Digital and Crypto Currency Issues


For people that lost money in the FTX crypto exchange collapse, will their amount that was held in those accounts be treated as a loss for 2022? Apparently, there are still recovery efforts going on.


The losses are not final. The losses may or may not be attributed to theft.  Remember theft losses are no longer deductible through 2025.  We need IRS guidance on this issue.  Based on the little information we have I would not take any losses until IRS issues guidance.
I would like the info from the cryptocurrency.


We offered 3 separate crypto classes in 2022. Contact Claudine at:  [email protected] She can discuss the classes.

The classes will be updated for 2023. August 24, 2023, will be a 2 hour update class.


You can register for our unlimited package at a cost of $249.00.  Best value. It included all our one- and two-hours webinars scheduled for 2023.

See what we currently have schedule at:

More sessions will be added in the future.


The $249.00 cost does not include our Fall 8-hour seminar or the Year end 8 hour seminar.




Other 1099 Issues


Any recommendations for how to handle 1099s reported with SSN and how to “move” them to EIN (and business return)? Schedule C to report and then zero out? Enter in Misc. income and zero out?


Be careful here.  The change needs to be made to the EIN ASAP.  IRS is death on nominee income, in other words nominee the income from a Sch C to an S Corp – I lost that issue in an audit.


Client gets 1099-NEC and has business expenses, so we use Sch C. Claims that is his total income – no cash or other income. Where would you report the NEC income? on “Other Income” line or Line 1 income on Sch C?


I just put the gross income on Line 1 and maintain the applicable year’s Form 1099-NEC.  But I caution you. IRS filters for this sort of thing as most people deal in cash at some time. They have statical studies they use to help decide to audit income.  Based on the audits I did and now continues as a representative – I have always been able to back into the cash income.  Depending on the income – just reporting 1099 information opens the door to potential audit issues.


Ag 1099g payments, if this is for CRP rent, should they go on a schedule E? Prior to putting it in CRP was cash rent, so on these cases I left it on the same schedule.


Sounds like you can continue to report on Schedule E if is for CRP rent based on your inquiry. But IRS will be matching the 1099 G to either the Schedule F or Form 4835.  I would suggest reporting on the Form 4835 in the future.


I have found that 1099S from the sale of a house is not sent separately but rather included with the settlement papers.  So be careful to look for it.


Yes, you are right – we must be diligent


Doesn’t the broker track the non-dividend distributions for us?


It depends, if the broker had the account from the beginning and there were no transfers etc., they may have a record of the non-dividend distributions.  But just like basis, it is the client’s responsibility to track this information.
Do I file a 1099-NEC to someone if I pay by credit/debit card?  I didn’t think so…




Do 1099’s have to be e-filed if there is no tax withholdings and is there a minimum each taxpayer is exempt from, such as files less than 10?


The rule is currently – The requirements to file electronically depend on the type of information returns that are being filed.

§ 6011(e) of the Internal Revenue Code and the regulations thereunder require any person, including a corporation, partnership, estate, or trust, who files 250 or more information returns, such as Forms 1042-S, 1098, 1099-INT, 1099-DIV, 3921, 3922, 5498, 5498-ESA, W-2, etc., to file these returns electronically. 26 CFR § 301.6011-2. This 250-threshold requirement applies separately for each type of form required to be filed, and to both original and corrected forms.


Are farmers now required to send a veterinary a 1099Misc for their services? Is that only if they are not part of a veterinary business?


Business owners, including farmers, who pay at least $600 in rents, services and other miscellaneous payments in the course of their business to an individual –– for example, an accountant, attorney, veterinarian or any person who provides custom services –– who is not an employee or incorporated, must file a Form 1099-MISC (Miscellaneous Income) reporting the income to the recipient and the IRS.


Payments include those made for the purchase of farm products, such as grain, crops and milk.


The only question for us is if the Form 1099-NEC updated this position.  The IRS released guidance late last year indicating that veterinarians meet the definition of a medical provider, therefore, if the farmer pays more than $600 to any vet during the year, they should issue a form 1099 at the end of the year, even if the vet is incorporated.  If you have a vet that provides services during the year and these payments exceed $600 for the year, make sure to issue a form 1099 to them at year-end.  Instead of being listed in box 7 (non-employee compensation), these payments will be listed in box 6 (medical and health care payments). We also looked that the IRS ATG guide for Vets.  They treat Vets as medical professionals.  So, the MISC Box 6 treatment may still be appropriate.

