JohnH

Rita: I know why he got the stimulus payment early. You entered the "PSE" notation on the bottom of page 2 in green ink. That's the secret "Pay Stimulus Early" code that only a few people knew about. Obviously you got the word...

Think it might be cheaper if he just moved to Canada?

I mostly followed what Deb just stated - explained the situation on to the clients by phone or email as I sent their returns back to them. I did have one phone call today and a couple of emails about it - both from people who had extensions. But the most interesting thing happened first thing this morning on my way into the office. I stopped by my mechanic's shop to ask a question about my car and the owner's wife (who is also a client) asked about the news coming out over the weekend. I told her I didn't know much more than what I had heard, but I assumed the direct deposits were going out a little faster than expected but the paper checks would probably follow the original schedule. One of the mechanics was standing off to the side and he corrected me by saying that the paper checks were scheduled to start May 9 rather than May 16. Now the two things I don't argue with mechanics about are auto repair matters and tax matters, so I just allowed the comment to slide off my back and left with my smug attitude. When I got to the office I learned he was right. So now I have to issue a blanket apology to every mechanic I've ever poked fun at concerning tax advice (although I'm still not taking back all the stuff I say about tax advice from hairstylists). I'm a little embarrassed about my smugness, but the good side of all this is that I now have a new reliable source of tax information when my research isn't satisfactory - I'm going to seek out that particular mechanic in the future to confirm my opinions.

Are you looking for business? Seems like handling this for her might be a good way to contact some prospective clients. Even if they went to someone else for 2007, they might still be looking for someone they can connect with. A personal connection to the prior preparer & having their files might be a good inroad. Offering to handle the client communcation for her would be a good service and could potentially generate new business for you. If you're not interested in doing it, maybe you know a preparer in town who would.

When your clients call, you have been given an opportunity to accomplish a more important task. I were you I'd ask for their email address if they use email. Then email them the link Jack just gave you. That way they can figure it out for themselves and you'll be out of the information loop (unless they insist on your calculating it for them). My email message to them says "This is the official IRS information, but if you still have addiitonal questions specific to your situaiton, feel free to email them to me." The added benefit is that you will be moving them in the direction of exchanging tax questions on any tax matter via email in the future rather than by phone, which is infintely more efficeint for you and your clients.

For most situations where the shareholder earns less than $95K and the C-corp has moderate earnings, the double tax is no big deal. After all, the taxpayer and corp would pay a combined 15% in Social Security (withholding plus matching tax) on the salary, so the 15% corp tax on the dividends is pretty close to a wash. If the dividends are qualifying dividends, the total tax bite on the personal income can actully be less than if it were paid in salary. Of course, if there is state income tax that also has to be taken into account and the person won't get earnings credit for SocSec. But in the final analysis just reporting it as a C-corp and reporting the payments as dividends might be not more costly than jumping through any sort of hoops. I'm not recommending this on an ongoing basis, but it might just be the easiest, most cost-effective way to handle year 1 and it most clearly reflects what actually happened. Sometimes we get into a tizzy over double taxation when it really isn't a huge issue from a net financial standpoint.

I find it equally interesting that people would choose to leave themselves with no viable options or put themselves in a position of having to make a hasty decision if something blows up on them. Especially when they are dealing with a company that sends the mixed signals we have been getting over the past year and a half. To each his own.

I buy HP Laserjet 1100 printers on ebay for about $30 each, plus shipping of another $20-$30, depending upon the seller. The toner cartridges are very large and can easily be refilled by local refill services. Since toner is the most expensive part of operating a printer, these are very economical printers for heavy-duty use. I usually keep one or two extras around, so if one breaks down on me I can just set up one of the spares and either throw away the old one or use it for spare parts.

I just think it's unwise to renew early under these circumstances. The company has given us plenty of reason to be cautious, and they are offering nothing in return - not even a functional product. For me this is an easy decision. There's no way I'm going to commit to the expense now of buying the software I'll be using for all my returns next season just in order to save what amounts to the charge for less than one decent size return. I'm holding out, not so mucj for financial reasons, but because having a smooth operation next year is way more important that saving a few dollars right now. When they have a product ready to go and I'm satisfied that it meets my needs, then I'll pay for it. It's still a good deal without the discount, and if they make the mistake of pricing themselves out of the market then I'll switch to one of their competitors. The ball is in their court, not mine.

