User talk:KatieJ

From TaxAlmanac

Katie, Was wondering if you could help me understand how guaranteed payments are apportioned as CA source income for nonresident members? If an LLC does business within and without CA, but the member never steps foot in CA, is his guaranteed payment sourced as CA income in accordance with the regular business apportionment % of the LLC or is it based on nexus for that member? If so, what effect does this have on the payroll factor? I have read through notice 89-493, CA R&TC 17854 & 17951-4 and the instructions. Still confused as to how this all fits together. My understanding is the payroll factor will vary depending on if they are a professional services firm. I did see a previous post relating to this and you indicated that the payroll factor still applies the 60/40% test (it sounded like you had a good historical perspective on this). Is the 60/40% allocation found in the example at R&TC 17951-4(g) applicable to "both" professional service and non-professional service firms? BTW: The CA FTB could not answer my question.

Thank you,

Gregj 15:11, 3 November 2010 (CDT)

Of course not!

Every user gets to choose who they respond to!! I know you often like to know a bit about the level of experience of those you're helping, so I was kind of hoping he'd update his user page before you read his question. You're one who certainly does tend to answer differently for the newbies than to the pros, often with a different level of detail and/or complexity. But you're also good at getting a sense for people based on the content of their questions, too.

Anyway, apologies for "eavesdropping," so to speak. One of the reasons I spend so much time on the site is to learn a lot, and I knew I'd pick up some good tips from your response to Greg. Which is yet another reason I wish he'd have posted it out on the forums, for all to learn from.

Trillium

Actually, I've been known to respond politely to many

without profiles, but then ask for a profile before any further discussion. Trillium isn't the only evesdropper (now where did that name come from?). Kevinh5

Hampton Court Palace outside London was the palace of King Henry VIII of England. In the eaves of its Great Hall, small faces are carved into the oak beams which lean at an angle of 45 degrees to the ground. These are known as 'Eaves Droppers'. Henry was known to be a strong ruler and often put spies in crowds of people to listen in to conversations. He wanted his staff (who slept in the Great Hall between banquets and would lie on straw looking up at the eaves) to know that he or his people would be listening at all times.

Cleanup

Having been reminded (by Trillium) that nothing is ever lost in this wiki environment, I have cleaned up my talk page by deleting everything up to current entries. All the old questions are still there under the "history" tab. KatieJ 12:01, 4 November 2010 (CDT)

Distribution and AAA

Hi Katie, I read your profile and feel that I have good connection with you- simply because I am a working mom. I try to understand more about the distribution and AAA, from the accounting and tax views. For distribution, it is reported on page 3 of Form 1120s, what other area I need to make entries- equity a/c or on the client's book? Another area I am very vague, it is the AAA account.In NJ, the numbers just flow through automatically from the software, I am not sure if it is right. How do I keep track of it? I don't remember I have learned all of these when I took my accounting courses years ago. Is any taxation book out there will help me to master these area better? I read your thread and liked your answer and found out you were a teacher- no wonder! Thanks for reading & Have a good day! JYC Tax

Katie:

You were very helpful with your reply regarding the consolidated tax return. I was wondering if I can speak with you on the phone. My emial is k.olson@cox.net and my phone number is 310-864-3371.

Thank you for your cooperation.

Sincerely,

Kathleen Olson

CA apportionment

KatieJ,

I posted this question a few days ago but no replies. Since I've seen several of your posts in the past regarding CA taxes, I hoped maybe you could shed some light on my situation as follows:

Can someone please help me regarding a 2010 CA apportionment issue? I have a partnership client who is located in IL and performs most of his services in IL. In 2010 he did some work for a few CA hospitals and I am trying to dfetermine whether he will have a filing requirement in that state. For two of the clients he performed less than 50% of the work in CA, but for the third he performed more than 50% of the work in CA. Overall between the three clients less than 50% of the total work for CA clients was performed in CA.

Based on these figures would we need to apportion any of the income to CA? To add another twist, our client called FTB and spoke to someone who told him that "analysis was different than consulting" and that because he was only doing "analysis" in CA and the "consulting" while he was back in IL that none of the income would need to be apportioned to CA. This part sounds strange to me, but then again we only do a few CA returns which are much more straightforward.

Thanks in advance for any comments.

Nightsnorkeler 16:21, 8 January 2011 (UTC)

State Nexus

Hi KatieJ, I posted a question on message board (Discussion:Nexus Court Awards) and JR suggested you would be the person to help answer. I am Johncpa99.

Here is the fact pattern: My client is a law firm with offices in VA. All personnel/offices are in VA; however, due to the nature of the lawsuits (class action) the attorney often travels to a different states where the trials are located. Question: Does the state where the trial is located have nexus on any proceeds awarded to attorney (ie. commissions on settlement. The only presence in the trial state is to have the trial. Would it matter if stayed at a hotel/rented an office, etc?

Thank you in advance for any help.

Johncpa99

if easier, my direct email is sternercpa@yahoo.com

Again, Thank you very much.

Maybe you'ld like to change this...

Katie, you've got this out there: "An S corporation may own up to 100% of the stock of another corporation, S or C."

But the owned corp can't be an S because it has a corporation owning its stock. I respect your technical moxie enough that I didn't just rush in and mess with what you've posted - which I might have done if this had been one of those young whippersnapper know-nothing know-it-alls...

Harry Boscoe

From XZ

Hi Katie:

Thank you very much for answering my question regarding S-corp income apportionment between NC and AZ.