When the RMD is transferred to a charitable organization as a contribution is the distribution code different than 7?


Unfortunately, the 1099R doesn’t generally identify the QCD. We rely on the client to tell us what happened. It’ll be reported as a normal distribution. Your software will require a code QCD to be shown on the tax return.





Inside and Outside Basis and Other Basis Issues


In a Family Farm Partnership where an owner died after harvest, but before sale of the crop.  How is the basis step-up handled for inheritance?  754 Election?


Review the above resource.

Can you explain inside basis and outside basis?


Partnership tax law often refers to “outside” and “inside” basis. Outside basis refers to a partner’s interest in a partnership. Inside basis refers to a partnership’s basis in its assets.

Inside basis refers to the adjusted basis of each partnership asset, as determined from the partnership’s tax accounts.


Inside basis usually comes from partner contributions but may also come from purchases the partnership makes with partnership funds.


Outside basis represents each partner’s basis in the partnership interest. Each partner “owns” a share of the partnerships inside basis for all of its assets, and all partners should maintain a record of their respective outside bases.

754 Adjustments to Basis

As a result of operations, the basis that a partner has in his or her partnership interest will fluctuate throughout the term of the partner’s ownership. The basis of a partner’s interest in the partnership will either increase or decrease according to the following:

The basis of a partnership interest is increased by:

  1. Additional contributions to the partnership or other forms of acquisition (e.g., purchases)
  2. The partner’s share of partnership taxable income, tax-exempt income
  3. Depletion deductions in excess of the basis of the property subject to depletion
  4. An increase in the partner’s share of partnership liabilities (including partnership liabilities assumed by the partner).

A partner’s basis is decreased by:

  1. Distributions of money or other property from the partnership
  2. The partner’s share of partnership losses and non-deductible, non-capitalized expenditures, including the partner’s share of disallowed partnership losses if such losses reduce the basis of partnership assets without a corresponding effect on its income
  3. Any reduction in a partner’s allocable share of partnership liabilities. The IRS stated that a reduction in a partner’s share of partnership debt is treated as an advance of cash to the partner and is taken into account at the end of the partnership year. This ruling formalized existing IRS policy that the decrease in basis occurs on the last day of the year and not on the mid-year date when the partner’s share of debt declines.



Rental Issues


The question on rental said, “average rental period”. So, what so you do with an Airbnb? IRS Reg. § 1.1402(a)-4(c) states that providing services with short-term rentals creates a business that’s reportable on Schedule C and subject to self-employment taxes.


Services. You render services to the occupant when such services are other than those usually or customarily rendered in connection with the rental of rooms or other space for occupancy only. For example, with the seven-days-or-less rental, you render more than occupancy services when you clean the unit, supply clean linens, wash the dishes, and provide maid services.


If all you do is clean public entrances, exits, stairways, and lobbies; collect the trash; and so forth, you are not rendering more than occupancy services.


Net income. If the short-term rental on Schedule C produces a net income, you likely have qualified business income for the possible 20% tax deduction under new tax code § 199A.

Net loss. If the rental that’s reported on Schedule C produces a tax-deductible loss, you combine that loss with other self-employment income to find the net earnings subject to the self-employment tax.


For purposes of the passive loss rules, your property with an average rental of seven days or less is not a rental, even when it’s reported on Schedule E. With an average rental of seven days or less, the property:

·        does not qualify for the $25,000 active participation rental loss break;

·        does not produce material participation hours that you can use to become a real estate professional; and

·        stands alone under the passive loss rules (albeit possibly grouped under the general business—not the rental—grouping rules).


When the average rental period is seven days or less, the property is not a rental property as defined by the tax code. Instead, the property is:

·        a commercial hotel type property that you report on Schedule C of your tax return if you provide services in connection with the rentals, or

·        a weird in-limbo property that you report on Schedule E when you don’t provide services.


If the property shows a loss, you can deduct that loss on either Schedule C or Schedule E if you can prove that you materially participate. With the seven-days-or-less-average rental, you likely have only two ways to materially participate.


The two paths to material participation are easy to understand and apply. Make sure you have a record of the hours to prove your work on the property.


If you have a profit on the rental, you likely have a § 199A deduction when you report the rental on Schedule C as a business.

Although not deemed a business by Schedule E reporting, the Schedule E rental could rise to the level of a business as defined for the § 199A deduction.

