What kind of business is this client that would make them be selected for audit?

1000 audits is only a token attempt at what is one of the major problems in this country!

I have never prepared a business tax return without filling out the balance sheet and reconciling book to tax. You are crazy not to do it as otherwise you may not have the correct numbers on the book or the tax return.

I would leave prior year as shown and adjust current income/expense to make current year balance sheet correct. If the prior year preparer was a paid preparer they should be reported to any organization they are a licensed member.

Well, I misunderstood. You can NOT change the amount of the total assets. How can you say it is fully depreciated if it still has a positive value? Maybe you ment it should have zero book value?

Probably, as the balance sheet should be zero after liquidating distribution and the K-1 only show ending partner equity. Remember that the negative balance members probably have deducted more than their tax basis and the negative amount is therefore taxable income to them as recapture ordinary income on 1040 Sch-E, page 2. The positive account members have a deduction as either capital gain or business bad debt.

The prior year should have the amounts on line 9. Just go ahead and add them now. Nothing wrong about correcting when it does not change the bottom line.

Simple! There is no government form. Your software has a checkbox or place on the 1099-R input sheet for you (or the taxpayer) to indicate the amount that was rolled over.

I don't see anything in your post that would justify a 1040 Sch-C reporting.

Maybe its the worksheet on the Sch-E,page 1, tab of ATX program? Its actually labeled a Vacation Home.

It does not matter which box they reported the code V (if in error) as it is still the same tax treatment.

>>$959.77 denoted as "V" (Income from exercise of nonstatutory stock option)...What is this?<< It was income added to the W2 as a benefit received by the taxpayer and becomes a part of the taxpayers tax cost basis in the stock issued or sold. when the stock is sold it is added to cost basis on Sch-D.

I don't know why the White House wants to raise taxes while taxpayers are forced to take actions such as this that pays more taxes. Government is to big and expensive! Enough!

And some of them prepare taxes.

Sounds like they are interested only in those that efile? Maybe its a efile benefit to get to visit with a young IRS gal.

Since the church did not treat him as an employee by issuing a W2, it is likely that he is not an employee. Although the IRS position is that all Clergy are employees that is not the actual case for many in certain church faiths. Ask the Clergy if his work was directed and hired by the church as an employee? If neither he or the church considered him as an employee all income and expense should properly be reported on 1040 Sch-C.

The person that actually made the payments from their money takes the deduction.

No step-up and the gain received is taxable in the same classification and manner as was before the death.