Can you please answer my other post about personal use of auto? I know I am asking too much favor from you. I am starting out on my own in my second year and I am trying hard to do a good job. I will try to spend time answering questions from other forum members to contribute to the forum.

Thanks,

xz

Husband in CA, Wife in OH

Was wondering if you could help me out? I have a client that moved to CA from OH, his wife his stayed in OH to continue working. They have two homes and for the near future she does not plan to move out there. I am not familiar with CA tax law to fully understand where the income will be taxed. They are planning on filing MFJ for federal purposes. My first inclination is that the CA income is taxed in CA on a part-year resident return and all OH income is taxed in OH on a resident return. Any insight or direction on where to verify would be helpful. Thank yyou in advance.

You can find out if someone posted a question (other than on your talk page)

by looking at their contribution history (Contribs or Edits)

http://www.taxalmanac.org/index.php/Special:Contributions/Romine17

Kevinh5

Katie,

What happens to E&P when a S corp that has E&P from prior tax years when it was a C corp, converts to a LLC (partnership)? Does the presents of the E&P make such a conversion unavailable? or must the E&P be purged before the conversion is done? do you have citations?

massachusetts husband /wife 50/50 interest LLC.

Hi Katie,

I was looking for some guidance on this issue. here's some background. I have a client of mine who owned a pizza shop ( an s-corp) filed a 1120 s every year.

he sold his business to his son in law. in march 2010. the son in law's lawyer set it up as a LLC with husband and wife each owning a 50% interest.

The IRS sent the ss-4 saying they should file a form 1065.

The son in law has been getting a paycheck from the corp since march 2010.

I don't think they want to pay self employment taxes on icome of the corp if possible.

is there a way that i can have them taxes as an s-corp. both on fed and state of Massachusetts?

what are the steps I would have to take at this point in time to do this?

Thanks Ted

CA multistate tax

Hi Katie,

Have a CA tax question for you.

Effective in 2011, California has adopted the "factors presence" nexus test that was proposed by the MTC in 2002. Any business with more than $50K of property or payroll, or more than $500K of sales, in the state, and that is not protected from a net income tax by Public Law 86-272, will be considered "doing business" and subject to the franchise tax.

So if a WA Company has an employee in CA state protected by 86-272 (mere solicitation), they will not be considered doing business even if they are doing 4 million in sales to CA for income and franchise tax? This is an LLC by the way.

On the flip side, if they have an employee doing more than just sales, but less than 500k in sales, say 400k, they wouldn't be considered doing business in CA and don't have to file? Or do they get you since you should be registered anyway?

In advance, thank you for being a great resource to the community.

Thank you,

Neil

Katie:

Here, I hope a private post, for the moment.

Yea, giving TAX advice (and asking questions) is scary!

One could be at a place with others just waiting to pick you apart for NOT 100% CORRECT!

It takes guts to post here!

That was me in multi-state. I was thinking a company had to be DOING Business in a state to be taked there, meaning not just producing something but also SELLING IT FROM-WITHIN that state.

I am familiar with multi-state (aka CA 100R) and the 3 factors (well now 4 with sales twice).

Plant is one, but i guess I was thinking it was a factor IF one was DOING BUSINESS (as I state above) in the state, not that IT gave the state NEXUS over the company.

I read YOU ARE/WERE CA FRANCHISE TAX BOARD.

This is a question for the forum, but I's rather, for the moment to not have the guts for there.

I have a 30 year client who developled (in my Opinion) THE BEST FULL CONSTRUCTION (JUB-COSTING) ACCOUNTING SOFTWARE WITH MULTI-STATE PAYROLL.

His proprietorship, now a LLC was located in CA from 1978 to 2006 when he moved his family (wife and two married sone & wives) to Texas.

His sales are all via Internet and from software conventions in Las Vegas and back east (non in CA)

His program support is all from employees in the company's Texas office OR one Long-Term ("family-type") lady WHO LIVES IN CALIF! She provides ALL her program support to the company's clients through out the USA FROM the desk and computer in her HOME.

CA SAYS THAT IS NEXUS AND "YOU" "WILL" APPROTION YOUR LLC INCOME TO CALIF (oh and the 540NR's for the Husband & Wife LLC owners).

Katie, during tax season, and I've spent (ordered) $500 worth of multi-state text for such as Kattie Wright I have to research this.

Katie, I HAVE NO CLIENTS, I ONLY HAVE FRIENDS WHOM I CHOSE TO PROVIDE MY SERVICES TO (my definifion of Friend comes from '68nam when that meant you gave ALL to protect someone YOU CHOOSE to be YOUR FRIEND)

This CA 100R does not FEEL right, it may be legally right but doesn't feel right. ONE employee form a computer, no "Boots (heel) on the groung!

Thank You for listening

Hugh

OH I had a post before this in reply to your post (the S-Corp multi-dtate) that I started here but moved to the forum.

Actually

could you give me your off-site email address so I can speak off-site. Thanks kevinhuston@msn.com Kevinh5

I just sent an email to you, please check to see if it went to your 'junk' folder. Kevinh5

Kay

I would really appreciate your ear, wise Katie. I filed as small business. Portrait painter made under 12,000 gross and did not claim my sons ssi death benefit. I am now being audited by the state. Do they have access to my bank accounts? Do I have to claim my son's benefits? I lied to get the education credit also. Am I doomed on the federal level as well? shaking in my second hand boots here, Kay

User:Kay9

Resources for non-pros

Hi, Katie! I will, of course, leave it up to you whether or not you respond to Kay at all, but I thought you might want to point Kay to some of the resources we have for non-pros on the top of the Consumer Questions page. In particular, finding free tax prep locations by state/county/city, a search engine offered by the University of Missouri: Find VITA, TCE or AARP sites, and Finding a local tax preparer.

