US Income Tax Thread: Bank error in your favor! GO DIRECTLY TO JAIL.

The Something Awful Forums > Discussion > Ask/Tell > Business, Finance, and Careers > US Income Tax Thread: Bank error in your favor! GO DIRECTLY TO JAIL.

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AbbiTheDog: May 21, 2007

Jethro Tull posted:

When do trusts have to legally send K-1 forms out by? I still haven't gotten mine and it's peeving me off.

Depends on what month the trust ends on (maybe December, maybe not). If it's a December year-end, you might not get your K-1 until september, and they've got the legal right to do so.

Ask the trustee to check with their CPA and get an estimate.

# ¿ Mar 7, 2011 01:19

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# ¿ Apr 29, 2024 02:44

AbbiTheDog: May 21, 2007

Jethro Tull posted:

I know at this point that without the K-1, I won't have to file. I'm pretty close to the limit, though (I've made about 8.5k in scholarships and stuff, not W-2 income per se but still taxable). So if the K-1 on a 50k irrevocable trust puts me above 9.5k (or whatever it is this year), then I will have to file. So it's sort of a sticky situation.

Depends on whether the trust is "simple" or "complex" (this can change from year to year). Also depends on how much in withdrawals were taken during the year that would "push out" the trust income to your personal return.

# ¿ Mar 8, 2011 02:34

AbbiTheDog: May 21, 2007

Admiral101 posted:

Client received a tax notice over a 1099-Q for a state QTP distribution. The recipient of the 1099Q is not the beneficiary, and I'm not sure why she's receiving a notice claiming that she owes tax. Even if the distribution wasn't used for educational purposes (which it was), the tax/penalty is the burden of the beneficiary - not the benefactor.

Any of you have a clue on what the deal is? Now that I think about it, how does the IRS even know who the beneficiaries are? The social security numbers aren't listed on the 1099's.

Probably because when it was setup she listed herself as the beneficiary. Probably need to copy the tuition paid, statements, etc. and respond to the CP-2000.

# ¿ Mar 9, 2011 02:36

AbbiTheDog: May 21, 2007

Zeta Taskforce posted:

Since I wrote most of the OP, I'm going to ask of all things a Turbo Tax question!

I zipped through virtually my entire return last night without incident. Everything ground to a halt the moment I had to enter prior year depreciation on my rental. Turbo tax is trying to walk me through calculating my basis. If I know that it is for example $229,947, and I know I am entitled to take lets just say $8362, and I know my prior is $12,195 is there any difference between just saying the original basis is $229,947 and it is used 100% for business? Or do I need to fight with their little wizard thing and put in the original purchase price, additions to basis, the land, the 71.23% that I am renting out, and fight with it until I get $229,947?

OR AM I RAVING MAD RIGHT NOW AND NEED TO TAKE A loving HAPPY PILL?!!!!!

Holy crap, what a pain in the butt. I'd do it right, since you don't want have to argue why the basis is changing from year-to-year if audited. Or you might change the percentage down the road and need the official amounts.

# ¿ Mar 9, 2011 02:38

AbbiTheDog: May 21, 2007

Zeta Taskforce posted:

Unfortunately that�s probably true in a lot of cases. My primary job is managing the day to day operations of my credit union�s credit card program. We charge 10.25% and no fees for cash advances on platinum. Even our classic isn�t that bad at 14.99%, still no fees. To me that seems high, but I often forget how truly awful a lot of the big banks are.

Considering he can't scrape up the $2k he owes, I'm going to venture he might not have a platinum card.

# ¿ Mar 10, 2011 17:01

AbbiTheDog: May 21, 2007

Pope Mobile posted:

Hmm, thanks for the info. The smart thing to do would be tightening my belt and paying it all off.

Shocking concept!

# ¿ Mar 10, 2011 22:59

AbbiTheDog: May 21, 2007

WrongWay Feldman posted:

I guess this is the place to ask.

I did some contract work for a guy last summer, generally getting about $300 a week. He has not sent me my 1099-MISC form yet. I have my doubts that he is going to. What are my options?

