VENT - The Geniuses

[BHoffman]

Clients own an SCorp.  SCorp gets a business line of credit.  Clients immediately tap the entire thing and take it all as a distribution.  Yep, and it's all in excess of basis.  So, no debt basis and no stock basis and LTCG of more than $35,000.  On loan proceeds.  Debt financed distributions.  They are so very upset.  Explaining the whole thing is just so hard.  I've always thought the old "make it a loan to the shareholder instead of an excess distribution" to be a cheap trick when you KNOW they will NEVER repay it.  AND I've already filed the 1120S (dummy me).  This is a miserable mess!  GAH!!

 

 

[Abby Normal]

You need to emphasize your value and explain that this is why they should always call you when doing anything financial that involves more the $1,000.

Some would argue that this is loan basis because the shareholder is personally liable, but I agree with you that it is not.

[Lee B]

So are they upset with the circumstances or are they actually upset with you for not magically fixing the their screwup.

Given the scenario you describe, I assume that they never consulted you ?

[Catherine]

You (we all) just can NOT save some people from themselves...

[Abby Normal]

True. We all have those self-destructive clients.

[TAXMAN]

Yea, how come the beautician down the street is smarter than me and cuts hair for a living???

[BHoffman]

Another client's bookkeeper coded $36,000 of Sch C owner contributions as revenue in 2016 (I'm amending that one) and $42,000 in owner contributions as revenue in 2017 (I caught that one).  I have never seen a bookkeeper do this before, and didn't look at the revenue details until preparing 2017 because my gut started screaming at me.  I did check to make sure she didn't deduct his estimated tax payments.  

I questioned the additional revenue in 2016 since his payroll wages did not increase as would be expected.  He told me he worked a lot in the field.  Fine.  So, I base his estimated payments on that amount and he dramatically overpays in 2017.

Big fat refunds for 2016 and 2017.  

[Abby Normal]

Now you're the hero!

[rscpa]

Talked to a client yesterday about his 2017 return.  His mom passed a couple of years ago.  He transferred all his stretch IRA's from JP Morgan Chase to a local bank which has trust services.   I asked him why he took the distributions, his response, because I didn't want to work with Chase.  Tax bill is about $65,000.  I seriously do not understand clients or the people that assist them sometimes...

[Richcpaman]

26 minutes ago, rscpa said:

Talked to a client yesterday about his 2017 return.  His mom passed a couple of years ago.  He transferred all his stretch IRA's from JP Morgan Chase to a local bank which has trust services.   I asked him why he took the distributions, his response, because I didn't want to work with Chase.  Tax bill is about $65,000.  I seriously do not understand clients or the people that assist them sometimes...

Didn't your client just do a rollover within 60 days?  Or did he take all the cash?   Or put it in a non retirement account?  Did he think he was putting it into a retirement account?  

[rscpa]

Took it all out, they withheld taxes at 20%.  Put in non-retirement account.  Past the 60 days...  I don't know whom to blame more, the client or the bozos at the bank getting the financial account.

[Margaret CPA in OH]

I would vote for the client.  The bank bozos are in business to make money and, perhaps, the client didn't even ask for advice.  Could be client just got a check and deposited it, no questions.

And, try as we might, too many of our clients forget again and again our advice that if money is involved, please ask US FIRST!  We can't fix stupid or wilful disregard. We are advisors not parents (well, most of us aren't parents of our clients.)

[Evan S. Golar]

How  would you like to have an 85-year old client withdraw $ 130,000 from an IRA, keep $ 25,000, and roll over the balance to another institution within 60 days, and not consider having Federal income tax taken out of the amount taken as a distribution?