(To copy/paste that entire block of text, your best bet is to click "edit this page" and scroll back down here to the bottom, and highlight the version that has the actual links spelled out. If you just click the text content, the links may not be functional once you paste them on someone else's user page. Let me know if you need more info on that, or if you'd rather I just send a note to Kay with that info, myself.)

Trillium 22:31, 6 March 2011 (UTC)

State Tax for travelling consultant

In which state to file state tax for salaried travelling consultant who works for a IT company that has office in California but clients in all states. Consultant travels to differnt client location (e.g AZ or any other state) from Monday to Thursday and returns home in Kansas on Friday and Spouse working locally in Kansas. Consltnat's employer deducted tax state for California and spouse's employer deducted tax for Kansas.

Is it appropriate to file joint return as Resident for Kansas and Non-resident for California?

Thanks Rajesh

Hi Katie - You have helped me on one or two state questions over the years and hoped you could answer this one. A client moved from PA to So. Korea for a new job with UC Riverside. (no CA residency) He is receiving the foreign income exclusion (as physical presence for this year). His W-2 from Riverside shows CA state income (no withholding), but should he file a CA return as non-resident since it is a CA source income? And after reading through all the CA instructions - it doesn't look like they accept the foreign income exclusion, so he would end up owing tax to CA - does that sound correct? Thank you. Krav 15:26, 5 April 2011 (UTC)

Hello Katie, I wanted to personally (well as personally as I can using this venue), to thank you so much for ALL your help. I should have guessed that you are (were) a teacher by the precision and clarity of your responses to my mundane question, thank you and in case you do not know who this is, your last reply to Boblink (who is also retired) was:

"With respect to whether the LP is an "investment partnership" for IRC Sec. 721(b) purposes, I believe it depends on whether there are other investors, family members, etc. who will also be contributing similar assets. If the client is the only contributor, so that he is not diversifying his investments by putting them into this vehicle, then I would guess it comes under 721(a) and no gain is recognized. If there are other contributors, I couldn't tell you how much "diversification" is enough to bring it under 721(b). I know just enough about this to be dangerous. That's about how much you will know after you have been through a basic partnership tax course such as the CCH offering. Enough to be dangerous."

The Living Trust along with the LP and the S-Corp were not intended to be a "scam" or anything that was illegal, immoral, unethical,..... but were a vehicle to help "protect" assets and avoid probate. Unfortunately the only objective of the attorney that set up this arrangement was to make money, which he is entitled to but leaving the documents without an explanation of what they are, how they relate to each other and what to do with them, was not on his agenda but the die is cast, it is what it is. The Living Trust is a 99.5% partner in the LP whose only "business" is buying and selling stock but I'll read up on 721(b) just to make sure that I am not overlooking anything. And as far as being dangerous, I believe that ignorance is more dangerous than having a bit of knowledge because you may know enough to realize that you really don't know anything. Thank you again for helping me through this maze. Regards, Bob

Please make sure to sign your message by adding four tildes: Boblink 02:50, 24 April 2011 (UTC) at the end of your message I am not sure what Boblink 02:50, 24 April 2011 (UTC) means but here it is

Tax Ramifications for Profits, Loses and Withdrawals for a Limited Partnership?

Hi Katie - You have helped me on one or two state questions over the years and hoped you could answer this one. A client moved from PA to So. Korea for a new job with UC Riverside. (no CA residency) He is receiving the foreign income exclusion (as physical presence for this year). His W-2 from Riverside shows CA state income (no withholding), but should he file a CA return as non-resident since it is a CA source income? And after reading through all the CA instructions - it doesn't look like they accept the foreign income exclusion, so he would end up owing tax to CA - does that sound correct? Thank you. Krav 15:26, 5 April 2011 (UTC)

I wanted to personally (well as personally as I can using this venue), to thank you so much for ALL your help. I should have guessed that you are (were) a teacher by the precision and clarity of your responses to my mundane question, thank you and in case you do not know who this is, your last reply to Boblink (who is also retired) was:

"With respect to whether the LP is an "investment partnership" for IRC Sec. 721(b) purposes, I believe it depends on whether there are other investors, family members, etc. who will also be contributing similar assets. If the client is the only contributor, so that he is not diversifying his investments by putting them into this vehicle, then I would guess it comes under 721(a) and no gain is recognized. If there are other contributors, I couldn't tell you how much "diversification" is enough to bring it under 721(b). I know just enough about this to be dangerous. That's about how much you will know after you have been through a basic partnership tax course such as the CCH offering. Enough to be dangerous."

The Living Trust along with the LP and the S-Corp were not intended to be a "scam" or anything that was illegal, immoral, unethical,..... but were a vehicle to help "protect" assets and avoid probate. Unfortunately the only objective of the attorney that set up this arrangement was to make money, which he is entitled to but leaving the documents without an explanation of what they are, how they relate to each other and what to do with them, was not on his agenda but the die is cast, it is what it is. The Living Trust is a 99.5% partner in the LP whose only "business" is buying and selling stock but I'll read up on 721(b) just to make sure that I am not overlooking anything. And as far as being dangerous, I believe that ignorance is more dangerous than having a bit of knowledge because you may know enough to realize that you really don't know anything. Thank you again for helping me through this maze. Regards, Bob Boblink 02:55, 24 April 2011 (UTC)

P.S.-this is a DUPLICATE of a message that I sent/left without the topic/title

Apportioning Guaranteed Payments

Hi Katie,

I saw some of your posts on having to "apportion guaranteed payments by the same percentage as distributive shares of income." I have been looking into this and have come to the same conclusion. My situation is with an LLC where a member is providing services as if he was an employee. The company could easily hire an outside manager and I would argue there shouldn't be a different tax outcome. The member in this case has a very small interest in the LLC. I'm surprised I haven't found more on this. So far I know that MI and MN source the GP to where the partner worked. Also for international tax the IRC also sources based on where the services were performed. Have you seen any journal articles on this? One work around is to call it a 707(a) payment in a non-partner capacity and then prepare a 1099.