A) Be honest and report the income anyway, since that is what you're legally required to do.
B) Don't be honest and cheat on your taxes.

There you go.

# ¿ Mar 11, 2011 02:21

AbbiTheDog: May 21, 2007

Zantie posted:

I have a question about if my husband and I need to amend our 2010 return due to a late 1099-MISC form he just got.

My husband works freelance and keeps a good record on income so this amount was already included under Gross receipts with all the other checks he got. So to include the late 1099-MISC he'd have to subtract that amount from the other non-1099'ed income he got, but ultimately that still results in the same amount of self-employment income.

In other words:

Filed with no 1099-MISC's and he had SE income total of $6596.

With the 1099-MISC the SE income total is still $6596 ($2414 on the 1099 + $4182 from everything else).

Because this doesn't change any of the tax due nor our refund amount do we even need to amend this? My worry is that the IRS would get the 1099 from the company and then assume my husband reported $6596 without the $2414, and then send us a bill assuming he made $9010. Would they do that, or would they figure we included it already because it was mailed to us 8 weeks late?

The IRS computers tie the gross receipts listed on sch. C to the total nonemployee compensation listed on Box 7, Form 1099-MISC. As long as the gross receipts listed on C are over the 1099 totals you're fine.

# ¿ Mar 16, 2011 19:58

AbbiTheDog: May 21, 2007

KennyG posted:

To answer your question more directly, you'd get audited. Likely a paper audit, but possibly a full one. Assuming everything else is above board too, you're ok. I believe the ultimate arbitor of penalties is the tax paid. http://books.google.com/books?id=YZ...mistake&f=false says there is no precedent in the US Tax Code for a penalty of a harmless error in a previous year which created an error in a subsequent year.

Also penalties that aren't due to fraud or frivilous positions are calculated based on the net tax difference. (what you owed vs. what you paid, obviously they don't assess a penalty if they audit you and find overpayment)

Wow, where did this come from? More realistic approach of under-reporting is a CP2000 matching notice and automatic calculation of tax owed. No need to frighten the poor person to death.

# ¿ Mar 18, 2011 01:19

AbbiTheDog: May 21, 2007

furushotakeru posted:

What CP2000 notice? The income on the 1099 in question was already included on the schedule C.

I know, but even if it didn't, haven't seen too many audits start from a matching notice.

In fact, I haven't seen many audits at all. I do around 1,000 returns a year (business, trust, personal) and we had four audits last year, of which two were from another CPA I bought out filing the wrong forms.

# ¿ Mar 18, 2011 20:34

AbbiTheDog: May 21, 2007

furushotakeru posted:

Audits are almost never random, they only audit your return if they think there is something to find.

We got stuck with a training audit this year.

"Why are you auditing our client?"

"To train our new agent."

Gotta learn somewhere, I guess.

# ¿ Mar 19, 2011 01:19

AbbiTheDog: May 21, 2007

KennyG posted:

This should actually make people feel pretty good. .4% is pretty drat good, especially for a public preparer (presumably bigger incomes, higher chances)

The national averages are about 1% for < $25k and 2% >$100K from http://www.fool.com/personal-finance/taxes/2006/03/17/top-5-audit-myths.aspx

It's not random though, I wonder what the 'random' rate is.

Hey, it's less than that, two weren't my fault! :colbert:

# ¿ Mar 19, 2011 01:20

AbbiTheDog: May 21, 2007

furushotakeru posted:

The local IRS office (San Jose) puts on "practitioner liaison meetings" three times a year, hosted by the Mission Society of Enrolled Agents. These meetings are usually attended by district and regional level management from the IRS.

I don't think one of these meetings has gone by that I can remember that at least one person hasn't cracked a joke about sending the IRS a bill for training their greenhorn agents. The IRS is having a lot of problems with high turnover for agents, who are going through the IRS training and then quitting to go make money in the private sector before a year has gone by, so there is a shortage of experienced auditors out there and they are constantly hiring new ones.

In talking to the ones up here in Portland, most of the "small business" agents they hired last year have all quit.

