Talking with TaxSpeaker: Video 90
1. I have a client who owes $6800 in federal taxes for 2019. He is prepared to make payment, but has outstanding old IRS debt. The attorney that is handling the old debt (employment taxes and income taxes) has advised him not to make any payments to the IRS because he will not be able to control how they apply the payment. Is this true? Is there anyway he can pay the 2019 liability and know that it will be applied to that year’s taxes.
2. In the situation where the parents make too much income to qualify for the education credits and they decided to not claim the college student as a dependent and the student doesn't claim an themselves either in order to get the $1000 refundable portion of the American Opportunity Credit, in a divorce situation can the custodial parent still claim head of household?
3. Retirement Saving Credit Form 8880, what is a distribution from a qualified plan as defined in sec 4974(c) When we had contributions to a PERA plan (Public Employees Retirement Account) years ago the contributions did not qualify for the credit because it was a qualified plan but it was not voluntary. Now when they are drawing from it, do we have to include it as a distribution?
4. A client paid off his home mortgage and a non-deductible HELOC with a new HELOC. He then took a draw of $18,000 on the HELOC for a down payment on a rental property. He now has three uses for the same loan – home mortgage, non-deductible personal use, and rental. He plans to continue to draw on the HELOC to make future investments in rental properties. At the same time, he is making the required monthly payments on the loan. Using the tracing rules, how do I properly allocate the interest to each activity, especially as the balance of the HELOC goes up and down. To make matters more complicated, the interest rate is not fixed, but is based on the value of One Month LIBOR.
5. Husband (80%) and wife (20%) LLC filing as a partnership. The wife is a homemaker and doesn't work in the business at all. Can she be classified as a limited partner and her share not be subject to self employment taxes?
6. I have a client that bought $20K of stock in a company (BRS) years ago through a broker in IN. A man in TX was indicted for defrauding BRS investors. My client sued and in 2019 recovered only $9620 gross but had to pay attorney fees of $3848. Do the attorney fees paid increase her basis in the stock for purposes of this loss?
7. If an S Corporation that has only rental property activity for the last 3 years, would the S corporation automatically convert it to C corporation? Do I just file form 1120 instead of form 1120S? Should we wait until IRS sends the notice of termination?
8. Two partners own a commercial building. The partnership rents the building to a business that one of the partners owns and materially participates in. Is self-rental determined at the entity level, and so the income is considered self-rental for both partners, or is self-rental determined at the partner level and so one partner is consider self-rental and the other is not?
9. I had a client refinance their loan and did not pull any money out of the refinance. However, the client rolled the costs of the refinance into the new loan. To confirm, would the interest on the portion of closing costs that were rolled in to the loan, NOT be deductible? (ie. 2% of the interest not being deductible, because 2% of the new mortgage represents the rolled in closing costs)
10. "Business Interest Expense Limitation-IRC Section 163(j) Have clients with more than 50 Schedule K-1s (Partnership and S-Corp). Interest expense deductions are through Partnership entities exclusively. None of the Partnership or S-Corporation will exceed $25 million average Revenue Test, does not meet commonly controlled companies since none of the Partnership or S-Corporation will have 5 or fewer owners owning 80% or more. Am I correct in understanding that based on these facts, each entity will deduct business interest deduction at entity level and will provide required proportionate data on Schedule K-1s.? At individual level, if taxpayer has income less that $25 million, is it safe to disregard K-1s data or do they need to complete Form 8990?"
11. Hey Bob, Can you have Inventory if you are a cash basis restaurant?
12. I have a two member LLC that elected to be taxed as an S-corp. One member owns 97% and the other owns 3%. The 97% member sold his interest to another individual. Am I correct that the transaction is treated as outside the LLC between the prior member of the LLC and the new member of the LLC and there is no way to get a stepped up basis for the assets inside the LLC? Going forward the new member will have both inside basis and outside basis?
13. I have a tax question, hope you can help me. I have a client that purchased a business, a pet grooming business with credit cards, the purchase was $48,700. How much of the purchase can I deduct and can the credit card payments be deducted too ? Thank you very much, appreciate your help.
14. I have a new client that had a firm (with EA's) that they paid to do payroll and enter information into quickbooks for all of 2019. They want to have me do the tax return but the EA's tell them that the quickbooks files are their property and will not give them the information to prepare a tax return. What would you suggest that I advise the client to do in this situation?