If your client decides to go the "Substantially Equal Payments" route, here is a great site for getting tips, answers, and planning strategies. I'v been monitoring it for about 2 years now, and I think it has real value. I wish I had known about it the last time I had a client who needed to set up an SEPP since their financial advisor was useless in this situation. The moderator is very knowledgeable and the replies to specific questions are generally right on target. http://72t.net/Discussion/ViewPosts.aspx One strategy he can follow is to move the money into an IRA, then split it into a large and a small one. He sets up the SEPP (72t) distribution from the larger IRA, which will enable him to avoid paying the penalty on that distribution amount. If that doesn't provide him sufficient income he can take withdrawals from the smaller IRA to make up the difference in his cash needs. He will only pay the penalty on the distributions from the smaller IRA. Depending upon how much he has in his plan, this can make a huge difference in the penalty he pays on his withdrawals.

I'd rather spend some time on this forum than filling out surveys that nobody pays attention to. At least here there's some response to the thoughts we express.

Jack: One of us is twisting the other one's words. Maybe it's me, but I'll continue anyhow. I didn't say that I would ALWAYS and under ALL CIRCUMSTANCES advise that a W-2 be issued. Maybe I didn't make that clear enough, but I'll pull my head out of the sand long enough to clarify. (Some people might suggest that my head is somewhere else, so thanks for not making THAT suggestion) I wouldn't tell them to issue a W-2 "because the vast majority of minsters are employees". I would tell them to do so because the minister is in my opinion an employee. But common sense does tell me that in the vast majority of cases that's what I'd be telling them. In the very rare case that this didn't apply, I'd tell them not to issue a W-2. Common sense also tells me that this will rarely happen. Again, it's all about making the proper distinctions using one's professional judgement, and on that point I agree with you completely.

I went to Drake's website and ran a few of their selected webinars (not the whole setup because it looks like it would take too long). I liked what I saw, so I registered online for the evaluation version, which arrived a couple of days later. I haven't installed it yet, but will do so in the next few days and will run a few extension returns with it to get some real-life experience. One thing I notice in their literature is that Drake claims that the attachment to forms-based software slows down data entry. I like the ATX forms-based approach with the bunny hops, so this claim by Drake surprised me. I don't quite get how using the data sheet approach will speed things up, but would be interested in hearing if anyone else agrees with that comment and why. (Maybe it will become obvious when working in the software)

I understand your points, but as a practical matter I disagree with you in all but a handful of rare situations. If one of those unusual situations arose, I might follow your logic. But for the vast majority of ministers, Form W-2 with an accountable plan is best., hands down. That's my story and I'm stickin' to it.

I didn't know that. Looks like I learned something today in spite of my best efforts not to do so.

If you re-read my original post, you'll find I didn't refer to a "threat". On the other hand, I recognized a real possibility. If you don't see it the same way that's OK by me. BTW, am I also on thin ice when I tell clients that depending upon the outcome of the next election they should probably expect their tax bill to increase in the future? But back to the main point, I'm all in favor of clergy taking advantage of all tax rules. In fact I encourage them to take full advantage of the favorable treatment they enjoy. I just don't see persisting in using Schedule C as taking advantage of anything - it's actually counterproductive. When the IRS already has a stated position that the minister should be issued a W-2, then FAILING to advise them that they should make every effort to switch to W-2 reporting with an accountable reimbursement plan is not serving the client's best interests, IMO.

While you're at it, maybe setting one up for Drake would also be a good idea: http://www.drakesoftware.com/Products/LaunchTax.aspx

Jack: No, I don't think it's ridiculous at all. Clerrgy enjoy a special tax status that is very unique among all other self-employed persons. Part of being a professional is properly applying the ability to make distinctions. I know from many of your posts that you have that ability, so I'd expect you to use it with clergy in the same manner you'd use it with any other special class of taxpayer. But thanks for the other suggestion. Now that I actually think about it, I have SOME Schedule C clients that I should be encouraging to get a real job. I may start working on that angle next tax season.