# ¿ Mar 19, 2011 16:46

AbbiTheDog: May 21, 2007

furushotakeru posted:

The enforcement budget of the IRS has grown significantly every year for some time now.

*cough* government unions *cough*

# ¿ Mar 19, 2011 22:27

AbbiTheDog: May 21, 2007

Zeta Taskforce posted:

On it's face, it seems illogical that you could take the full $8000 product cost to qualify for the credit when you paid $3500, but it seems you can. Insurance settlements on your personal property are not taxable except to the extent you realize a gain. (ie, you bought the house for $30,000 and they paid you $40,000, 10K is gain). Barring that, it's money and money is fungible. I'm curious if anyone has a different interpretation, but I would take all of it.

I'm going to disagree on this one, since your out-of-pocket costs are only $3,500. But it's not my return.

# ¿ Mar 20, 2011 21:12

AbbiTheDog: May 21, 2007

Gimbal_Machine posted:

Just wondering why you'd go with this? Is it just the 'safe play'? If I had kept the money and done the work myself and bought a new car then installed new windows at a later time using 8k of my own money, I would be able to make the deduction, right? Seems logical to me that the decision to spend the insurance proceeds on energy upgrades was my decision to make, no?

If you'd kept the money and bought a new car the amount spend on the new car would be taxable income to you through the involuntary conversion rules.

# ¿ Mar 21, 2011 19:41

AbbiTheDog: May 21, 2007

furushotakeru posted:

Just since Abbi didn't really explain what he meant by involuntary conversion rules: the money paid by the insurance company is only non taxable if you use it to replace or repair the property that they were paying the claim for. However, you do have I think 18 months from the loss to spend it before it becomes income.

Ninja edit - some is three years, some is two years after the close of the first tax year.

AbbiTheDog fucked around with this message at 21:37 on Mar 21, 2011

# ¿ Mar 21, 2011 21:35

AbbiTheDog: May 21, 2007

Gimbal_Machine posted:

Right, I understand. Thanks to you both for your opinions. Helpful to see what pros think

If my firm was doing your taxes, I'd tell you to use the smaller amount. If it was my own return, I'd still use the smaller amount. If I was preparing Furu's return, I'd ignore it, because big pink talking things don't deserve tax credits.

Your milage may vary.

# ¿ Mar 21, 2011 23:55

AbbiTheDog: May 21, 2007

Zeta Taskforce posted:

Your losses offset your gains.

Watch out for wash-loss sales.

# ¿ Mar 29, 2011 03:04

AbbiTheDog: May 21, 2007

No longer stickied? For shame, mods. For shame.

# ¿ Apr 10, 2011 23:22

AbbiTheDog: May 21, 2007

Zeta Taskforce posted:

Fixed. How did that happen? Do we want to have poo poo post icon?

The dancing pig seems more appropriate. Like a little piggy bank.

# ¿ Apr 11, 2011 19:46

AbbiTheDog: May 21, 2007

furushotakeru posted:

I believe with HRB pricing also varies by region and by date. This close to the deadline I imagine that the rates are jacked up a bunch. I could be wrong about this though.

Also, most HRB offices are franchises so I don't know if perhaps this varies from office to office as well, or if it is standard policy from the head office.

It's called "value billing," bitches. :smug:

# ¿ Apr 11, 2011 22:45

AbbiTheDog: May 21, 2007

Pinkied_Brain posted:

Can someone explain this AMT business for me?

I left a startup and exercised all my Stock Options (the company is still private).

The stock options were worth 10c when I joined, and when I left they were valued at 23c. I bought all the vested ones I had (65,000) for the original 10c, so I paid $6500. Now there is some sort of AMT thing people talk about, based on the difference (23c - 10c = 13c * 65,000 = $8,450) on my stocks which are of course worthless right now. Do I have to pay tax on that 8 grand I "made" by paying 6500?

Assuming incentive stock option (ISO)?

If ISO, you have AMT income for the difference on the amount you paid versus the value of the stock. Report on Form 6251.

You then have a higher AMT basis on your stock vs. regular tax for when you eventually sell the stock. You need to hold the ISO stock for two years to get the best tax treatment, otherwise you have a disqualifying disposition (may be ordinary income).

