Friend's dad can claim his daughter?

2010-03-16T05:33:31Z

Hello, I have a friend whose father is claiming her for this year's tax return, however, she is taking on-line classes (10 units) which should not constitute her as a "full-time student" as well as being over the age of nineteen (19). In addition, she made over $9,000. Does her father have any eligibility to claim his daughter on this year's tax return? If not, is there any way she can over-ride the verdict so that she can receive the personal exemption as well as being eligible for the Working Pay Tax Credit? Any advice is much needed and appreciated.

Residential Energy Credit - Mixed Use Property

2010-03-15T14:57:26Z

A client owns a 3 family home. He occupies 1/3 and rents 2/3.

He bought a boiler that qualifies for the home energy credit. The boiler serves the whole house.

Can he take the energy credit on 1/3 of the boiler and depreciate the remaining 2/3?

Tom

Tax Home not residence and per-diem

2010-03-15T19:22:30Z

I would appreciate any cites anyone may have on this. I have a client who is an employee of a large discount chain. He is a truck driver. The company provides the truck. Compensation is by the mile. He lives in one city. His official terminal (whick he almost hever goes to) is in another, over 100 miles from his residence and chooses to work in an area (very large city and some town near-by) also more than 100 miles from residence and terminal. He is required to sleep in the truck & works 4 days a week. My position is that his tax home is where the terminal is making allowing him per diem those 4 days. Someone else thinks the city where he works most is the tax home making him entitled to per-diem for very few days (when he goes to other towns). Again, please provide cites, if possible.

Partnership with Negative Capital Accounts

2010-02-05T23:31:01Z

I have four person partnership. The capital accounts are as follows:

 A.      (112,000)
B.       (49,000)
C.        92,000
D.       250,000
Total    181,000

The Partners A and B with negative capital accounts have walked away from the partnerhip. Partners C and D will remain. The operating agreement does have a negative capital make up provision. However, partners A and B will not pay back the money. I presume that A and B will pay tax on the negative accounts. What happens to C and D and the partnership going forward?

Cost to prepare final partnership return

2010-03-14T16:30:39Z

The cost to prepare the final tax return for a parternship was paid personally by the only "active" partner. The expense was not paid by funds from the partnership and was not deducted on the final partnership return.

Where can I deduct the cost? Schedule A unreimbursed employee expenses (line 21) or tax prep fees (line 22)?

Thank you.

Marie

How to handle C-Corp investment on individual return?

2010-03-10T00:43:28Z

We started a C-Corp business in 2009 and each (two people) invested $3,000. We purchased some stock with this investment. In 2010, we have already purchased more stock with $6,000 each. This is a new startup business that has no revenue yet, so we have received no profits from the corporation.

How do we handle this on our 2009 personal tax returns? Will that be the same for 2010?

Edit: it's a Delaware C-Corp operating in Florida, but without a brick-and-mortar office or retail location. We all work from home.

2009 or 2010 College Expense?

2010-03-15T14:59:06Z

Student transferred to a new school starting January 2010 and is attending full-time.

Tuition was billed and paid in December 2009.

Student received a 2009 1098-T showing the tuition billed in box 2. Box 7 is checked. Box 8 (full time student) is NOT checked - presumably because he was not attending this school in 2009 - but he is full-time now, during the semester that was paid in 2009.

Is he eligible for any 2009 education credit?

Tom

Schedule M-1 & M-3

2010-03-15T00:36:22Z

Hello,

When does a corporation need to file schedule M-1 or M-2?

Thanks,

Saf

Can I take a loss on my 401k?

2010-03-14T22:30:18Z

I had a 401k and converted to a regular IRA.

I had it for 9 years and finally cashed it out 2009. It started with $5,000 and ended up with $2,400. I cashed it out at age of 64 so I believe no penalty.

Can I claim a loss of $2,600 on my income tax for 2009?

Form 1041 for Estate of Deceased Relative -- No Income, Sold House

2010-02-28T15:36:39Z

Hello!

We are in a bit of a bind and are hoping someone can give us a quick bit of advice and point us in the right direction.

My fiance's mother passed away in May of 2009. She lived off of the interest of several CD's that she had for several years. The CD's were all Payable on Death to my fiance, so they were not included as part of the estate. There was also a will, fiance was the sole heir. However, we hired an estate attorney (not knowing anything about the process), who established an estate with a Federal EIN.