This is a conversation I've had with clergy members from time-to-time, and I believe there's a chance those who insist on using Schedule C may someday find that they shot themselves in the foot on this issue. If there continues to be controversy over their dual status, at some point Congress might step in and clarfiy the issue. If than happens and everything goes on the table, an unfortunate side effect could be the elimination of the tax-favored treatment of the H&U allowance as a part of the process, and possibly loss of the ability to treat retirement contributions as pre-tax benefits. Given that for most ministers the value of these benefits far outweighs the ability to use Schedule C, and since a properly documented accountable reimbursement plan completely negates the benefits of using Schedule C anyhow, they could easily find themselves winning the battle but losing the war. When I encounter a minister who wants to focus on using Schedule C for reporting their primary source of income, I encourage them to spend their time more constructively. First they should be sure their H&U allowance is set well above their actual requirements, and secondly they should work with their Finance Committee to establish an accountable plan, even if it means a salary reduction of approximately the same amount. Thinking about the potential downside, I do everything I can to discourage their even thinking in terms of Schedule C, except for honoraria and other related secondary income sources.

I was on the verge of asking the original poster if there were any known drug addicts in the client's immediate family, but I didn't want to come across as being crass or insensitive.

It could be that the client isn't leveling with you, or it could be a clerical error with the credit card issuers & the IRS, or it could be a very serious matter of identity theft. If I were the client I'd immnediately contact the credit card issuers for specifics on the chargeoff. I'd also pull my credit reports from all 3 agencies and review them carefully. This will cost some money, but this isn't a time to be pinching pennies. Where the client goes from there will depend upon what they learn. This could warrant some serious attention far more significant than the tax issue.

Eli: Your friend may have a problem. While some time shares have value, it's my understanding that the vast majority carry little or no resale value. The initial purchase price is so inflated with marketing fees that the owner can never gain any "equity" ( assuming there is such a thing with a time share). My experience with this can give you an idea of the situation many sellers face. For several years my wife & I would rent whatever was unoccupied at a time share development near a ski area we visit. We finally decided it would be nice to go to the same unit each year, so I obtained a list of unit-weeks for sale at that complex. I finally offered a guy $750, plus we paid the two years of back dues he owed (about $300). When we signed the closing papers, I noticed he had paid $8,000 for the time share about 10 years earlier. He had been trying to sell it for 2-3 years and ours was the only offer he had ever received. In his case he owned it outright, so accepting our offer was just a matter of swallowing a sunk cost. If he had been making payments on a loan I doubt he would have sold to us since he would have been required to bring money to the closing. He would probably still have it on the market with no offers and the delinquency on the annual fee piling up, or else he would have just let it go to foreclosure at some point. For us it was a good deal, but for him it was a disaster. He's probably lucky he hadn't been induced to pay $25K for the time share when it was initially marketed to him. We saved more in the first couple of years than we were paying to rent the place, so if we ever must get rid of it and can't find a buyer, we can just tell the time share company they can have it back and we're not out anything. Time shares seem like a good idea at first, but people forget that their needs change. They move, their interests change, their lifestyle changes. But there's that albatross still around their neck and they can't get rid of it. I know some people do quite well with time shares, but for most people paying more than they are willing to walk away from makes them a sorry deal. Certainly not an investment that can be relied upon to produce a return or even a break-even..

OK, I confess. I made up the part about how much you contribute being what advances you on the list.

Read "Getting Things Done" by David Allen and your requirements might just change significantly. His ideas on this subject completely altered how I manage my time. I'm not a shill for him, but I strongly recommend that people take a look at his ideas before making any sort of decision on how to keep track of projects.

Speaking of insults and the like, did you hear about the guy who showed up at work on Monday with two black eyes. When someone asked him about it, he said that it happened when he was trying to be helpful at church the previous day. He explained, "When we stood up to sing, I noticed that the lady in front of me had the bottom of her skirt hung in the top of her panty hose, so I pulled it out for her. She turned around, punched me in the face, and said she didn't appreciate what I had done." The friend then asked, "Well what about the OTHER black eye?" He answered, "Well, the next time we stood up to sing, I stuffed it back where it had been."