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Contents

Welcome!

Hello, and welcome to TaxAlmanac! My name is Tim Doyle and I serve here in the role of TaxAlmanac Moderator. If you haven't done so already, you might want to review our Quick Start Guide to help you get oriented.

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- Tim Doyle, TaxAlmanac Moderator - Talk to me 15:45, 24 February 2007 (CST)

 !!

Wow, I'm 53! 1976, Holy Cross Hog until they tore it down and stuck a flag pole there! And just got back from Annapolis, went across to St. Michael's, fell totally in love with the Chesapeake and crabcakes. I could actually live there, tho' I know it's freakin' hot in the summer. What a gorgeous area...office on the sailboat for sure.JR1 Jeff

Anchor

What part of Virginia to do you in? I live in Arlington and have my practice there too. YOU???

LLC

Hey Jim. *sigh* thinking about the Chesapeake....Maria's in Annapolis...St. Michael's...

Oh, yes, taxes. All I meant was that an LLC isn't the wrong entity for RE, like a corp is. So it's ok to have both the biz and the RE in the same LLC from that angle. I'd just split 'em at some point because often, a business is sold apart from the RE. And if they can make it happen, they sell the biz in whole rather than the assets, preserving cap gain treatment on it. Busting it up in order to keep the RE kicks up more tax usually. So no big hurry, but that would be my tack! Yes, intentional sailing term thanks to your location. Unless you're in the mountains or around Washington... Jeff JR1

Penalty abatement

Hey!!

When I request a penalty abatement I do so in a letter referencing the items that are subject to the abatement.

9 times out of 10 if you have a valid reason (and these are loosely determined...the LLC handled things in house and now they hired an accountant that can advise them or a change in accountants, etc. etc.) they will abate small penalties like that. "abatement" is the key word....use that term and most often it is allowed :)

Pics are from Maine. I traveled there in 2006 in the summer and then again in the fall. Was there for 6 weeks working and enjoyed my Sunday's as this was a day off!!

Welcome here...your name reminds me of Matt Lauer or Brian Williams...some anchor man on news :)

SandySea

You said that you can find phone numbers of new businesses online for free.

Can you send me an email and tell me how to do that?

Mike@SBSCPAGROUP.com

Fort Wayne CPA

Frank Salman

I'd be happy to answer questions about Franks program. My email is barry@greatbendcpa.com.

Barry

Hi Anchorman

I'm new to this site & didn't realize I had a message. Still figuring this board out! I'm in the Wilmington area, not sure how far that is from you. Your daughter will love it here, especially if she likes the beach. Let me know if you need any info about anything here. seaside cpaSeaside CPA 18:22, 6 August 2008 (CDT)

Hi Anchorman, I still don't know how to do messages very well, but I think I had one from you regarding insurance agents. I can give you a couple of names of agents I know personally that I would trust. Robert McIver with George Chadwick Insurance (located on Wrightsville Avenue) and David Ager with LagomarAger Corporation (Allstate Agency located on Carolina Beach Road.) Hope this helps!

Fee study

for you Kevinh5

Worthless debt

I doubt that there is a hard and fast way to prove such, especially if I read correctly that your client is an attorney, but normally I'd like to see an attorney's thoughts about why it is worthless, or perhaps the odds of success, and it be arms length in nature. "ABC Company has a long line of judgments against it and since your's is not secured you would simply be last in line. In my opinion, any suit to force judgment on the part of anyone will lead to bankruptcy.' Those type of words, not simply, 'in my opinion the debt is worthless.'

Death&Taxes 12:09, 25 February 2009 (CST)

1098-T

Yes, I'd use the amount in Box 2. I don't know why, but it's always listed in Box 2 on the 1098-T forms that I've seen. I've also seen proof in many cases that the same amount in Box 2 was actually paid during the year for tuition. Be sure you include all educational expenses, including tuition, fees, books, supplies, equipment, and room and board (less the amount of tuition used for the tuition credit or deduction) when filling out the Education Expenses Worksheet.

Deb 08:52, 25 March 2009 (CDT)

Good Luck to you too

Thanks for the personal response.

That's too bad about your client. I cringe now everytime I ask my clients how their year has been.

I had clicked on your profile after I answered the posts - you have a very lovely family.

Stephanie

Good....

I wasn't sure as I was responding to you if my message was making sense. Glad to help.

I was in the Army for a while and stationed in VA too. I actually changed my residency from TX to VA for a while, then was sent to another post outside of the state. I found out then that VA does not require state income tax from active duty members outside of the state.

Anyhow, I appreciate it and will chat again sometime. Oh yeah, auditing is not too fun. Pete

Geez...your 1065 K1's

I feel like I have to pass on reviewing all that...it's late in the game, probably around 3 dozen for me to go yet along with all the usual quarterly payroll crap on top of that...

I do use my software well. I wonder if Drake has a 1040 worksheet or K1 import? In ProSeries, after doing a 1065 or 1120S, I open the 1040 and import the K1's...easy as pie 99% of the time. Only issues are the stupid production deduction and if they're not at risk, so you have to check that box and open a 6198 sometimes.