The assets that went through the probate process were a house and a car.

Sold the car in July of 2009 for $1,000 to a 3rd party. Sold the house in October of 2009 for a fair market value to a 3rd party.

So! Our understanding at this point is that:

1) The estate had no "income", since the sale of a car and a house are not income.

2) However, at least with the house, there are tax forms that need to be filed to determine if there was any capital gain, etc. (there won't be).

At this point, our understanding is that the sale of the house and the car are a part of the estate. On the other hand, our understanding is that the estate also had no income after it was formed, which means we would not normally be required to file a Form 1041.

There was never a separate estate checking account or anything, the proceeds from the sale of both the house and the car just went straight to my fiance. She also paid out of pocket for the estate attorney (which cost about $3,000), money to clean and fix up the house which was sorely need of repair before being sold, etc.

Aside from my fiance's normal tax return, and the final 1040 tax return for the deceased, what other tax forms are we going to need to file, and where? Can we just file the forms for the house on my fiance's tax return, or the deceased's 1040, or must we file a 1041 for the estate, reporting no income, and then include the proper forms for the sale of the house?

Thanks so much for any help anyone out there can offer. We don't mind paying a tax professional to handle this if it's out of our league, but we're feeling a bit burned by the estate attorney who we feel charged us an arm and a leg and still left us with no real direction or guidance regarding what to do to get this whole process finalized.

American Opportunity Credit (First Four Years ?)

2010-03-14T13:11:05Z

American Opportunity credit can only be used???

Choose one:

during the first four years of college
as a credit when occuring expenses during the first four years of school

My reason for asking:

I was a fifth year senior in 2009 when I incurred school expenses. Of course I am filing with the American Opportunity Credit for the first time availability for 2009 tax purposes. I am not sure if I lose the ability to claim this credit because I was technically not in my first four years of college or if I am good because I was technically finishing up the typical fourth year of college credits.

Missing NYS S-Corp tax bill

2010-03-11T16:48:08Z

What do I do if I can't find our S-Corp tax bill? How can I find out how much is due and where to send it?

Can a business charge another business a tax on SERVICE?

2010-03-10T00:10:33Z

Can a business charge another business a tax on a SERVICE?

For example, when purchasing technology e.g. hardware and software, is a vendor required to list and itemize separately for the equipment - which may include a tax (sales) - and for the professional SERVICE, or maintenance SERVICE - which is not subject to any tax?

What is the treatise for not taxing SERVICE? and,

Is there any U.S. jurisdiction that may apply a tax to a SERVICE?

Neal Huffman Contract Manager, Strategic Procurement

How much do you charge for tax returns?

2010-02-19T22:29:34Z

I am a CPA. Most of my business is write-up and QB consulting. This is my first year offering tax return prep. Most of the work will be current clients but I am hoping to pick up new clients with recurring work as well. One of my prospects needs a S corp return along with the 1040, containing two Sched Cs and the related State return. Could some of you please share your fee structure? I know some charge by the schedule, some a flat rate, etc. I want to charge low enough to encourage them to give me more non-tax work but not so low that if nothing else pans out, I lose money. I am located in the Northeast. In advance, thanks for the help.

taxation of VAT repayments

2009-11-19T22:06:21Z

Are VAT repayments made following European Court of Justice rulings subject to UK corporation tax

Revoke 1120S election for 2009 ...is it too late ?

2010-03-12T14:51:31Z

Filed 2553 with 2008 return (Co started 10/1/2008) and reported small loss on 1040's. Now want to revoke Sub-S election for 2009 since paid large salaries plus K-1 income; tax is less for C-Corp. Regs say 2.5 months in tax year to revoke... anything I can do now ?

Recapture ramifications of electing181 film deduction (for partnership) vs straight line amortization?

2010-03-12T15:18:09Z

HAS anynone expereinced this already- recapture from 181 film election in prior years?

Section 181 (runaway tax provision up to $15M) for films/TV productions has been around since '04, and extended in '08 and '09. It allows for investors (active on production) to take ordinary loss of entire costs in year film began production, and passive losses for investors (such as limited partners) assuming they meet all qualifiers of $15m limits and flmed in US. Qualifiers are not the concern as this is an Indie Film, Micro budget and principal photography was completed fall '09 and & P&R- residuals will NEVER come close to exceeding $15m in costs.