If you have a rental complex and you give a few rooms free rent for watching the management and for another that repairs/paints the property, are they supposed to get a 1099 NEC for the value of that rent?


Maybe a Form 1099-MISC or and NEC because the character of this benefit is lodging for the benefit of the employer.


I would issue such a document to the individual that benefited from the lodging as part of their ability to meet their employment obligations.

What if you rent the room/house to 7 persons for 5 days?

7 different periods I mean for avg of 5 days?



When you offer your home, or a room in your home, as a short-term rental through services such as Airbnb, HomeAway, VRBO, FlipKey and many others, you minimize the tax on this income—and sometimes eliminate it entirely—if you follow some of these useful tax tips.

Tax laws are full of exceptions, but the 14-day rule—sometimes called the “Masters exception” because of its popularity in Georgia during the annual Masters golf tournament—is the most important for anyone considering renting out a vacation home. Under this rule, you don’t report any of the rental income you earn from the short-term rental, as long as you:

  • Rent the property for no more than 14 days during the year AND
  • Use the vacation house yourself 14 days or more during the year

If you meet the requirements of the 14-day rule, you do not have to report the income on your taxes and you don’t deduct any expenses as a rental expense.

If you just rent out one room in your house, the 14-day rule applies in the same way as if you rent out your whole house. Fourteen days or less, you don’t even have to report the income on your taxes, but you cannot take any rental expense deductions either.

The rule is simple: you don’t have to report rental income if you stay within the 14-day rule. However, because of reporting laws, companies like Airbnb, HomeAway and VRBO may report to the IRS all income you receive from short-term rentals, even if you rent for less than two weeks. If reported, this income will likely be reflected on a Form 1099-K.


Would 10-12, 2–3-day short term stays and turnovers per month be substantial for Sch C? vs using Sch E?


The Internal Revenue Service recently issued Letter Ruling 202151005 providing IRS Chief Counsel Advice on the application of self-employment tax to certain rental income. The chief counsel first finds that whether an activity is a “rental activity” under Internal Revenue Code § 469 does not determine whether the activity is “rentals from real estate” excluded from net earnings from self-employment under Code §1402 for self-employment tax purposes. In situations that do not involve real estate dealers, the chief counsel further finds that if sufficiently substantial services are provided to occupants, the net rental income may be subject to self-employment tax. The taxpayer requested advice on two general fact patterns that highlight the circumstances when self-employment tax may apply to net rental income.

Fact situation 1

An individual taxpayer directly owns and rents, in a trade or business, a fully furnished vacation property via an online rental marketplace. The taxpayer is not a real estate dealer and does materially participate, so the activity is not a passive activity. The taxpayer provides linens, kitchen utensils, and all other items to make the vacation property fully habitable for each occupant. The taxpayer also provides daily maid services, including delivery of individual-use toiletries and other sundries; access to dedicated Wi-Fi service for the rental property; access to beach and other recreational equipment for occupant use; and prepaid vouchers for ride-share services between the rental property and the nearest business district.

Fact situation 2

An individual taxpayer directly owns and rents, in a trade or business, a fully furnished room and bathroom in a dwelling via an online rental marketplace. The taxpayer is not a real estate dealer and does materially participate, so the activity is not a passive activity. Occupants only have access to common areas of the home to enter and exit the room and bathroom and have no access to other common areas such as the kitchen and laundry room. The taxpayer cleans the room and bathroom in between each occupant’s stay.


What is considered a relative in this case of rental property?


Related in reference to §§ 267, 707 and 318.



FAFSA, Student Loan Issues and Forgiveness and § 529 Issues


If you go to the FAFSA website, you will find that they are no longer taking applications for student loan forgiveness because there is a court proceeding to determine if this will really happened so all applications have been completely suspended.


This is a moving target, you are correct, but it is my understanding that they are processing applications during this time in preparation for future guidance.  It is a confusing issue to say the least.


So, they are no longer taking student loan forgiveness applications?


That is correct as it pertains to forgiveness.


If student would claim $4000 of grants and scholarships as income, can parents then claim the full AOTC credit?


Yes, this is an option if all other tests are met.
If the 529 is too large – what is the best way to withdraw the asset?  Least amount of tax? penalties?  Who should take the funds the beneficiary or account owner?


You might have leftover funds in a 529 plan account after your beneficiary graduates from college, or decides not to go to college. Under 529 plan withdrawal rules the 529 account owner may:

·        Use the money to make student loan payments.

·        Liquidate the account and pay income tax and a 10% penalty on the earnings.