So explore all that first before you willing pay someone real money to do it for you...! But you can always risk just sending me the pdf's of the 1065 and 1040 and I'm happy to take a free peek for the obvious.... Jeff JR1 Hit me at email and I'll come back and delete that whenever I can remember to!

My process

as of 4/14 I had completed 437 returns since Jan 1. Most were appointments of return clients. About 80 were new clients. About 80 were mail in's or drop offs. I do have a process.

1) We pre-schedule apointments same date/time as prior year appointment. Except no pre-scheduled appointments in April - we move them all up to 3/30 or 3/31 then work backwards. And people who traditionally owe or have late K-1s don't get another Feb appointment - those appointments are reserved for people expecting refunds who have everything by the end of Feb.

2) Half hour appointments. Very little chit chat, other than walking them from the reception room to my office. Once I sit down the interview begins. Well, that's the idea, but there are exceptions.

3) I work off an interview sheet. I only make a note of the things not on another document. Why write down their SSNs if you have last year's return?

4) I had an input /starter this year. A young lady who had done data entry/quickbooks/excel type stuff in the past. No accounting degree, but relevant work experience. I paid her $13 an hour for 4 hours/day from the last week of Jan until we were caught up the end of the first week of April. Honestly I didn't have 4 hours of work for her after April 9th, so that was her last day. In late January while she was learning how to input (Drake has some practice returns I had her do), I also had her pull everyone's How Much Stimulus page and print it out and put it in their file. This saved lots of time later, as I didn't need to ask people how much they got, and for new people, we just looked it up too.

If someone took a standard deduction, she also went online to look up their county property taxes.

5) I have a financial planning/investment assistant who works for me year round. She does the 'pick up's, and I only talk with people who have additional questions, or people who dropped off and I want to see them for financial planning reasons.

For year's I've had someone do the pick-ups, it saves SO MUCH TIME, all you have to do is teach someone how to read the tax return (This was your salary, this was your interest, this was your dividends, etc) line by line. It would help if that person has done some basic data input so they know what wages and interest earned are. My assistant took an Intro To Tax Prep class online through NATP this past Fall.

6) Clients pay at the pick up. We take credit cards for those who 'forgot' to bring their checkbook. We do mail out returns to people out of town prior to payment, but they've got to pay before we e-file their returns. Yes, I've been stiffed one one or two returns a year for the past 21 years, but that is a cost of trusting people too much. I don't get stiffed on the ones who pay up front, only the ones I trusted. Go figure.

Hope this helps. Kevinh5

pick up

By pick up, I mean the appointment for the client to go over/pick up their finished return and pay us before we e-file. This is a chance to ask additional questions.

I only print organizers for those who request them. I learned very long ago that some people are offended by them "If I could fill that out, I wouldn't need you, I could do my own return."

So we send out a letter in January telling the client when their pre-scheduled appointment is and telling them that if that date is not convenient, they may call the office to re-schedule. Also, if they'd like a personalized organizer with last year's data in it, let the receptionist know and she will print and mail one out.

About 15 or so years ago, I sent everyone an organizer and most clients brought them back unopened "it said Important Tax Info so I knew you would need this." duh. Kevinh5

Would you be willing...

Would you be willing to either discuss with me via email or let me call and talk to you about how you started your business? I am a CPA with a full-time job and I'm trying to start a home-based business so I would love to have the opportunity to talk to someone that has been successful at this.

Thanks. copelandh@sbcglobal.net

Pay yourself rent?

There's a case that I'll find when I can remember its name, something short and Anglo like "Clark" or "Short" or some such, but for now, here's a link to anauthoritative commentary on where the deduction for paying oneself and/or one's spouse for a home office is at [Look at how far I will go to show that a preposition is, indeed, something I can end a sentence with.]: http://www.cbscpa.com/new/cbscpa/content.asp?contentid=402359660 Harry Boscoe 09:21, 22 April 2009 (CDT)

Pay yourself rent, use the Cox case...

this might or might not be the case I was thinking about; it is certainly the case described in the article sent earlier. it's the good news/bad news about renting from yourself case. it can be found on findlaw.com. maybe some place else, too, will comment on it, I didn't look.


United States Court of Appeals for the eighth circuit

                                   No.  96-2896                                     
        D. Sherman and Maxine M. Cox, Appellants,  

When I said "short, Anglo" I really really didn't remember that the name of the case was "Cox"...

Harry Boscoe 13:30, 22 April 2009 (CDT)

Craigslist ad

Hi Anchorman

Thanks for replying to the topic, it is a great discussion. Would you mind forwarding that Craigslist ad you referred to? I am based in NYC so I don't think we are in competition.

Thanks so much Dave Aca2ea 09:32, 24 April 2009 (CDT)

Craigslist ctd..

my email is boltontax@live.com

Will definitely keep it to myself. Thanks again and if I can help you with anything please let me know.

Dave Aca2ea 15:23, 24 April 2009 (CDT)

Craigslist

Anchorman,


Thank you for the kind offer. My email is: brockandassociates@gmail.com.


By the way, that's a beautiful set of Anchorettes you have there. You must be proud of them!