181 does state recapture is triggered by sale of the film and must be claimed as income. My concern for my investors (both active and passive) is:

1- Must 181 be taken? or can we (a) just capitalize everything and send out k1's w/1065 showing zero loss/gain.. (b) amortize straight line (assuming 4 years) 25% all costs and reflect percentages in K1. 2- if 181 must be elected is recapture also triggered -- as result of film going bust, total loss (no one ever picks it up for distribution), and then what are consequences: Do we have to recapture income (once ordinary in election year) against capital loss (limited by 3k per year).

Is 181 more dangerous risk to INDIE films than it is worth? What must be filed w/1065 (which has general partners also key investors, and limited partners minor investors)?

Reporting Tax Fraud

2010-03-05T02:21:03Z

It has come to my attention that one of my competitors is asking tax payers to "find" more dependents to claim the child tax credit on their taxes - this way, the taxpayer gets a bigger refund. Additionally, this tax preparer is not even signing the tax returns. I educate my clients and tell them the rules for claiming dependents, but a lot of these tax payers are indigents and only see the amount of the refund.

How do I report this guy?

How Income Tax and personal tax is charged in US

2010-03-11T07:10:03Z

Can please someone let me know how the US Taxation laws & compliance are charged in USA.

Foreign Earned Income Exclusion for A Sales Rep Working Overseas

2010-03-11T02:05:38Z

I have a tax client who moved to China in Aug of 2009. He will continue living there until an undetermined period of time, but it will be at least a year from the time he moved. His employer is in Atlanta, GA and so is his payroll and tax withholding as if he is still working and living in GA. His position is a sales rep for computer parts and IT products. Almost all of the clients he brought in are from overseas, East Asia, more specifically. He could work from anywhere and not limited to any specific office. He mostly makes sales calls, sends catalog, and provides online product demos. He moved to China, so he can be closer to his family in his home country. He just got his green card (Permanent Residency) about two years ago. The company whom he works for has a plan to open a satellite office there but nothing is definite and mostly talk. His employer did not provide nor reimbursed any of his living, moving, and meals expenses the entire time he is living there. His income is around $300K as shown on his W2.

My questions:

1) Can he claim Foreign Earned Income (FEI) and Housing exclusions? My research so far has been leaning toward "Yes" due to the fact that he gets client from China and it is for the benefit of his employer.

2) Since he will not be living overseas for a year comes April 15, we will need to file an extension. My understanding is he cannot file with the exclusion until after he has actually stayed there for a year (based on bona fide resident and physical presence tests). Is this correct?

I appreciate any response out there.

Filips

Merchant cash advances

2010-03-12T01:28:50Z

How are you treating merchant cash advances (i.e. cash advance coupled with a fee which is subsequently repaid by the provider taking a percentage of credit card receipts) for tax reporting purposes. Are you treating these as loans with an imputed interest rate? If so, what repayment assumptions are you using? Anyone seen any official guidance specific to this product?

What do you charge for additional copies of a tax return?

2010-02-05T22:47:46Z

By law we provide a copy of the filed return to the client. Do they feed it to their dog?

What happens is everytime they need a copy for a refi or home purchase, etc they call and ask me to send one to their "whomever". I never used to charge for this service but I am now.

I figure if the IRS can ask 58 for a copy I can ask 50. and include the state. With the new 7216 requirements it slows down the process.

I had a broker try to give me the IRS form to request a transcript and told him that was not acceptable. I emailed him a pdf copy of my 7216 form and a bill for two years.

He didn't want to pay the bill for something he had not seen yet! The client thinks we are being the bad guy and not being cooperative. requests.

So how have you been handling this?

Maryland state refund on form 1041 estate tax

2010-03-06T17:21:18Z

Is a state tax refund considered other income on Form 1041 (line 8) for an estate?

Foreign employees in India

2009-10-09T05:26:08Z

I have a client who is a web developer in the USA. This client outsources some of his work to India and over the past year he has started to develop a business in India. He has transferred money from his USA bank accounts to accounts in India for purposes of starting up an overseas business there. He is currently a USA corporation and files form 1120.

He has not (yet) earned any income over on the India side... only expenses. He has paid for normal business expenses/overhead and for employees or labor.

Are the transfers from the U.S. bank account deductible?

What are his filing requirements?

