$10,000 Hobby Income Rule

[DaveinTexas]

I actually spent some time researching this. New client calls (referred by friend at work). Last preparer was an H&R Block Premium preparer. Client tells me he is a W2 worker, wife is not, she operates a Sole Prop but "we aren't reporting anything with it because the income is under $10,000".

This puzzled me so I asked him what he meant by that remark. He said his Premium preparer told him if his wife's business generated less than $10,000, then it is a hobby and you "don't have to report it at all, so were just not going to mess with it this year".

(Retorical question) have you guys ever heard of this? I told the new client the ramifications of not "reporting it" and told him I would help him fix what needed fixing and going forward ensure the proper rules are followed. I guess I'm a fuddy dud, I mean, it would be fun if CI came in the office (guns drawn) but it wouldn't be fun if the guns were pointed at me!

I wonder what type of training they receive at the premium offices. I don't mean disrespect but that little rule I mentioned above, where does stuff come from?

Good luck this year guys, try to stay sane!

[appelman]

Something new every day!

The least one can say is that HRB needs to do a better job of training its "premium" preparers. Even the VITA volunteers that I supervise wouldn't come up with a whooper like that!

[taxxcpa]

hobby income

I thought anything under $ 250,000 was a hobby and didn't have to be reported.

[DaveinTexas]

Awesome!!!

I thought anything under $ 250,000 was a hobby and didn't have to be reported.

Half of my clients won't even have to file.....ER....wait, that's not a good thing!!

What a stimulant to the economy right? No one earning under $250K pays any tax, ah but think of all the roads that wouldn't be built and Congress couldn't get their $200 shoe shines anymore!

[cpahispano]

HRB Premiun Tax Preparer Hobby

I wonder if the HRB tax preparer thinks his part time tax preparer job is also a hobby...

[FEDUKE404]

This is a joke, correct?

I wonder if the HRB tax preparer thinks his part time tax preparer job is also a hobby...

I would love some clarification as to whether the HRB Premium preparer IS or WAS an employee.

(I bet he/she is an absolute hoot re preparation of EITC clients!! )

FE

[WhiteOleander]

So, since the client said they were told not to report the income, it must be true? I've been told all kinds of things by clients so they can blame the prior preparer.

[smithtax]

I forget. Why does the IRS want to test everyone?

[DaveinTexas]

I'll check

I would love some clarification as to whether the HRB Premium preparer IS or WAS an employee.

(I bet he/she is an absolute hoot re preparation of EITC clients!! )

FE

I think the H&R Block employee this client saw the last couple of years is still an employee. I can't recall why this client started asking around for other opinions/friend's referrals.

This was the best phony rule I've heard in a while, it really threw me for a loop.

Go 49ers! (Yes, I am a closet 49er fan living near Jerry World)!

[David1980]

$10,000 huh? Isn't that the size of a deposit to a bank that the bank has to report to the IRS somehow? Wonder if the preparer tells people that cash income doesn't count as income either.

[taxxcpa]

Cash income Rule

Wonder if the preparer tells people that cash income doesn't count as income either.

It is a long-standing "rule" that if you don't deposit the money it is non-taxable.

Of course, it is not a rule of law or a rule of logic. It is a rule of thumb.

[JoshinNC]

New Client This Year

College student, very entrepreneurial, formed an S-Corp couple years back for a technology product he's working on. Comes to me because his brother, a physician, is my client and he referred him. Brings in last year's S-Corp return prepared by a CPA in Washington state (we are in NC) and his 1040 prepared by a "Master Preparer" at HRB Premium office here in NC. S-Corp return appears correct, including shareholder basis worksheet which clearly indicates my client contributed no new funds to the S-Corp and that loss for year is carried over to 2012 due to lack of basis. What does page 1 of 1040 show on Line 17? $40k+ loss from same S-Corp!!!!

"Master Preparer"?! "Premium" office?!

[DaveinTexas]

Masterful

College student, very entrepreneurial, formed an S-Corp couple years back for a technology product he's working on. Comes to me because his brother, a physician, is my client and he referred him. Brings in last year's S-Corp return prepared by a CPA in Washington state (we are in NC) and his 1040 prepared by a "Master Preparer" at HRB Premium office here in NC. S-Corp return appears correct, including shareholder basis worksheet which clearly indicates my client contributed no new funds to the S-Corp and that loss for year is carried over to 2012 due to lack of basis. What does page 1 of 1040 show on Line 17? $40k+ loss from same S-Corp!!!!

"Master Preparer"?! "Premium" office?!

Although I must say I have seen this mistake made by many preparers. Wonder when the IRS will start asking for basis worksheets as required attachment, it may be coming soon, they have started with the 1099B.

[New York Enrolled Agent]

This puzzled me so I asked him what he meant by that remark. He said his Premium preparer told him if his wife's business generated less than $10,000, then it is a hobby and you "don't have to report it at all, so were just not going to mess with it this year".

I wonder what type of training they receive at the premium offices. I don't mean disrespect but that little rule I mentioned above, where does stuff come from?

The comment from the taxpayer is clearly hearsay and to be honest with you, I question its veracity. I believe it's true that these employees earn money for additional forms and entries on the returns they prepare. So are you telling me, the preparer is going to hurt him/herself by ignoring income from a business/hobby on a routine basis? Hard to believe.

I have no connection to HRB but from attendance at local EA chapter meetings, I do know a good number of EAs who work for them. These EAs are all quite competent and I will put their tax knowledge on a par with most of the posters on this board. Personally, I find it silly that other posters automatically accept the original post as factually correct. The company commercials on television may often contain hyperbole and the company does have short-term seasonal preparers but I still won't accept hearsay as being equal to fact.

[cpahispano]

HRB Complaints

The comment from the taxpayer is clearly hearsay and to be honest with you, I question its veracity. I believe it's true that these employees earn money for additional forms and entries on the returns they prepare. So are you telling me, the preparer is going to hurt him/herself by ignoring income from a business/hobby on a routine basis? Hard to believe.

I have no connection to HRB but from attendance at local EA chapter meetings, I do know a good number of EAs who work for them. These EAs are all quite competent and I will put their tax knowledge on a par with most of the posters on this board. Personally, I find it silly that other posters automatically accept the original post as factually correct. The company commercials on television may often contain hyperbole and the company does have short-term seasonal preparers but I still won't accept hearsay as being equal to fact.

Just google hr Block complaints, you might change your mind after looking over the thousands of complaints....