Michael

Shelby courthouse

My assistant grew up in Shelby and she recognized the courthouse when I just showed her the picture. I'm glad you got something out of the material. I don't share it with everybody, but you have always been very nice in your posts and questions. Kevinh5

check your email

I sent you another gift. Kevinh5

105 vs 125

Hi, I'm away from my office this week, so I'm writing from memory, not from reference. The 125 is generally used when you want to pay for med insurance premiums with pre-tax monies. The 105 is for when you want to pay any health care cost (insurance premium or out of pocket cost) with non-taxed dollars. The 125 is generally a salary deduction, whereas the 105 is pure employer money. You might want to post a general question or add to an existing question if you want to know more. Kevinh5

Duplicate questions

Hi, Anchorman - I've noticed you've started posting questions twice - once on an existing discussion, and then again an hour or so later as a new discussion.

As you saw last time (here and here), this can get confusing when you end up with responses in both places. Also, the people responding in one discussion may not have the benefit of having seen the responses in the other discussion, and so we all lose the value of the "power of the group" - when answers start to build on each other. To avoid that same thing happening this time, I've actually deleted the first question you asked today, which you put at the end of this discussion, so that all responses will end up in your new discussion.

In the future, I'd ask that you only pose the question in one place. (Or, at the very least, go back and edit your original question if you decide you shouldn't have asked it there, and edit it similar to the way I edited the one today, with a link to your new question.)

Thanks,

Trillium 13:40, 5 June 2009 (CDT)

Recognition, double posts, etc.

Hi, Anchorman!

The silver, gold, etc. recognition boxes were something that Tim Doyle (the moderator from Intuit) used to do when the site was first starting out. He had a program that counted up number of posts per user, and from what I gather, he was trying to recognize those who spent a lot of time here, as part of his goal of creating a viable community. Until quite recently, I don't believe any of these had been "awarded" for quite some time, but really any user could add one to someone else's page subjectively. I see that Kevin's done that for a few of the long-time regulars since the start of the year.

If I'm correct that the original gold, silver, and bronze recognitions were earned by post quantity and not quality, then their value might be a little questionable. Some of the least reliable posters have high post count, whereas some very very reliable users didn't start posting until after the recognition boxes were awarded. While later stars might be more likely to have been earned by subjective appreciation from another user, even then there's inconsistency. I find that a review of a user's past contributions is much more valuable when I'm assessing the reliability of one of their posts. To see that, click on "edits" next to their name in a discussion, or go to their user page and then click "user contributions" in the toolbox section of the left hand side of the screen.

You might want to get in touch with Tim and see what his current criteria are, or contact Kevin, since he does seem willing to "award" recognition.


Tim Doyle is an Intuit employee, and is the moderator of the site. Kevin and I help him out, at his request, moving discussions to the consumer forum, deleting duplicate questions, cleaning up spam, etc. This was an experiment that started late last year, at the same time the Consumer Forum was created. But we're not Intuit employees.


As to the double posts - I think that once you've done a search, if the best / closest discussion to your topic is either long or more than a year old, then the best thing to do is to start a new discussion right from the start, and link back to the older one at some point in your question. That allows people to click back to the old discussion if they want to see what you're relying on/see what research you've done, without clouding up the discussion with old/off-topic stuff. And fewer people will get distracted before they get to your question!

Hope that all helps - if I missed something that you asked about, let me know.

Trillium 12:13, 8 June 2009 (CDT)

263A

See Regs. Sec. 1.263A-3. Rules relating to property acquired for resale

Reg. 1.263A-3

I am asking "Does not the $10M reseller exception only apply to the taxpayer if the taxpayer has "DE MINIMIS PRODUCTION ACTIVITIES"?

RoyDaleOne 11:29, 29 July 2009 (CDT)

From IRS Web Site

http://www.irs.gov/businesses/small/industries/article/0,,id=97675,00.html

Exceptions to the Uniform Capitalization Rules

The uniform capitalization rules do not apply to:

Resellers of personal property with average annual gross receipts of $10 million or less for the 3 prior tax years Property used for personal or non-business purposes or for purposes not connected with a trade or business or an activity conducted for profit Research and experimental expenditures deductible under Section 174 Intangible drilling and development costs of oil and gas or geothermal wells or any amortization deduction allowable under Section 59(e) for intangible drilling, development, or mining exploration expenditures Property produced under a long-term contract, except for certain home construction contracts described in Section 460(e)(1) Timber and certain ornamental trees raised, harvested, or grown, and the underlying land Qualified creative expenses incurred as a free-lance (self-employed) writer, photographer, or artist that are otherwise deductible on your tax return Costs allocable to natural gas acquired for resale, to the extent these costs would otherwise be allocable to "cushion gas" stored underground Property produced if substantial construction occurred before March 1, 1986 Property provided to customers in connection with providing services. It must be de minimus, and not be inventory in the hands of the service provider Loan originations The costs of certain producers who use a simplified production method and whose total indirect costs are $200,000 or less


RoyDaleOne 13:10, 29 July 2009 (CDT)

Better Explanation

Small-manufacturer exception. In response to comments concerning the administrative burden of complying with the UNICAP rules, the Regulations except qualifying "small" manufacturers. Under Reg. 1.263A-2(b)(3)(iv) , a manufacturer that uses the simplified production method and, during its tax year, incurs total indirect costs of $200,000 or less may treat its additional Section 263A costs as zero. For this purpose, any nonproduction costs not required to be capitalized under Reg. 1.263A-1(e)(3)(iii) (e.g., selling and distribution costs) may be excluded from the computation of the $200,000 threshold. Taxpayers that use a method other than the simplified production method (e.g., facts and circumstances) may have to file a Form 3115 (Application for Change in Accounting Method) or otherwise change their election in order to qualify for this exception.