Translation - might want to pay someone to do your taxes this year. Git 'r' dun.

Ninja edit - if you do trigger AMT due to this, I believe they've changed the code so you can get an AMT credit carryforward for use in later years (timing difference, not permanent difference). Form 8801.

# ¿ Apr 12, 2011 01:16

AbbiTheDog: May 21, 2007

Surreal Windmill posted:

It's all very frustrating I really don't understand why my bank couldnt allow it to just go into savings or checkings or whatever I don't care it's the same person.

It's because banks and tax preparers get sued for silly little poo poo like this, especially if the money goes into the wrong account and the owner won't give it back.

# ¿ Apr 14, 2011 03:26

AbbiTheDog: May 21, 2007

Zeta Taskforce posted:

Maybe there is a phone app that does it?

There are apps that do this, haven't tried any of them though. Trying to convince my clients to give it a shot.

# ¿ Apr 14, 2011 18:37

AbbiTheDog: May 21, 2007

taqueso posted:

I am a newbie small business owner. 2009 was a loss, 2010 we had a profit and I had not been filing any estimated tax because everything looked like it was going to be near break-even. I am going to be paying estimated tax for 2011.

Is there a disadvantage to increasing the withholding on my W-4 instead of filing estimated tax (1040-ES) quarterly? The withholding method seems like it would remove a quarterly headache from my life, but there must be some kind of downside, right?

No. In fact, it's better, because no matter when you make the withholding it's treated as being paid in all year, as opposed to the estimates, which are date-dependant.

Example: Come December, you find out you forgot your estimates (oh crap!). If you pay the 4th quarter estimate for the $10,000, you get nailed with underpayment interest for being underpaid all year.

You do the same $10,000 through your w-2, bingo! No interest charge. Same payment. IT'S TAX MAGIC

# ¿ Apr 15, 2011 16:30

AbbiTheDog: May 21, 2007

entris posted:

Do owners of LLCs, or partners in a partnership, have the option of withholding? Something in my brain is tingling about owners of small businesses who try to treat themselves as employees, and give themselves a W-2 instead of a K-1, and who try to do withholding rather than making estimated payments.

Abbi/furu/zeta can you clear that up for me?

S Corp owners are probably taking a W-2 already and can adjust their withholdings.

LLC/LLP/partnership owners are BANNED from taking payroll and need to do estimated coupons.

# ¿ Apr 15, 2011 23:36

AbbiTheDog: May 21, 2007

furushotakeru posted:

I have no idea. Unlike with an S Corp you still pay self employment tax on any profit in the company so there isn't really any benefit to doing this other than having withholding.

Unemployment.

# ¿ Apr 16, 2011 16:22

AbbiTheDog: May 21, 2007

poppingseagull posted:

I had a stint for a few months as 1099-MISC. I'm an idiot and just checked the form they sent. Non-employee comp shows $2000. According to my records I was paid $14,800.

Should I just attach a letter saying there was a mistake? Should I call the employer first?

You should go off what you actually collected, not what the form said. The IRS uses the 1099s to tie out to your tax return (eg, if the 1099 says $2,000 and you report $1,000 gross, you'll get a matching notice). If you report more than what the IRS receives in 1099s you will not get a matching notice.

# ¿ Apr 16, 2011 18:12

AbbiTheDog: May 21, 2007

2 1/2 hours before I shut my door, go home, and get drunk. ARRRGHH what a year.

# ¿ Apr 18, 2011 22:26

AbbiTheDog: May 21, 2007

Alfalfa posted:

I run a small LLC/S-Corp business in which my wife and I are equal "partners" in it.

I have been paying myself through payroll so I get the correct taxes taken out etc. but I am not sure if I am doing anything with the business optimally.

I have been "operating" since November 2009, and have not filed any type of taxes this year other than my 940/941 forms.

I have no clue what type of federal tax to file or how to set it up. I'm fine with having a CPA do it, but the two that I've spoken with really don't care to give me the time of day or offer any actual business advice since I'm small and didn't actually start making any decent money until late this year.