Thanks Justin

23:06, 30 April 2011 User:Jlafber

Hello KatieJ,

I took your advice and read over this case (http://www.taxpravo.ru/sudebnie_dela/statya-81297-William_A_Price_v_Commissioner_United_States_Tax_Court_-)

Interested to know, do you think if the legal entity owning the hospital had been structured differently than Mr. Prince would have won?

All the best,

Covance

Safe Horbor (I worked in Asia & my family live in California)

Hi KatieJ,

I left California since March 2006 to work for Philips in Hongkong & China! I then changed my job to another Hongkong company working in China from September 2007 through February 2010! On March 2010 I started with another company working in China. I am now temporary back to US to sell my house in San Diego. The plan is to also move my wife to HK/China. The kids are all in colleges now.

I travelled back to California once a year for about 3-4 weeks. I have no intangible incomes from any sources. All incomes were from working in Hongkong/china.

While I was out in HK/China, my wife and 3 childrens are living in California. My wife is a homemaker!My 3 childrens attending schools in California!

California FTB is now questioning me on my 2009 tax return... I thought I am qualified for the safe harbor rule... So, I didn't file any California tax return while I was away eventhough my family are in California!

Questions: 1. I believe I qualified for safe harbor rule, am I? 2. Do I still need to file california return for 2009? They didn't ask for 2007, 2008! 3. how do I claim safe harbor? Letters from the companies I worked for in Hongkong/china? My passport? 4. I heard some said I qualified for safe harbor but my spouse NOT and some also said she has to file with half of my income? If this is the case, can she still able to itemize full deduction from mortage,...?

Please advise...

Thanks

TomKung Tomkung 11:16, 12 May 2011 (

KatieJ,

I updated my profile per your request but I can't find the consumer's board, so, I posted under Intuit Tax Questions area...Please Help

Thanks Tomkung 03:05, 14 May 2011 (UTC)

Don't know where

Hi, Katie: I don't know where your non-pro posted his question. It wasn't on this site, and I checked the other intuit boards, including the TurboTax board - which is where he really should be posting anyway - and I didn't see a relevant question on any of those.

Perhaps he should just be redirected to either TurboTax community to post the question there, or better yet, Discussion:How to find a local Tax Professional, so he can work with someone who can understand the entire situation and implications of any elections, etc.

Trillium 14:38, 14 May 2011 (UTC)

Non-resident safe harbor

I posted this on tax almanac and did not receive any comments. I was wondering if you could help me with this issue. Thanks in advance for any help:

My client left Calif in Aug 2010 under a > 546 day employment related contract and has not returned. Question: Can he be considered a PY resident in 2010 under the safe harbor? My confusion is that FTB Pub 1031 and §17041(d) say "return" visits up to 45 days in a tax year are allowed under the safe harbor. He left in Aug and didn't return. However, the 540NR instructions say if he is present in CA more than 45 days in 2010, he doesn't qualify for the safe harbor. He was present before he left (ie, Jan- July). As a follow up question, is any election or statement required on the return to claim the safe harbor?

User:Taxinca

Hi, Katie - Here's a link to Taxinca's discussion, since I know you prefer to respond on the boards: Discussion:Calif Non-Resident Safe Harbor.

Trillium 02:05, 27 May 2011 (UTC)

Sorry I missed you the other week

when you were in Waynesville. So sad to hear of the loss of a family member too.

I was actually out of the office that day, so I didn't even get your message for a few days when I returned.

Hopefully next time you visit the are it is for happier reasons!

Thanks for calling!

Kevinh5

Hello Katie,

I'm hoping you can help me with a CA-specific question. It's related to some questions you've answered before but none of them fit this specific fact pattern.

Client had an approx $30k capital loss in 2002, carried forward and only used against ordinary income $3k/yr in subsequent tax returns. The carryover will be just about used up next year.

Now the client has found out that, due to VLCI2 he may have to amend several (but not all) California returns since 2005 to report cap gain distribution income from a foreign account and pay tax on it.

Must the capital losses previously carried forward be brought BACK to 2005 to offset this income? 2005 would use up a portion of the carryover as would 2006, 2007 and 2009 but the amount carried forward year-to-year will obviously change, and for CA only the loss would "run out" before 2010 and additional tax would be due on the 2010 return (independent of the VLCI2 income) because $3000 of ordinary could no longer be offset.

Or should the year-to-year carryforward regime be preserved resulting in additional tax liability for the earlier years of this sequence?

Thanks very much.

Steve Newtaxguy 19:07, 5 August 2011 (UTC)

Katie - I think that Newtaxguy may have posted a part of that issue on the forum, here: Discussion:Cap loss carryover in back year amendment; in case you wish to respond there. Trillium 19:25, 5 August 2011 (UTC)'

Hello KatieJ,

We messaged in days past about state composite tax issues and I respect you broad perspective.

Am dealing with reverse credits for taxes paid to other states, specifically where a CA resident has apportioned partnership income in several states including VA (both party to a reverse credit agreement).