Small-reseller exception. Under Section 263A(b)(2)(B) , the UNICAP rules do not apply to personal property acquired for resale by a taxpayer with average annual gross receipts of $10 million or less for the three preceding tax years. The Temporary Regulations had left unresolved whether some minimal manufacturing activity would prevent a taxpayer from qualifying for this exception. The final Regulations provide that a small reseller may disregard de minimis production activities. Whether production activities are de minimis is based on all the facts and circumstances. In addition, production activities are presumed de minimis if (1) gross receipts from the sale of the produced property and (2) labor costs of the production activities are less than 10% of total gross receipts and labor costs, respectively, for the entire trade or business. Moreover, small resellers are exempted from the general UNICAP rule that property produced under contract for a taxpayer is treated as produced by the taxpayer. Accordingly, third-party contract production does not prevent an otherwise qualified taxpayer from using the small-reseller exception.

Your big money client

Jim, you wondered about this: "How about inc'ing the biz, reducing her SE income to the reasonable salary level, and then buying the loft for office use, personally, taking rent out of the corp, etc. Then, her solo 401k number just went to 25% of salary plus the deferral amount."

Yeah, what I'm describing there is pretty classic. Inc. the biz, set as an S corp, set a reasonable salary which limits the SE taxes. Buy the loft personally, rent it to the corp for as high a FMV as you can justify, which just gets money legally out of the corp, again free of SS taxes. And then do the solo 401k to the max...

Hope that is clearer.... Jeff JR1

Sorry anchorman...just recently saw your question

Yes, Section 125 plans are simple to set up....did you get any input or advice?

My apologies.....did not see the post until I signed in today after several months away

Sandy

Sec 125 plan

Hey there;

I used coredocuments.com when I set one up for a church that I worked for. I believe the cost for that was 99.00 too, but it also gave me detailed instructions on how to set it up.

I was required to use the 3rd party (core) to assist as this was a non profit and they like to spend money like its water sometimes.

But this was very very simple and very cost effective for us. We had about 80 employees total, some of course ministers, but many laypersons and it took all of about 2 weeks total.

Hope this helps

Sandy

Craigslist Ad

Anchorman,

I am a CPA in Tampa, FL. I have been placing ads on Craigslist without much success. I have only received a few calls and emails from price shoppers.

Would you be kind enough to share your ad copy or an actual copy of the Craigslist posting?

Thanks,

Tpacct

Hi Anchorman,

I was reading this discussion in which you mentioned you received someone's Craigslist ad copy that generated results. Is there any way you could send me a sample? I certainly have tried on my own but without success - except spam!

Hang in there this tax season!

Karl

karl@Accounting-OnCall.com

Phoenix Review Course

Hello, I saw your post about the Phoenix EA review course. Did you like it and did you pass on first try? I am trying to decide which course to buy. Gleim seemed good but very pricey. The Fast Forward Academy also seemed reasonable.

Any comments you could provide would be very much appreciated.

Regards, Susan Taxoasis

Phoenix Tax Course

Hi, Anchorman, Thank you for the feedback. I have narrowed it down to Gleim and Phoenix Tax. Wow, it sounds like you put in a lot of study time. I hope to get this test completed by October so I can advertise as an EA.

Again, good luck with the rest of your test and thanks for the information. Taxoasis 17:20, 25 May 2010 (CDT) Susan C.

Hi Anchorman;

The method you are using seems to be working well for you. Question how do you get client's to buy your write up services, for me it seems one of the hardest to sell, most people go out and purchase QB. What script are you using if you don't mind sharing.

Thanks Hi Anchorman:

Thanks for the info an the side business. My e-mail address is rjmcpherson@live.com I am retired and need the extra income to make ends meet.

Thanks!

Thank, Jim, for the Starbucks giftcard. I will put it to good use! Merry Christmas, Jeff

Craig's List Ad

Anchorman, I noticed you generated good results from a Craig's list ad. Do you mind sharing it with me? I am in New York. Specy24@aol.com.

question from userpage

Hi Anchorman,

"By the way, my wife and I own a separate business which generates income every month when customers make their monthly payments for essential services such as cell phone, internet, tv, elec and gas. If you're open to generating multiple streams of income, just click on the "discussion" tab and leave me a message requesting more information."

Can you give me information regarding this?

Thanks,

PirateCPA 18:04, 2 March 2011 (UTC)

NC Non Taxable Income

Hi Anchorman,

Be sure to follow the link I provided on the NCDOR website & look at "vesting period for qualifying federal retirement systems." If the person is fully vested in the TSP, the amount would not be taxable per Bailey Settlement. If I recall correctly (double check me on the web-site), TSP has two parts - an employee component and an employer component. If the employee made a contribution to the TSP prior to 8-12-89, that component is fully vested.