What are my options to pay myself? I've seen things like basic salaried payroll (which I do now), owners draw, and other options and have no clue what would be best for my position and business.

Any advice or any more information you guys need just let me know.

You need to be filing Form 1120s (due March 15th every year) for the business.

This will "spit out" a form K-1 which will list you and your wife's share of the profit/loss.

You're two years late (2009 and 2010), and the IRS levies a per-shareholder, per-month penalty. You can get one year waived if you ask nicely (I'd recommend 2009, as it will be highest) but you're stuck with the 2010 penalty.

You pay yourself "market wages" (up for interpretation) on a paystub, and any extra money you take out as a distribution (NOT a dividend). Difference is distributions are not subject to payroll/self-employment taxes (saves around 15%).

Edit - Keep trying to find a professional - you need professional help, but try a smaller firm/sole practitioner (or LTC, they do a fine job as well). Or start looking in May/June, as we all could use some summer work.

# ¿ Apr 21, 2011 16:22

AbbiTheDog: May 21, 2007

furushotakeru posted:

Hey look Abbi, Intuit's VP of professional products recorded a nice video to tell us how much they "appreciate" our business. Then they released next year's pricing and are waiting for us to bend over and take it up the shorts like they do every year.

REP charges unlicensed individual states are increasing from $18 to $25. I guess they are providing 39% more value somehow? Oh look, it now "includes state efiling". Problem is, I already pay $1K a year for unlimited federal and state efiling so they are just finding creative ways to gently caress me out of more money. I guess now I only pay $1K for unlimited federal efiling now?

REP for business entities is increasing from $54 to $60.

Oh an apparently we now get to pay $500 for DMS, analyzer and tax planner. Yeah I used to just pay $150 each for DMS and tax planner and have absolutely no use for their worthless analyzer, but that's cool I guess. Just loving rape me for another $200 with no justification.

I loving hate Lacerte so drat much every time I have to pay them. I mostly love the program when I am using it, so I wish there was a good alternative.

I paid a grand total of $20k last year for it....grrrr......

# ¿ Apr 21, 2011 22:31

AbbiTheDog: May 21, 2007

Missing Donut posted:

Are you actually paying more than you would for CCH Prosystems? I sure hope it's worth it.

I'm not surprised, really. Intuit has been raising prices substantially in the past few years. The only price program they haven't restructured lately is that on the QuickBooks program proper (they hosed with payroll subscription a year or two back).

The only consolation is knowing that Intuit will decide to shoot themselves in the head again and that maybe, just maybe, good alternatives will become popular.

Learning curve is my issue. I have 4-5 staff who have been using it for years, we're paperless with the DMS program, yadda yadda yadda.

And they know it. Ever since they were bought by intuit the drat program suffers from feature creep and bloat. I DON'T WANT TO INSTALL THE TEN OTHER THINGS YOU'RE TRYING TO SELL ME.

# ¿ Apr 22, 2011 16:54

AbbiTheDog: May 21, 2007

entris posted:

So, my study buddy and I were reviewing "advanced" partnership tax topics for our exam in two weeks. We both noted that all of our instructional materials use examples that are basically pulled from the regs, and we both thought it would be cool if there were other problems, with answers, that we could study from.

As tax CPA people, what do your instructional materials look like? Do you get lots of practice problems illustrating various tax principles, or what?

OTJ

# ¿ Apr 22, 2011 21:25

AbbiTheDog: May 21, 2007

powermac posted:

I got a certified letter, never picked it up. In between moving, and working at a startup. Ugh, I bet it was from the IRS. I wonder if it was just that they were going to intercept my tax refund.

Guess I'll call them tomorrow. Can't do it today.

Well, there's your levy notice. And they would have sent you a ton of notices prior to the certified one notifying you of their intent to levy.

# ¿ Apr 28, 2011 18:04

AbbiTheDog: May 21, 2007

scribe jones posted:

Friend of mine filled out her check to the Oregon DOR wrong, and ended up shorting them by eleven bucks. Should she go ahead and send a new check, or wait for them to bill her?