So odd to see non-resident VA granting credit for resident CA tax, and CA refusing credit for VA tax. I thought reciprocity agreements in general facilitated portability for wage earners - but business income as well, and across the country?

Does a reverse credit for only pass-through business income make sense to you, i.e pass the "smell test" for intent?

Much thanks, Fpayne 23:53, 3 October 2011 (UTC)FpayneFpayne 23:53, 3 October 2011 (UTC)

CA unitary return Capital loss

Hi Katie,

Its mshikder again. I need to check with you one more thing.

I am filing combined return to CA which consist of all members in a federal consolidated group except for a insurance company. I am leaving out the insurance company because I believe, CA does not impose income/ franchise tax on insurance company.

Anyway, some members have capital gain and one member has capital loss. Should I add back the entire capital loss on CA return for that member?

Thanks again.

I appreciate.

Mohammed 612 859 6644

CA unitary return Capital loss

Hi Katie,

Its mshikder again. I need to check with you one more thing.

I am filing combined return to CA which consist of all members in a federal consolidated group except for a insurance company. I am leaving out the insurance company because I believe, CA does not impose income/ franchise tax on insurance company.

Anyway, some members have capital gain and one member has capital loss. Should I add back the entire capital loss on CA return for that member?

Thanks again.

I appreciate.

New York CT-3 question

Hi Kathie,

I have a follow up question regarding my question at this thread http://www.taxalmanac.org/index.php/Discussion:New_York_CT-3_question. I would be more than willing to pay for your time.I was wondering if you could contact me via khanzade@swbell.netto discuss this matter further.

Regards AmirK

CA New Jobs CreditBob W 13:47, 22 December 2011 (UTC)

Hi Katie, I am an out of state preparer and I could sure use some help with this credit for a client in CA. Could you please contact me? bob@raw-cpa.comBob W 13:47, 22 December 2011 (UTC)

Nah,

I just get off on being snarky some days. Kevinh5

But you're right, it would help if people wrote comprehensible questions in decent English using lower case letters appropriately.

Does limited partner of an LLC have filing requirment in CA.

Hi Katie,

I have many questions:

Does a true limited partner have a filing requirement in CA. A CA partnership has nexus with CA and has a limited partner, that is an llc, without nexus with CA. I believe the limited partner would have a filing requirment to pay tax on their share of income, but no franchise fee.

Should they file form 568. I think they should. It's for 2009, so they would already be late.

I hope this makes sense.

TOrahaCPA 20:28, 9 January 2012 (UTC)Terry

Los Angeles area preparers

Hi Katie,

Hope all is well and the New Year brings forth great promise for you. Anyway, it is that time right now and I had a client come in with an California LLC non filing issue. Didn't file in 2010 and needs to file in 2011.

With the regulations abundance of California tax law, I am hesitant to deal in that state.

My client is a 49% shareholder in the LLC, her sister owns the other 51%, and I have no idea even what kind of business entity they have chosen. The sisters plan was to just go to an H&R Block. Obviously I said Nooooooooooooooooooooooo.

If you know of anyone in the LA area, or you yourself are wishing for new clients, any assistance is appreciated.

Fsteincpa 16:41, 10 January 2012 (UTC)

Sent

Email has been sent.

Thanks much for the referral.

Fsteincpa 20:19, 10 January 2012 (UTC)

Terry EA

Thanks for the referral. Terry called yesterday and I forwarded his phone number along. We talked for a bit. He seems very nice and was very helpful. We shall see what comes of it.

Thanks again,

Fsteincpa 22:19, 12 January 2012 (UTC)

Hi Katie, although I have been using TaxWise software since the 1990 filing season, I have never used the online version. Overall I've been extremely satisfied with the software, even after CCH took over. I've also been using UltraTax for the last few years, and while TaxWise is not even close to the power of UltraTax it also doesn't cost nearly as much. For less than $2,500 for TaxWise I get unlimited everything (all businesses and all states) including unlimited e-files! That won't even buy the base UltraTax package. The office that I use UltraTax in spends about $14,000 per year after PPR and efile fees. Although TaxWise has it's limitations, for the price it is a great program and handles 95% of my clients returns quite easily. For someone with a lot of clients with S-Corps and partnerships I would definately recommend something with better tracking and data-sharing such as UltraTax.

I'm sorry I couldn't give you any insight into the online version.

TaxWise online

Hi Katie, although I have been using TaxWise software since the 1990 filing season, I have never used the online version. Overall I've been extremely satisfied with the software, even after CCH took over. I've also been using UltraTax for the last few years, and while TaxWise is not even close to the power of UltraTax it also doesn't cost nearly as much. For less than $2,500 for TaxWise I get unlimited everything (all businesses and all states) including unlimited e-files! That won't even buy the base UltraTax package. The office that I use UltraTax in spends about $14,000 per year after PPR and efile fees. Although TaxWise has it's limitations, for the price it is a great program and handles 95% of my clients returns quite easily. For someone with a lot of clients with S-Corps and partnerships I would definately recommend something with better tracking and data-sharing such as UltraTax.

I'm sorry I couldn't give you any insight into the online version.

Sorry for the messed up post, I haven't posted on users' pages much!

Nightsnorkeler 06:01, 3 February 2012 (UTC)

Taxation of LLC where two owners are CA residents and one is Texas Residence

Hi Katie,

First off - Thanks, in advance for your help. I'm a practicing CPA here in San Diego and also a SDSU Grad (long time ago...)