The employer component is composed to two different things - contributions by the employer based on a fixed % of EE's salary, and matching contributions by the employer that match the EE's contributions. EE is vested in ER matching contributions if a matching contribution was made before 8-12-89. EE is vested in employer fixed % component if EE had three years of service as of 8-12-89.

So, if based on the above, (again double check me on the website) the employee was fully vested, the amount would not be taxable to NC under the Bailey Decision. I think if EE did not have 3 years service as of 8-12-89, or did not contribute to TSP before 8-12-89, some or all will be taxable. Hope this helps!

Bailey

Anchorman, thanks for the note. All I'm saying is that your guy isn't blowing smoke. I don't know his specific facts, however. Here's a directive from NC that might help. And yes, 8/12/89 is the magic date. For most folks, they need 5-years of creditable service as of this date. But as someone else pointed out in the post, the rule for the Fed Thrift Saving Plan is different and guidance is provided in the directive below with respect to the TSP. I run into this a lot. In NC, on the 1099R for former state employees, it actually says "NC Vested as of 8/12/89."

The history behind Bailey is very interesting, all revolving around the NC Legislature's law change that stemmed from the Davis vs. Michigan Department of Revenue decision.

North Carolina Individual Income Technical Bulletin No. IV, 12/30/2009 

Date Issued: 12/30/2009

Tax Type(s): Estate & Gift, Inheritance, and transfer, Personal Income Tax

Subject: Bailey Settlement As a result of the North Carolina Supreme Court's decision in Bailey v. State of North Carolina and the settlement subsequently reached in that case, North Carolina may not tax retirement benefits received by a retiree (or by a beneficiary of a retiree) from qualifying State, local, or federal retirement systems if the retiree was vested in the retirement system as of August 12, 1989. For most government retirement systems, a person is vested if the person had five or more years of creditable service in a qualifying State, local or federal retirement system as of August 12, 1989. For certain retirement systems, the vesting period is less.

1. Qualifying State or Local Retirement System The following retirement systems were designated as a North Carolina state or local governmental retirement system:


System Law Creating the System


North Carolina Teachers' and State Employees' G.S. 135, Article 1 Retirement System (TSERS)


Optional Retirement Program available to G.S. 105-135-5.1 administrators and faculty of the University of North Carolina system in lieu of TSERS


North Carolina Local Governmental Employees' G.S. 128, Article 3 Retirement System


North Carolina Consolidated Judicial Retirement G.S. 135, Article 4 System


North Carolina Legislative Retirement System G.S. 120, Article 1A


North Carolina Disability Income Plan G.S. 135, Article 6 (both short-term and long-term disability benefits)


North Carolina Supplemental Retirement Income G.S. 135, Article 5 Plan


North Carolina Supplemental Retirement Income G.S. 143-166.30(d) Plan for State Law Enforcement Officers


North Carolina Deferred Compensation Plan G.S. 143B, Article 9


North Carolina National Guard Pension Fund G.S. 127A-40


North Carolina Sheriffs' Supplemental Pension G.S. 143, Article 12H Fund


North Carolina Registers of Deeds' Supplemental G.S. 161, Article 3 Pension Fund


North Carolina Supplemental Retirement Plan for G.S. 143-166.50(e) Local Governmental Law Enforcement Officers Separate Insurance Benefits Plan for State and Local


Governmental Law Enforcement Officers G.S. 143-166.60


North Carolina Firemen's and Rescue Squad G.S. 58, Article 86 Workers' Pension Fund


Charlotte Firefighters' Retirement System Session Laws 1947,

                                                     Chapter 926, Sec. 6(c)

Firemen's Supplemental Fund of Hickory Session Laws 1971,

                                                     Chapter 65

Winston-Salem Police Officers' Retirement Session Laws 1939, System Chapter 296


Separate Insurance Benefits Plan for State G. S. 143-166.60 and Local Government Law Enforcement Officers


New Hanover County School Employees' 1979 Session Laws, Retirement Plan Chapter 1307


No local government optional contribution plans, similar to the State's Supplemental Retirement Income Plan and Deferred Compensation Plan, were afforded tax exemption prior to August 12, 1989. Therefore, retirement benefits from local government optional contribution plans (such as local government 457 plans) are not subject to future tax exemption.

Teachers and other employees of North Carolina's public schools have the option of contributing to optional contribution plans established pursuant to section 403(b) of the Code. Distributions from these plans may not be excluded from taxable income under the settlement.

The “special separation allowance” paid to retired law enforcement officers pursuant to G.S. 143-166.41 and reported on Form W-2 does not qualify for exclusion under Bailey. However, the special separation allowance is subject to the $4,000 retirement benefits deduction.

2. Vesting Period for Qualifying State or Local Retirement Systems The general rule is that a participant in a qualifying State or local retirement system is vested if the participant had five or more years of creditable service as of August 12, 1989. The general rule does not apply to qualifying optional contribution plans, however, or to certain other qualifying plans.