The bill will come pretty quick (within a week or so). Might as well wait, so she can pay all the penalties/interest the first time.

# ¿ May 4, 2011 22:05

AbbiTheDog: May 21, 2007

kaishek posted:

Correct, Turbo Tax will use any information you provide from 1098-Ts to calculate any student credits, etc, you may get. In fact, if you tell it you're a student at any point it will specifically prompt you to enter your 1098T.

These numbers might not be wholly accurate, since the timing of when you made the payments might not tie out to when the college invoiced you for classes.

Plus, some of your other out-of-pocket expenses and fees might not be included on here.

# ¿ May 9, 2011 16:32

AbbiTheDog: May 21, 2007

Hillridge posted:

Are there restrictions on how much/what I can donate to a 501c3 if I'm a board member of that 501c3?

I'm thinking about donating my old truck to the non-profit I help run, but a friend thought there may be a law forbidding me to claim it as a deduction. If it matters, the non-profit would be keeping the truck to use, not selling it.

To further complicate things, we're not a 501c3 ourselves, but operate under a parent 501c3 as a group exemption.

If the value of the truck is over $500 the non-profit needs to issue you a 1098-C for the value of the donated auto.

http://www.irs.gov/pub/irs-pdf/f1098c.pdf

I'd see no problem with you doing this. The "Self-dealing" rules tend to be more payroll/rent/interest related that accepting donations from an officer.

# ¿ May 9, 2011 16:34

AbbiTheDog: May 21, 2007

TraderStav posted:

I just purchased a new home and am renting out my existing. I have a question on how the rental income is treated. Do I add the gross amount to my taxes, or would I only be adding the difference between what I receive, and what I pay to the mortgage company?

I also have set up an LLC (State of Michigan) for the property management to take advantage of deductions and such. Does this change the answer to the question asked above?

Be careful, if your old home (new rental) is worth more than you paid for it, and you rent it for too long, you might lose the home gain exclusion when you sell it.

# ¿ Jun 8, 2011 19:58

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# ¿ Apr 29, 2024 02:44

AbbiTheDog: May 21, 2007

TraderStav posted:

Excellent, thank you for the very detailed response. This has given my a lot to think about and I am glad that I am armed with the accurate situation...

On a separate note, following some great reads (Millionaire next door, etc.) and motivation to get my financial house completely in order, I have decided I need to retain the services of a CPA for advice as well as just completing my taxes. My finances are starting to get more complex and the strategies I want to undertake (massive debt elimination, lifestyle changes, etc.) require experts in areas to best enable that.

What should I look for in a CPA? As I said, I am not merely looking for a knowledgeable tax-guy to complete forms, but someone who 'gets' what I'm trying to do and acts on my personal board of directors so-to-speak. How are they compensated for non-returns oriented work? What should I know about the profession that outsiders would otherwise not know so I don't fall for tricksy marketing? I don't have substantial assets yet, but significant income draining away at a good amount of low/no interest debt. (zero credit-card debt though)

I plan to contact the CEO of my former firm (Investment Management company managing about a billion) for a few referrals, but want to be equipped to sift through those as well.

Not sure if "tricksy marketing" goes along with CPA, but oh well. We're not that clever.

I'd ask someone besides your boss in this case for a referral, he probably uses someone that costs a heck of a lot more than what you can/will pay. If you have an investment advisor, ask them first, and then check with your friends/family.

For non-return items, an hourly charge is typical. It's not as bad as with lawyers, but if you've never retained the services of a professional before be aware there will be some sticker shock.

What you're looking for is more of a "certified financial planner" (CFP) type person - some CPAs have both and charge accordingly. You might get the same kind of advice in this matter from a non-CPA, and the CFPs that do this tend to be financial advisors (stock brokers). It's monday morning and I'm rambling, so let me know if you need some more clarification.

# ¿ Jun 13, 2011 16:49

The Something Awful Forums > Discussion > Ask/Tell > Business, Finance, and Careers > US Income Tax Thread: Bank error in your favor! GO DIRECTLY TO JAIL.

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