I have a client who does consulting work. They are a LLC formed in CA. Two partners live and work here in CA. One lives and works out of Texas. They work equally for their business and do work for other business' all over the world.

The Texas owner's CPA proposed the following split of income. I don't think this is possible, but am having a problem understanding the rules for allocation of income.

- Each partner will receive $120K in guaranteed payments. This is treated as wages for tax purposes. As such, B's (The texas owner) $120K is subject to TX income tax (or lack thereof) while the two CA owners is treated as CA tax. - The remaining profits in the company (~$40K per partner) are distributed equally among us, not wages, but ordinary income. - These monies need to be "apportioned" based on states of residence of the partners: 2/3 of this is subject to CA tax and 1/3 is subject to TX tax. - The three of us would file CA and TX forms because of the apportionment. - Additionally, the company would have to do an LLC filing in TX for the apportionment to apply. We are likely to be below the Texas threshold for any entity level taxation.

This is what was proposed by the texas owners' CPA.

Do you think this works?

I read the following document - https://www.ftb.ca.gov/law/notices/1999/99-8att.pdf

This seems to indicate that the owners all split the income based on where the income is earned AT THE PARTNERSHIP LEVEL. So based on this, the owners from CA would be taxed in CA on all their income and the owner from Texas would get taxed on 2/3 of his income to CA.

What do you think?

Again - Thanks, in advance for your help.

Take care- Mark

Taxation of LLC where two owners are CA residents and one is Texas Residence

Hi Katie,

First off - Thanks, in advance for your help. I'm a practicing CPA here in San Diego and also a SDSU Grad (long time ago...)

I have a client who does consulting work. They are a LLC formed in CA. Two partners live and work here in CA. One lives and works out of Texas. They work equally for their business and do work for other business' all over the world.

The Texas owner's CPA proposed the following split of income. I don't think this is possible, but am having a problem understanding the rules for allocation of income.

- Each partner will receive $120K in guaranteed payments. This is treated as wages for tax purposes. As such, B's (The texas owner) $120K is subject to TX income tax (or lack thereof) while the two CA owners is treated as CA tax. - The remaining profits in the company (~$40K per partner) are distributed equally among us, not wages, but ordinary income. - These monies need to be "apportioned" based on states of residence of the partners: 2/3 of this is subject to CA tax and 1/3 is subject to TX tax. - The three of us would file CA and TX forms because of the apportionment. - Additionally, the company would have to do an LLC filing in TX for the apportionment to apply. We are likely to be below the Texas threshold for any entity level taxation.

This is what was proposed by the texas owners' CPA.

Do you think this works?

I read the following document - https://www.ftb.ca.gov/law/notices/1999/99-8att.pdf

This seems to indicate that the owners all split the income based on where the income is earned AT THE PARTNERSHIP LEVEL. So based on this, the owners from CA would be taxed in CA on all their income and the owner from Texas would get taxed on 2/3 of his income to CA.

What do you think?

Again - Thanks, in advance for your help.

Take care- Mark

Katie!

I am so sorry to read about your recent health issues. Rehab after a stroke can take time, so be sure to give yourself time... get lots of rest and try to recognize all of the small gains you are making every day. Hope to have you back here at full strength when you're ready. (And at half-strength you probably run circles around most of us anyway. So to speak.)

Trillium 03:05, 29 February 2012 (UTC)

Get well

Sorry to hear about your stroke. Hope you have a smooth recovery. Nevermind on my poorly timed question. Take care.

Jimmer 14:39, 29 February 2012 (UTC)

Get Well Soon

Sorry to hear about your stroke, I hope you fully recover. I have read many of your answers and it seems like you have command of many corporate Tax topics like no other. Readers and contributors of Tax Almanac are blessed with your answers, I hope you fully recover and get well soon. I do have an 'S' Corporation COD by shareholder to his 'S' Corporation question. Thank you in advance for your kind help.cloudaccounting 03:08, 4 March 2012 (UTC)

Stay strong

I was sorry to hear your news; but the Katie we know will do battle & come back stronger than ever. As Trillium said, you can run circles around us under any circumstances. Please keep us posted on your progress; your expertise and humor will be missed as you recover. Belle 17:45, 4 March 2012 (UTC)

Just a quick "Hello"...

Hi KatieJ, Just wanted to drop a quick note of thanks for your reply to my question, and to let you know you've been added to my prayers for a quick & speedy "Catch-Up"....for a complete recovery! Just keep plugging away!

CA

KatieJ - I had a question for you:

CA LLC (partnership) based in San Francisco has a member that is also an LLC (also taxed as a partnership). This upper-tier LLC is based in NC. When K1 income flows up from the lower-tier LLC (the CA LLC) to the upper-tier LLC (the NC LLC), are there any CA tax withholding obligations...on the flow-thru income itself?

I don't think there is, but thought I'd check.

If I'm right, individual members of the NC LLC, all of whom are CA non-residents, will be part of a CA Group Composite Return, Form 540-NR.

(My recollection and 'real quick' last minute research here seems to indicate that CA withholding tax is only due on actual "distributions" - not on pass-thru income. FYI - This return will be extended, seeing that client just throws this at me at the last minute).

We have always filed CA LLC returns for both entities...but this will be the first year that the thing has made any money.

You're the Best!

Ckenefick 03:15, 7 April 2012 (UTC)ckenefick

Thanks!

Thanks, KatieJ. I appreciate the feedback. One question...you mentioned:

The upper tier NC LLC can get a waiver of withholding by agreeing to withhold when it makes a distribution to its individual nonresident members.