·        Keep the funds in the account to use for graduate school or continuing education.

·        Change the beneficiary to a qualifying family member who will use the funds for college.

·        Save the funds for a future grandchild.


If the child had scholarships in grants in year one.  Four years later funds remain.  Can the parent in year five take out the value of the scholarships given in year one as a qualified distribution without penalty?


I am assuming you are talking about a § 529 Plan??? I am not sure I understand the issue.
Student loan interest is not deductible on married filing separate federal return. Is it deductible on Iowa returns if you file married filing separate on a joint Iowa return?


Good point.
If you use the scholarship or grant for food or housing, you make the grant taxable to student and the full tuition payment is deductible?


That is correct.


If my client uses § 529 money to pay college tuition, can he take AOTC?


There is a formula to avoid double dipping Look at Pub 970.


Can the child with no income or very less income claim the AOTC credit when the parents cannot, due to income limitation?


But the question is Do the parents qualify to claim the child as a dependent. If the parent qualifies and do not claim them, it is as if they claimed them. I do not see in this situation any possibly that the dependent would profit.

Also, there is the issue of “one living parent”.  Review Pub 970.


Will the student’s statement list all information on the 1098T – specifically the scholarship grants box 5?


Typically, yes!


With a 529 plan distribution.  Are we allowed to allocate the distribution to non AOTC expenses (Room & Board) before Tuition in order to maximize the value of all Tuition/plans to the taxpayer?





Pensions/ VA Disability


I have several persons receiving disability pay from the VA. They all say this money is not considered income for tax purposes. Comments?


It is not subject to income tax!  I need to go track down the cite on this. The short answer is no, VA disability benefits are not taxed.  According to IRS Publication 907, veterans’ disability benefits are not taxable.


But beware, I have had many individuals claim they are on disability from the VA when what they are receiving is a pension that is taxable. Ask a few questions.

As stated in IRS publications, veterans should not include in their income “any veterans’ benefits paid under any law, regulation, or administrative practice administered by the Department of Veterans Affairs (VA).” Veterans Pension is a tax-free monetary benefit payable to low-income wartime Veterans. Generally, a Veteran must have at least 90 days of active-duty service, with at least one day during a wartime period to qualify for a VA Pension.


Retirement Issues


Can a sole proprietor contribute a SEP contribution and compensation?  Do you have any materials that explain well how to calculate this? and how to calculate other contributing plans?


I was thinking that there was an employer contribution and an individual contribution.



SEP plans (that are not SARSEPs) only allow employer contributions.

For a self-employed individual, contributions are limited to 25% of your net earnings from self-employment (not including contributions for yourself), up to $61,000 for 2022 ($58,000 for 2021; $57,000 for 2020).  There are FAQ’s on search engine ” SEP Plan FAQs


Publication 560 590A and 590 B also has information



Can you have a business in a Roth IRA??


I think you are asking if a Roth IRA can hold an investment in a closely held business – the answer is yes, with a tremendous amount of caution.

The business will have to be valued each year so that a Form 5498 can reflect the value of the ROTH IRA account each 12/31.

Also, if the small business is the individual’s small business the prohibited transaction rules must be reviewed carefully.


Decedent dies in 2022 after his RBD.  Beneficiaries are four trusts.  Each provides for income to a child or grandchild.  An inherited IRA is set up for each trust.  If the inherited IRA distributes all of the RMD payment the child or grandchild, the trust can use the 10-year rule.  Correct?


That is correct.  The 10-year rule applies assuming that the four trusts are treated as qualifying beneficiaries (which is appears they are).
Can you discuss what happens if a beneficiary receives an inherited IRA and then the beneficiary dies? What rules are followed then? It’s an inheritance of an inherited IRA.


What happens to an inherited IRA when the beneficiary dies?

Inherited IRAs: Old Rules

If an original beneficiary died prior to depleting the full inherited IRA, the successor beneficiary was able to “step into the shoes” of the original beneficiary.


They could continue to take the RMD each year based on the original beneficiary’s remaining life expectancy.


Is a college student who receives an IRA as an inheritance, considered to be an eligible designated beneficiary not subject to the 10-year payout? If yes, is there an age limitation?


If the college student is an eligible designated beneficiary (i.e., has not reach age 21) then RDMs are required under age 21.  Then the 10-year payout begins at age 21 when the college student is no longer an eligible designated beneficiary.
Non spouse Inherited ROTH IRA in 2019 is RMD required over lifetime or within 5 years?