PA Income Tax on Employee Contribution to Retirement Plan

2010-02-24T16:50:19Z

Some of you know far more about PA Income Tax than I--here is the real world hypothetical As a condition of employment a $50,000 a year employee is required as a condition of employment to contribute say 4% of salary to a qualified retirement plan and the deduction is made directly by employer ..of course the correct taxable salary for Federal purposes is $48,000. The employer also contributes to said plan, no tax questions as to that.

Yes I know 61 PaCode 101.6(c)8 says such contributions are included in pay in PA but that is inconsistent with PA's own revenue rulings! BOTH WAYS

Rulings as to voluntary contributions 401k or 403b employee plans clearly focus on contributions being included IN income because employee had "constructive receipt of the funds" under federal concepts and state was obligated to follow the feds, therefore state must divert from Federal exclusion federal and include the payment as income .
Ruling as to paying unused sick /vacation leave directly into a qualified plan (403b plan ), per a collective bargaining clause, in contradiction to literal read of 61 PaCode 101.6(c)8 says exactly the same thing that since the employee lacked constructive receipt of the funds the state was clearly required to follow the federal rule and exclude the payment as income. (Pit 05-020) Actually this PIT is very well laid out!

Clearly both rules are consistent as to constructive receipt! !

So both ways to issue the determining factor was "constructive receipt or lack of same" And in my hypothetical it is clear that employee lacks any element of constructive receipt and the plan is clearly a qualified plan and nothing is voluntary about the contribution ---

OK so why is the employee contribution added back to income in PA?

And the rather shallow response I got from PaDept Of Rev is it must be taxed on one side or other--which is not the question at all--and besides--the #2 example clearly and openly results in NO tax at either end!

So if PA is bound by own rules to follow constructive receipt doctrine--why is it taxable?

Is additional stock received as consideration to convert a loan to stock reportable on Form 1099-MISC, box 3?

2010-02-03T23:31:20Z

I've got a new non-public client that issues common stock (restricted as to transferability) as a "bonus" for an unrelated non-corporate lender to convert the loan to common stock, either under the terms of the loan, or as an amendment to the loan. Sometimes the "bonus" stock is issued to induce a potential lender to make the initial loan. The value of this "bonus" is usually stated in the Note Payable document. Is that reportable on Form 1099-MISC, Box 3 (Other income) if the amount is over $600? I'm guessing that it is, and Section 83(b) is not applicable, because this is not for services as a contractor or employee.

Schedule C - Huge Loss

2010-03-07T22:12:03Z

Is there a limit as to the amount of loss I can report on schedule-C?

Opened a business in 2009 - Revenues = $50,000, Expenses = $125,000.

Included in expenses is about $12,000 start up costs.

I also, have W-2 income of about $60,000.

Can I report the full $75,000 loss on my schedule-c?

Thanks.

Should independent contractor say business uses cash or accrual method, if he does not remember and last return was so long ago that it cannot easily be checked?

2010-03-07T01:01:59Z

Person worked as a self-employed independent contractor (receiving Form 1099-MISC non-employee compensation) in 2001, 2003, 2004, and 2009, but not in 2005-2008. Person no longer remembers whether 2001, 2003, and 2004 returns used cash or accrual method on Schedule C. I considered using Form 4506-T to get a transcript or record of account, but Form 4506-T says to that it is too late now to request a 2001, 2003, or 2004 transcript or record. I also considered just saying that the original business ended in 2004 and this is a new business that started in 2009, but that does not work because of issues with the retirement plan. Taxes will be the same regardless of which box is checked, but the same box needs to be checked as previously, because IRS approval to change methods has not been requested. How do I determine which box was checked on the 2001, 2003, and 2004 returns?

smllc now as s corp

2010-03-10T21:09:44Z

I received acceptance from IRS for 2010 sub s status

but now considering pass through as smllc due to current fees/expense arrangement

can i use a w-9 with disregarded entity and continue as smllc / pass through even though sub s status is in place?

I may want to sub s status in future years - not this year though.... do i have to cancel with IRS - if so how? I didn't see a particular form like a 2553 revocation....

or can i continue proceeding as pass through disregarded entity without completing revocation process?

Thank you!

S corp wages health insurance premiums attribution rules

2010-03-10T19:12:24Z

Am I correct to add the health insurance premiums to wages for the son of an "S" corp owner due to rules of attribution for the stock ownership? The son owns no shares of his own, however, my understanding is that he is considered owning his father's shares for this purpose. Any comments or directions?

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