When lower issues K1 to upper tier, upper tier will report said income as CA source and flow it through to the K1's it will issue to the individual members of upper tier. As such, the individual members will pay CA tax on this income (either via a composite return or via filing separate individual returns).

But when said income (a portion, actually - just a tax distribution) is actually paid from lower tier to upper tier (most likely in the following year), and then actually paid from upper tier to individual upper tier members...it seems to me there should be no CA withholding on any of these payments b/c this income has already been taxed to CA.

I've browsed through the pub, but haven't read it thoroughly. I thought I saw something to the effect that if the distributed income has already been taxed in CA, no withholding is actually required.

Ckenefick 21:14, 14 April 2012 (UTC)ckenefick

Arthur

Katie, I just had occasion to look up your profile (again) and saw that you had a stroke. very sorry to hear it, and really hope you are doing well. Reason I looked you up is that I was answering a question for another TA pro, who turns out to be an Arthur alum, also in CA. Her TA name is CindyLee. There are quite a number of us. Did you happen to see my post kidding you about practicing law w/o a license and my not "catching" you? Len PodolinPodolin 22:50, 18 April 2012 (UTC)

Hi Katie,

Very sorry hear the news of your stroke. I hope you are feeling better and recover fully soon. Please feel free to let me know if I could be of any assistance.

Best wishes and regards.

Mohammed

I hope you are progressing well.

So sorry to hear of your recent stroke. We love you. Kevinh5

Hi KatieJ,

I don't know you beyond this message board but I must say you impress me as quite a terrific person on numerous counts. You obviously are a very eloquent writer and seem quite knowledgeable in taxes. Your profile reads quite well also. I see you suffered a stroke. I never had a stoke per se (although I'm always fearful of getting one) but I did have a heart attack back in 2006. I think any serious medical condition or illness changes your perspective on life and makes one re-think many of the things we take for granted. I certainly wish you all the best and I hope you have a full recovery. We need to hang on to as many good people as we can. Again, thanks for your feedback on my post. I appreciate the help.Bob K 21:33, 10 May 2012 (UTC)

2008 SOL NYS

Hey Katie! I see you had a response to my post about the 08 SOL for NY. It did not take.....when I look, it has your name as the last poster, but no post.

Thanks for taking the time! Hope you are well.

Kbairtax

2008 SOL NYS

Hey Katie....Thanks for clarifying.

I looked on the NYS website too and found as you did...nothing. THe IRS website I did find the right information so I am good there, but I am just not sure if NYS conformed. THey GENERALLY do, but I could not even find antyhing that states the normal. I will keep looking.

Thanks again! Kbairtax

2008 Refund

Katie...

I found it in an article on the site, so it is likely not authoritive. BUT, I will use it to my advantage as it was released to the public.

http://www.irs.gov/newsroom/article/0,,id=254725,00.html

Thanks again for taking the time on this!!

Kbairtax

2008 refund

Katie....Thanks for you help. I hit the same dead end. What I was more hoping someone knew is where it is that NYS follows the IRS for due dates. Or a court case that may mention that they do. I don't have a good way to search those things for NYS. I can never remember a time when NYS did not, but then again, I have only been doing taxes for 10 years.

If you come across anything, you know where to find me. I am going to fire off a letter and see where it gets me.

Thanks again! Kbairtax

2008 Refund

Katie....you made my day! Thanks for the cite. I am going to tuck that way as I see a second letter getting written after NYS denies my first.

Kbairtax 21:09, 21 May 2012 (UTC)

Hi Katie,

This is Phillysunny, You responded to my issue on demand penaly for 2010 tax return. I would like to know frmo you if I should call them and discuss this over phone and/or also send fax of explanation?

Also I wanted to see if the tax return which was created is right or wrong since now I dont trust my that CPA who is not reachable. FTB said they are taking anywehre upto 11 weeks to process return, So should I take next few days to get my return cleaned and verified and send it by thursday (postmark day) so that it's right. My concern is in case if penalty is not waived I at least need to make sure my actual tax liability is correct/less so that 25% of that is proportionately lesser.

Thanks,

Sonny Phillysunny 19:02, 11 June 2012 (UTC)

Phillysunny 19:02, 11 June 2012 (UTC)

3805Z Trade or Business Income

Katie, Thank you for your recent post on Discussion:CA_Form_3805Z_-_Trade_or_business_income_limitation and setting WEISSEA straight on what the question is. I was wondering if you had any opinions about my question on how much income is reported by the taxpayer in calculating how much credit they get to claim.

I have received instructions from one of these tax credit mills on how to prepare my client's 3805Z and it does not seem correct.

• • Thank you for the reply, Katie.

--Wiles 14:23, 29 June 2012 (UTC)

LP technical termination

Hi Katie, I was in your tax class back in 96. I hope you're doing well and could help with a weird situation I have.

I have a LP client that filed a final 2008 return and mailed the Certificate of Cancellation on 4/12/09.

Unknown to the client (until a few months ago), the Certificate of Cancellation was rejected by the SOS because the signer wasnt the GP on record.

He recently got a FTB notice for the 09 tax return. In order to cancel with the SOS, he filed the amendment to change the GP to an SMLLC and also the Cert of Cancellation of 1/12/12. It was accepted and endorsed by the SOS.

Now we don't know what to do about the 09, 10, and 11 CA tax returns. My original thought was to file the 565 for those years and pay the tax. The odd thing here is that all the other partners left as of 12/31/08, so that would that leave just the one GP for 09, 10, 11? By defintion, the partnership terminated with the greater than 50% change. Could I argue that the LP had a technical termination on 12/31/08 and therefore not liable for the $800 tax for those later years?

