Head-Scratcher Comment of the Day

[Burke]

After 3-4 emails back and forth about the FIN-CEN 114 requirement, I get this: "$72,527.12 in equivalent USD is less than $10,000. I thought I only had to file it if it was over $10,000."

[RitaB]

Well

After 3-4 emails back and forth about the FIN-CEN 114 requirement, I get this: "$72,527.12 in equivalent USD is less than $10,000. I thought I only had to file it if it was over $10,000."

"Well, you thought wrong." Hahaha

I seriously, this morning, had an IDIOT call me on a bad connection, from TX, wanting to know if he could pay his wife to manage rental so he could increase income for EIC purposes. I was soooo furious. I told him, "You people need to get jobs and stop basing financial decisions on how to maximize EIC, and did you get your return that I mailed to you a month ago? And would you sign 8879 and pay me and not talk to me again?"

[JohnH]

After 3-4 emails back and forth about the FIN-CEN 114 requirement, I get this: "$72,527.12 in equivalent USD is less than $10,000. I thought I only had to file it if it was over $10,000."

Yes, in rupees, won, yen or kyat.
But not with that dollar sign in front.
What are they thinking?

Maybe they're trying to convert Iraqi Dinar to dollars....

[Gretel]

I bet he read it as $100,000.

[Burke]

Except that I told him that three times. Apparently once you read something wrong, I guess it sticks. After I emailed back again, I simply said, $72K is more than $10K. Haven't heard back. (PS: $72K is after I converted to USD from CAD).

[Gretel]

Who knows, but you are rights, sometimes we are very stubborn for whatever reasons, at least I experience myself that way.

[Corduroy Frog]

Not so fast

"Well, you thought wrong." Hahaha

I seriously, this morning, had an IDIOT call me on a bad connection, from TX, wanting to know if he could pay his wife to manage rental so he could increase income for EIC purposes. I was soooo furious. I told him, "You people need to get jobs and stop basing financial decisions on how to maximize EIC, and did you get your return that I mailed to you a month ago? And would you sign 8879 and pay me and not talk to me again?"

As wacky as this sounds, I'm not so sure it's disallowable. I might disallow it on principle, but don't know that the IRS would do so.

Some years ago, taxpayers were encouraged to pay their spouses compensation for the purposes of giving them earned income, thus allowing eligibility for IRAs. There are "spousal" IRAs but quite limited, and the strategy had the full knowledge and blessing of the IRS.

So what makes the EIC any different based on the theory? Other than the disgust involved, I'm not sure there is any difference at all.
One problem is there is no prior precedent. (But there wasn't in the IRA situation either). If I went down this road, I would make sure the compensation is reasonable, and SE tax was charged. I would also make sure there was actual payment. Then I would be consistent every year thereafter, regardless of whether it brought any benefit, and that SE tax would be charged regardless of any other EIC factors, or lack thereof.

Someone please chime in and tell us whether there is a regulation against this. Something like "for purposes of EIC, earned income cannot include payments from related taxpayers". As far as I know, there is nothing stopping this. Good taste and moral standing never seems to matter in taxes anyway...

[kathyc2]

As wacky as this sounds, I'm not so sure it's disallowable. I might disallow it on principle, but don't know that the IRS would do so.

Some years ago, taxpayers were encouraged to pay their spouses compensation for the purposes of giving them earned income, thus allowing eligibility for IRAs. There are "spousal" IRAs but quite limited, and the strategy had the full knowledge and blessing of the IRS.

I thought the same thing, but the property would need to be titled under husband name alone for it to work. Since it's in TX that might not even work with the strange way community property states work.

[Super Mom]

Trailer Park Owned by TP

I have a new client that has a trailer park. Their previous preparer told them they could deduct up to 1500.00 per year for grounds care/maintenance. I'm thinking the only thing they can deduct are expenses they have receipts for, however, there is a safe harbor for home offices, so maybe their is something I don't know about. Anyone know? I also will be having to research how to deduct home office expenses for a sched E activity, only familiar with that on C and F. Any input there from experience would be very much appreciated. Thanks in advance for helping.

[RitaB]

I didn't tell him he cuuldn't do it

As wacky as this sounds, I'm not so sure it's disallowable. I might disallow it on principle, but don't know that the IRS would do so.

Some years ago, taxpayers were encouraged to pay their spouses compensation for the purposes of giving them earned income, thus allowing eligibility for IRAs. There are "spousal" IRAs but quite limited, and the strategy had the full knowledge and blessing of the IRS.

So what makes the EIC any different based on the theory? Other than the disgust involved, I'm not sure there is any difference at all.
One problem is there is no prior precedent. (But there wasn't in the IRA situation either). If I went down this road, I would make sure the compensation is reasonable, and SE tax was charged. I would also make sure there was actual payment. Then I would be consistent every year thereafter, regardless of whether it brought any benefit, and that SE tax would be charged regardless of any other EIC factors, or lack thereof.

Someone please chime in and tell us whether there is a regulation against this. Something like "for purposes of EIC, earned income cannot include payments from related taxpayers". As far as I know, there is nothing stopping this. Good taste and moral standing never seems to matter in taxes anyway...

I didn't tell him he couldn't do it. But I'm not checking into it before April 15. And they DO need to get jobs. And return Form 8879. And pay me. Maybe my use of the word "IDIOT" made you think I dismissed the idea. No, he's an idiot on principle and years of experience. Also probably posted in the wrong thread. The head scratching is because I have trouble with people finagling to get free money when they could earn it. It's like, "I'll do a lot of things for money, but I'm going to draw the line at working."

[RitaB]

Not in TX

I thought the same thing, but the property would need to be titled under husband name alone for it to work. Since it's in TX that might not even work with the strange way community property states work.

The property is in TN. Another reason I will study hard and long on this one, after the 15th, because I don't think much managing is going to happen from TX, and it's pretty obviously a move to maximize EIC, he actually said so, and that makes me furious and reluctant to be a party to it.

[manyhappyreturns]

Home office for rental

I also will be having to research how to deduct home office expenses for a sched E activity, only familiar with that on C and F. Any input there from experience would be very much appreciated. Thanks in advance for helping.

Some tax prep software allows you to set the 8829 to flow to the Sch E, and some do not. If you're software doesn't, you can figure out the amount on the 8829, then delete it and enter it as "Home office expense" in the miscellaneous section on the Sch E. If you do it that way, make sure you adjust the mortgage interest and property tax if you are also itemizing deductions.

[manyhappyreturns]

I had a client a couple of years ago who lived in Oklahoma and got a temporary job here in California that lasted several months. She had done research on "tax home" and wanted to include in her job expenses a rather exorbitant amount of money that she paid her teenage son and daughter for cleaning and yard maintentance of her house in Oklahoma while she was away.

[Burke]

I know. I have another one right now that I am going back and forth on, because he doesn't get it that the personal residence he sold this year, and which he has not lived in since 2005, is not excluded under 121. He has another home which is his primary residence. I don't think he is really trying to game the system; he just doesn't understand what the system is. He thinks because he never rented it, that it is okay to exclude.

[RitaB]

Hmmmm

I have a new client that has a trailer park. Their previous preparer told them they could deduct up to 1500.00 per year for grounds care/maintenance. I'm thinking the only thing they can deduct are expenses they have receipts for...

They can deduct actual expenses.

I really get a kick out of some previous preparers.

My client told me last week that HIS friend's preparer deducts $8,400 a year advertising because his van with a sign on it is the same thing as buying a $700 a month billboard. I told my client, hey, ask your buddy who he paid for the billboard equivalent, and see if any lights come on.