Participants in the State's Supplemental Retirement Income Plan ( Internal Revenue Code § 401(k) ) or the State's Deferred Compensation Plan (Code § 457) are vested in the plan as of August 12, 1989, if they contributed or contracted to contribute to the plan by August 12, 1989. If the participant contributed any money to a plan before August 12, 1989, all future withdrawals from that plan are excludable from tax. Contributions to one plan prior to August 12, 1989, do not qualify contributions to the other plan as vested. If a State employee began contributing to the § 401(k) plan in June 1989, and to the § 457 plan in October 1989, the employee is vested only in the § 401(k) plan. Participants in the State's Supplemental Retirement Income Plan or the State's Deferred Compensation Plan may have chosen an annuity as an investment option. In some cases, they receive the annuity payments and the subsequent tax information statement from the annuity company instead of the plan administrator. These amounts also qualify for future tax exemption if the retiree was vested.

Participants in the North Carolina Firemen's and Rescue Workers' Pension Plan are vested as of August 12, 1989, only if the individual had both five years of service and had paid five years of contributions to the plan by August 12, 1989. Sheriffs receiving benefits from the North Carolina Sheriffs' Supplemental Pension Fund and Registers of Deeds receiving benefits from the North Carolina Registers of Deeds' Supplemental Pension Fund are vested as of August 12, 1989, only if the sheriff or the register of deeds (not a deputy or assistant) had five years of service as a sheriff or a register of deeds and five years of participation in the Local Government Employees' Retirement System (or equivalent local plan) by August 12, 1989.

An employee in a qualifying State or local government retirement system who was vested prior to August 12, 1989, and who leaves employment remains vested if the employee later returns to work, provided the employee did not withdraw his or her contributions to the retirement system. If the employee withdrew his or her contributions, the employee is no longer vested in the retirement system, even if the employee subsequently buys back the service time, unless the employee returned to employment in time to become vested again before August 12, 1989.

3. Qualifying Federal Retirement Systems The following retirement systems were designated as a federal governmental retirement system:

Federal Civil Service Retirement System Federal Employees' Retirement System Lighthouse Retirement System Thrift Savings Plan Foreign Service Retirement and Disability System and Pension System Military Retirement System Coast Guard Retirement System Central Intelligence Agency Retirement System Commissioned Corps of the Public Health Service Retirement System Comptrollers' General Retirement Plan Judicial Plans & Pay for Federal Judges Treated as Retirement Pay by Federal Law, including: — Judicial Retirement System — Judicial Survivors' Annuities System — Court of Federal Claims Judges' Retirement System — Court of Veterans Appeals Judges' Retirement Plan — Judicial Officers' Retirement System (for Bankruptcy Judges and Magistrates) — United States Tax Court Retirement Plan — United States Tax Court Survivors' Annuity Plan — Retirement Plans for District Court Judges for the Northern Mariana Islands, the Virgin Islands, and Guam — Court of Appeals for the Armed Forces Judges Retirement System National Oceanic and Atmospheric Administration Retirement System Tennessee Valley Authority Retirement System and TVA Savings and Deferral Retirement Plan Financial Institutions Retirement Fund (Office of Thrift Supervision Employees) Federal Home Loan Bank Board Retirement Systems Federal Home Loan Mortgage Corporation Plan Federal Reserve Employees Retirement Plans and Thrift Plan Nonappropriated fund plans, including: — Retirement Annuity Plan for Employees of Army and Air Force Exchange Service — Supplemental Deferred Compensation Plan for Members of the Executive Management Program (Army and Air Force Exchange Service) — Nonappropriated Fund Retirement Plan for Civilian Employees — United States Army Nonappropriated Fund Retirement Plan — Retirement Plan for Civilian Employees of United States Marine Corps Morale, Welfare, and Recreation Activities and Miscellaneous Nonappropriated Fund Instrumentalities — Navy Exchange Service Command Retirement Plan — Navy Nonappropriated Fund Retirement Plan for Employees of Civilian Morale, Welfare, and Recreation Activities — Norfolk Naval Shipyard Pension Plan — Retirement Savings Plan and Trust for Employees of the Army and Air Force Exchange Service — Coast Guard Nonappropriated Fund Retirement Plan District of Columbia Police Officers and Fire Fighters' Retirement Fund and Related Funds (including payments to Secret Service and U.S. Park Police covered by the Fund) District of Columbia Teachers' Retirement Fund and Related Funds District of Columbia Judges' Retirement Fund and Related Funds Uniformed Services University of the Health Sciences Plan Smithsonian Institution Defined Contribution Retirement Plan USDA Graduate School Plan 4. Vesting Period for Qualifying Federal Retirement Systems Generally, participants in the qualifying federal retirement systems listed above, including military retirees, are vested for purposes of the settlement if they had five or more years of creditable service as of August 12, 1989. The general rule, however, does not apply to the Thrift Savings Plan.

The Thrift Savings Plan has both an employee and an employer component. The employee component is similar to the State's § 401(k) and § 457 plans and allows the employee to voluntarily contribute to the Plan. The employee is vested in the employee component if the employee first made a contribution to the plan prior to August 12, 1989. The employer component includes both contributions by the employer of a fixed percentage of the employee's salary and contributions by the employer that match the employee's voluntary contributions. The employee is also vested in the employer matching contributions if the employer first made a matching contribution prior to August 12, 1989. An employee is vested in the employer fixed component only if the employee had three years of service (two years of service for certain highly ranked employees) as of August 12, 1989. One exception to the three-year rule is that an employee who died prior to completing the mandatory three years is still considered vested if the date of death was on or before August 12, 1989.