Also, the new GP is an SMLLC which will dissolve this year. The LP was never profitable and never made distributions to the partners.

Any thoughts would be appreciated. Thanks. Birdman 19:05, 10 July 2012 (UTC)

California LLC

dear Katie,

I am not a tax professional and I have been reading some of the posts in an attempt to better understand the tax liabilities of our California LLC (me and my husband and two friends) which provides scientific consulting. For example, I learned from your posts that LLCs are not supposed to give partners wages, but rather guaranteed payments, something I had not expected. In short, we can really use a tax professional like you to help us with tax planning and returns. We are in San Diego and we like to know if you are still accepting clients. If not, we would really appreciate your referral of other CPAs.

Thank you kindly,

Chuan

8583577134 csuanza@yahoo.com

EZ Credit

Katie, Just wanted to let you know that I updated the thread.

--Wiles 23:27, 11 July 2012 (UTC)

KatieJ - I'm so sorry to hear about your health. I hope your recuperation is going well.

Here's a really odd issue to consider if you feel like it.

I have a client here in Maryland who moved out of state Oct 2011. He is owner of a very profitable S corp, only 5% of the income being allocated to MD.

So I was assuming that I would include 3/4 of the S corp income on his resident return.

But, now I see MD Administrative Release 8, which tells me that ALL of the 2011 S corp income is allocated based on where his residence was as of the last day of the year!

This is costing the state of MD hundreds of thousands in taxes on this return, but I suppose they would make up for it with taxpayers who move into the state part way through the year, which of course with tax rates approaching 10% is getting less and less likely.

Is that odd? Do you know if other states have this rule, as opposed to simple proration based on days of residence in the state?

Smokeytax

Smokeytax 09:41, 24 August 2012 (UTC)

Better

i hope you are doing well. What do I know? 14:21, 27 December 2012 (UTC)

Special allocation of multi-state income

Hi Katie

I was in the Masters program (tax) at SDSU in late 80's and took a class from you while studying there.

I have a client who gets a K-1 from a multistate business that apportions their income. The LLC does commodity trading from multiple office locations. One of the partners in OK gets an override on the CA office income. He gets a distribution payment for that income. The apportioned K-1 income from CA is much larger. The CA partner is getting income apportioned from OK, but he has no interest in the OK office, or their profits.

Could they have a special allocations agreement to specially allocate the partners income, to be weighted by the actual income sourced from each state? Any excess or shortfall would be allocated on the weighted average. CA apportioned income would still be allocated the same, but the alllocation amongst the partners would be different based on the economic reality of their earnings source. This would be part of the shareholder agreement. Would CA have a problem with this? Would it have to be approved by CA ahead of time?

I looked at CA 25137 regarding a petition for a special allocation - is this ever approved?

Thank you

BrucebcaBrucebca 17:28, 18 January 2013 (UTC)

brucebcpa@hotmail.com

Hi Katie,

I hope you are recovering well from your recent stroke. I see you have made some great contributions to this site I am thankful to you for that.

I came across your page while searching for an answer to my state sourced income question and I see that you are an expert on state tax issues. I was hoping you may be able to provide some insight to my recent question.

The post is located at the below link. Thank you.

http://www.taxalmanac.org/index.php/Discussion:Truck_Driver_/_Maine_State_taxes_(source_of_income)

CA - change of domicile to WA

Hi KatieJ - I hope you are recovering well. Your knowledge on residency is impressive!!

I have a client who is moving out of CA to WA for a new long term job - maybe 4-6 years, to work with a company to the point of sale, then sell the company for a substantial amount of money. We are trying to make sure that domicile is changed to WA. They have two houses here in CA - one in the mountains, and one "regular" they have lived in for years.

My question is - I know that CA wants the intent for them to be gone either permanently or indefinitely. They will do the usual - change voter registration, drivers licenses, new church, etc. But what about the house in CA? They want to keep it, and potentially move back in 5 or so years. Is the 5 years indefinite enough to be gone and not considered domiciled in CA? I have read they should lease the house unfurnished to an unrelated 3rd party to at least sever this tie. Would it hurt the domicile issue if they moved back into this same house 4-6 years later? Any chance that 5 years is long enough that they could let their adult daughter live in the house rent free - or is that not a permanent severing of the ties? The spouse wants to come back to CA one week a month to visit her daughter, and also spend time in the mountain house. How does the sever look in that situation?

The biggest concern is that if this new company in WA does indeed sell in 4-6 years, then we don't want CA to tax on the sale. The 546 day rule won't work in their instance since they plan to be in CA more than 45 days each. The current home in CA is really the sticky point right now.

Thank you so much.

Lemon-aide 21:00, 5 August 2013 (UTC)

Thanks so much for your reply. I am glad to see you back on this site!

Nexus thread

Hi KatieJ,

I see Fred drew you back to TA today. I am glad to hear you are doing well.

I don't know if you stuck around long enough to see an old thread was bumped up by yours truly. Discussion:What_is_nexus?. I would really appreciate any input you can provide on this.

You need to spend less time on Facebook and more time with your real friends here on TA.

--PVVCPA 22:11, 12 September 2013 (UTC)

Thank you for taking the time to respond. I very much appreciate it. I hope to see you around TA more often.

--PVVCPA 14:53, 14 September 2013 (UTC)

Katie, we have missed you

hope you are doing better. Lots of folks worried. See the "Have you noticed" discussion. Kevinh5 21:13, 17 September 2013 (UTC)

End of the forum

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