Amendment advise for Sch C

[JAinNC]

New clients came in last week. Sch C service business, wife and husband work same number of hours, children go to day care.

Last 3 years preparer gave no advice on need possible need for 2 Sch Cs so wife would show income -- or could have had husband issue 1099 to her and have her file her a Sch C.

Problem -- preparer gave them big "Life time education Credits" last 3 years -- when it should have been child care credit.----- but wife had no income so no Child care credit.
The children were both under 5 years old. How long will IRS let that sit before they disallow that????

After I questioned futher there are more deductions that could have been taken. 2006 purchased 23000 in business equip. Not on retrun. No depreciation.When they bring me backup on this, can't I sec 179 and expense off if needed on 1040X ?????

I advised clients that they need to have amendments done to correct the "Education Credits" taken that were not allowed. But I want them to be able to at least use the Child care credit.... and any other deductions that were missed.
Preparer is in another state and still has all old years recpts and documents. I advised them to request their info back.
Any opinions?
Thanks,
Jeannie

[ChEAr$]

You're certainly on the right track

New clients came in last week. Sch C service business, wife and husband work same number of hours, children go to day care.

Last 3 years preparer gave no advice on need possible need for 2 Sch Cs so wife would show income -- or could have had husband issue 1099 to her and have her file her a Sch C.

Problem -- preparer gave them big "Life time education Credits" last 3 years -- when it should have been child care credit.----- but wife had no income so no Child care credit.
The children were both under 5 years old. How long will IRS let that sit before they disallow that????

After I questioned futher there are more deductions that could have been taken. 2006 purchased 23000 in business equip. Not on retrun. No depreciation.When they bring me backup on this, can't I sec 179 and expense off if needed on 1040X ?????

I advised clients that they need to have amendments done to correct the "Education Credits" taken that were not allowed. But I want them to be able to at least use the Child care credit.... and any other deductions that were missed.
Preparer is in another state and still has all old years recpts and documents. I advised them to request their info back.
Any opinions?
Thanks,
Jeannie

1040x to include:

1. two schedule c's and 2 se's to reflect both spouses' business endeavors.
2. delete the education credits, esp if children were named on the form as qualifiers.
3. No depreciation? gads! Depending on income, you want to tweak the actual
179 and depreciation very carefully (there are over 23,000 possibilities) to achieve
best results for the next five years for clients.

And be sure client is firm about getting their records back, since you and I both know
that IRS says preparer may not keep records when asked to return them.

Good luck, Jeannie!

[JAinNC]

Thanks Harlan

I need the records - especially for assets placed in service.

[Larmil]

For 2007 and 2008 you need no 1099. You can file a 'joint' Sched C.

[JAinNC]

Thanks, I was researching that - but that does not produce two SEs does it????
If yes - would the 2006 also be joint C?

[Larmil]

Thanks, I was researching that - but that does not produce two SEs does it????
If yes - would the 2006 also be joint C?

My software produces two SE's based on the percentage entered on the C. You can only use joint C's for tax years beginning after 12/31/06.

[JAinNC]

Thanks

I knew it was a year that the joint Sch C became allowable.

Appreciate all the help.

[JAinNC]

Oh she can. Works as hard as her husband and just as many hours.

[ChEAr$]

oh really?

My software produces two SE's based on the percentage entered on the C. You can only use joint C's for tax years beginning after 12/31/06.

I was under the impression two schedule c's were to be filed. My software (Taxwise)
produces the desired results, 2 each c's and se's.

[Larmil]

I was under the impression two schedule c's were to be filed. My software (Taxwise)
produces the desired results, 2 each c's and se's.

Sorry, I meant only one input is required.

[Davc]

My software produces two SE's based on the percentage entered on the C. You can only use joint C's for tax years beginning after 12/31/06.

Which while frequently overlooked, was never correct.

[ChEAr$]

Actually

Which while frequently overlooked, was never correct.

I seem to remember hearing about that in community property states, and IRS allowed
said filings. then the rule change in 2006 made it possible to have spousal proprietorship,
except now there must be two schedule c's instead of one.