As explained above, it is possible for a participant in the Federal Thrift Savings Plan to be vested as of August 12, 1989, in some components of the plan while at the same time not being vested in other components. The annual tax information statement (Form 1099-R) does not distinguish between the various components when reporting the amount distributed during the year; therefore, the recipient cannot readily determine the amount to exclude from North Carolina income tax. When a participant in the plan ceases employment, the recipient is provided a Form TSP-8, Thrift Savings Plan Participant Statement, that identifies the cash balances in the various components. To determine the proper amount to exclude, the recipient should multiply the annual distribution by a fraction, the numerator of which is the balance of the components in which the recipient is vested as of August 12, 1989. The denominator of the fraction is the total cash balance of all components. That same fraction will be used for each year the recipient receives distributions from the plan.

5. Rollover Distributions with Respect to Bailey Retirement Plans The Economic Growth and Tax Relief Reconciliation Act of 2001 made numerous changes with respect of pension portability. Beginning in 2002, distributions from most types of retirement plans may be rolled over into another retirement plan or into an IRA. Because rollover distributions lose their character upon rollover, all distributions from a qualifying Bailey retirement account in which the employee/retiree was “vested” as of August 12, 1989, are exempt from State income tax regardless of the source of the funds contained in the account. Conversely, qualifying tax-exempt Bailey benefits rolled over into another retirement plan lose their character and would not be exempt upon distribution from the other plan unless that plan is a qualifying Bailey retirement account in which the employee was vested as of August 12, 1989. (Rollovers to IRAs will always result in a loss of tax-exempt status since IRAs do not qualify under the Bailey settlement.)

6. Benefits from Other Retirement Plans Retirees receiving benefits from government retirement plans of other states or territories were not class members in Bailey and are not entitled to recovery of taxes paid in earlier years or to tax exemption in future years, except for the $4,000 deduction provided by G.S. 105-134.6(b)(6). Private retirement benefits remain taxable except for the $2,000 deduction.

You are correct

the taxpayer would have had to have been vested by 1989 for the Bailey exclusion, otherwise only a $4000 exclusion would apply. Depending on the taxpayer's age, make your decision. Kevinh5

Looking for 2010 Phoenix Study Cards

Hello! Am taking all three parts of the SEE before the end of this month (Feb 2012). I was looking for the Phoenix Tax Group Study Cards, but they are all sold out on their website. Was wondering if anyone has all three sets of study cards that they would be willing to part with? Below are my scheduled test dates and below that is my TaxAlmanac profile. Thanks! ~Elizabeth

Feb 12, 2012: Part 1 - Feb 19, 2012: Part 3 - Feb 21, 2012: Part 2

Hello my name is Elizabeth. I am a sole proprietor offering business and taxation services since April 2000. I have offices in San Francisco, CA and Utah.

I passed the old SEE exam back in 2006, but did not file a Form 23. I am retaking all three parts before the end of this month, Feb 2012, hoping that the new test is similar and that I am able to pass. I am also a CPA candidate needing to take the exams. My plan is to begin studying for them in March 2012. And aim to complete them within the year. Am finally biting the CPA bullet, as I have been able to take them since Aug 2004... Have been and am currently struggling with the 2000 hours of slave labor...

My main taxation interests are individuals and small businesses.

Adding designations

Discussion:New Designations available for your User Page Kevinh5 16:55, 2 March 2012 (UTC)

Accrual Method Change Questions

No problem. You had two questions:

"1. When does the statue run (out) on the 2009 corporate filing? (I presume you're referring to statute of limitations)."

Yes, I mean the statute of limitations. I'd assume three years, but your client's facts may warrant a different answer.

"2. Please explain your statement "I'm not sure if your client's sales are low enough to qualify for a price break"."

If your client does not qualify for an automatic method change, they can make an "advanced consent" method change, which involves paying the IRS a user fee of $7,000. Below I've pasted the reduced user fee section from Rev Proc 2012-1, if you need it:

(4) Reduced user fee for a request for a letter ruling, method or period change or closing agreement. A reduced user fee is provided in the following situations if the person provides the certification described in paragraph (B)(1) of this appendix:

	(a)	Request involves a personal or business tax issue from a person with gross income (as determined under paragraphs (B)(2), (3) and (4) of this appendix) of less than $250,000	$2,000
	(b)	Request involves a personal or business tax issue from a person with gross income (as determined under paragraphs (B)(2), (3), and (4) of this appendix) of less than $1 million and $250,000 or more.	$4,000

LLC

If client has not received any correspondence, you don't have to do anything.

If IRS wants prior year tax returns, respond via letter and tell them business was never started.

You will have to decide how to handle going forward, however. And maybe you can just keep it as a 1-member LLC and make sure all paperwork reflects this fact.

Ck Ckenefick 23:05, 15 April 2012 (UTC)ckenefick

No guarantees...

...but the best course of action, based on my experience and insight - wow, there's a load of crap! - is to let this sleeping dog lie. You want to play your cards as you want them to be seen, and you want them to be seen as a sole proprietorship/SMLLC. Let the other folks - IRS - discover any glitches, and don't never no not never tell them something isn't right, as they'll then feel it's their sworn duty to jam it down your throat, *especially* when you go to them with the problem...

Just my suggestion, no guarantees. I think someone, maybe Ckenefick, already put this "solution" up the forum.

On the other hand, and with no segue whatsoever, I know without looking that your ZIP Code is likely the infamous "23456". I spent time as a child in the Tidewater area, and learned to body surf at Sandbridge Beach, 23456. In the fifties. In the *early* fifties. Sheesh I'm pretty old to be swimming in 6-8' storm surf... Old Guys Rule.

Surf's up, Dude.

Spell Czech

LLC is a sole proprietorship

Basically, where I'm coming from is that you and your client should do anything you can to reinforce your position that this is an SMLLC filing a Schedule C and has been that since whenever. Don't even hint at the idea that you're aware of the problem. Put the name and the number of the SMLLC [see how easily I started referring to it as a single-member...] on your client's Schedule C. Play your cards the way you want them to be seen...

Spell Czech

Marketing Plan

I'd prefer if you'd just share what you've done. Yes, you can mention where you got the idea, but I want to control who has my information. (I make money off of teaching this kind of stuff at various conferences.) Thanks for asking. Kevinh5

Forums for Representation

thanks for the nice words, but I do not know of a forum that specializes in those areas.

Death&Taxes 16:03, 9 May 2012 (UTC)

2006 client mess

Hi Anchorman, I got your message. I'm not sure how you are going to get two S Corp elections approved 6 years late. There's no reasonable cause that I could think of, unless the clients were in a coma.

If it was me, personally, I wouldn't bother. I would file the clients as a C Corp, which is what they are, (and which is the mess they created for themselves). The books don't sound like they are accurate, either, so you have some major clean-up there, as well. You'll be filing late payroll reports anyway, so they will owe penalties, and you will probably have to book distributions as well, because It sounds like they didn't bother running a payroll for either corp. If they want to dissolve the corp or elect S-status this year, then they could do it, but I'm not particularly sympathetic to clients that ignore IRS notices for years and years. I wouldn't touch this without at least 5K up front, and that would be just the cost of the corporate filings (if they have two corps, that's going to be 12 corporate returns and 6 personal returns, not counting the payroll returns). The corp returns have to be filed either way--the IRS will keep asking for them forever. Good luck. You're a better person than I am for taking this on.

Visiting nearby business

Hi Anchorman,

I saw your post a couple of years ago about visiting local businesses. Are you still doing that? Do you have particular business you target at?

Thanks in advance for sharing,

xz (Shelly) xingli@xz-cpa.com

top gun

I had people renting at an 1100 a month deficit, but in their case they were trying to sell, having moved to another state. This was many years ago, but I recall putting the rents on Line 21 and the deductible expenses on Sch A (they collected their own rent and it was a fair rental value....)

Death&Taxes 13:25, 22 February 2013 (UTC)

Not Rented for Profit

Hi. From pub 527


Not Rented for Profit


If you do not rent your property to make a profit, you can deduct your rental expenses only up to the amount of your rental income. You cannot deduct a loss or carry forward to the next year any rental expenses that are more than your rental income for the year.

Where to report. Report your not-for-profit rental income on Form 1040 or 1040NR, line 21. For example, if you are filing Form 1040, you can include your mortgage interest and any qualified mortgage insurance premiums (if you use the property as your main home or second home), real estate taxes, and casualty losses on the appropriate lines of Schedule A (Form 1040) if you itemize your deductions. If you itemize your deductions, claim your other rental expenses, subject to the rules explained in chapter 1 of Publication 535, as miscellaneous itemized deductions on Schedule A (Form 1040), line 23, or Schedule A (Form 1040NR), line 9. You can deduct these expenses only if they, together with certain other miscellaneous itemized deductions, total more than 2% of your adjusted gross income.

Presumption of profit. If your rental income is more than your rental expenses for at least 3 years out of a period of 5 consecutive years, you are presumed to be renting your property to make a profit.

Postponing decision. If you are starting your rental activity and do not have 3 years showing a profit, you can elect to have the presumption made after you have the 5 years of experience required by the test. You may choose to postpone the decision of whether the rental is for profit by filing Form 5213. You must file Form 5213 within 3 years after the due date of your return (determined without extensions) for the year in which you first carried on the activity or, if earlier, within 60 days after receiving written notice from the Internal Revenue Service proposing to disallow deductions attributable to the activity.

More information. For more information about the rules for an activity not engaged in for profit, see Not-for-Profit Activities in chapter 1 of Publication 535.

Not sure this can work in your case but thought I would point it out. If it is a one time thing maybe intent matters? Not totally sure. Good luck.

03:56, 23 February 2013 User:EZTAX

Just saw the message you left me

I do not often log in when I read here. I am in Franklin. Southwest corner of the state near the TN and GA borders

On your point...I am not certain.

What I would say is that after that amount of time, this seems like a taxable loss.

For example, if he bought 49 territories for $1,000 each and borrowed the money, he still has the debt.

Selling the territory back or to a 3rd party in my mind is a taxable event. I could be wrong but dont think I am.

I just ran the scenario through my software and the loss appeared on page 1, part 1 of the 4797 assuming it is LT.

The entire loss was deducted, it was not capital.

If you have a question..better to email me at matt at mattjelnickycpa dot com

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