Under the old rules, which apply if your loved one passed away in 2019 or earlier, you have to take RMDs when you inherit a Roth IRA from someone who wasn’t your spouse.

You can stretch distributions over your lifetime using an IRS uniform life expectancy table to estimate your remaining lifespan based on your age.

For example, someone who is 40 years old in 2022 could expect to live another 45.7 years. So, a 40-year-old with a $1 million inherited Roth IRA would have an RMD of $21,881, which is equal to $1 million divided by 45.7.


For higher income taxpayers is the backdoor ROTH still recommended?


Not sure if it recommended in all cases.  The tax advisor would need to review the client financial and tax situation and determine if such a financial / tax strategy makes sense.  If a client has other significant IRA (pre-tax accounts) accounts (SIMPLEs, SEPs, and IRAs) there may be an income recognition component associated with the non-deductible IRA contribution.  At this time, the backdoor ROTH strategy has not been eliminated as a tax planning strategy by Congress or the IRS
I was advised to wait one more year to start my RMD from my Annuity to gain more value in the annuity. He advised that I could take the annuity RMD. He said I could take the Annuity RMD amount from my IRA.  Have you heard of this? Let’s look at an example to address this matter.  Assume that Harry, age 73, has two IRAs: IRA ABC and IRA XYZ? IRA ABC has $100,000 and IRA XYZ has $90,000, for a combined value of $190,000. Harry annuitizes IRA A over his lifetime and starts to receive $9,000 a year.

Assume that Harry would have a total RMD of around $8,000 for his IRAs this year if he hadn’t annuitized any part of his $190,000 IRA balance. Will the $9,000 he receives from the annuity satisfy the total RMD for all of Ron’s IRAs for the year? Here is where the answer may not be clear.

There is some debate over whether or not such a distribution from an annuitized annuity can be used to satisfy RMDs for other IRAs in the year of annuitization. On one hand, once annuitized, IRA annuities generally follow defined benefit plan rules instead of the defined contribution rules. That would lead you to believe the answer is no.

On the other hand, RMDs are based on prior year-end balances. Since the annuitized annuity had a prior year-end balance and wasn’t annuitized at the time, that might lead you to believe yes (which is the view supported by most — but not all — experts in the field). Due to the lack of guidance in this area, the most conservative approach is to take the $9,000 annuity distribution from IRA A and an additional distribution from IRA B based on its prior year-end balance.

After the year of annuitization, things get much clearer. Nearly all experts agree there is no way to use the income from the annuitized annuity in IRA ABC to offset any of the RMD that must be taken from IRA XYZ. In this situation, the annuity payout will only satisfy the RMD for IRA ABC.

Practitioners thought we could wait until end of 10 years and take it all, but new regs (proposed? final?) say have to begin right away – and still have it all out by end of 10 years.  Correct?


That’s correct.


If a parent dies and leaves her IRA to her son, and then the money is put into an irrevocable trust for that son, who pays the tax and how are the distribution rules applied?


It appears that the son is the beneficiary of the IRA.  It appears that the distributions are transferred to the irrevocable trust.  The son would pay the tax on the IRA distributions (RMDs) and then the tax on the 10-year distribution.


Miscellaneous Questions and Answers


I had a client this year that the spouse and daughter were on an ACA plan.  We applied all of the insurance and credits to the mom, as the daughter had graduated college and they could no longer claim her.


Taxwise would not acknowledge me applying this all to the mom and the IRS kept rejecting the return. Was I supposed to do this differently somehow?


On the 2nd form of ACA, I put the parent’s social and 100% to her and 0% to the daughter.


Was I supposed to put 3 on the ACA form for the household and not 2, and then based on what I read I was supposed to put 0 for the daughter?


I am somewhat confused by the question. We would need more facts.
I am helping another preparer in town that is in an audit with the IRS, he was not accurate in several areas and did not know the law in several circumstances, how can I defend him? He is not a CPA or an EA. And do you have any good sources for accounting for a car dealer?


Also, he started a business that had inventory.  The business did not go well, and he wrote-off the inventory.  He, however, still has the inventory.  Is there a way that he can dispose of the inventory in order to take it as a deduction? If he gives it to family and friends he can’t, but what about a charitable organization?  Or what can I possibly do with this?  The IRS agent was going to look into this.  She initially was going to deny everything, and I argued he had a business plan, and all and definitely started it to make money.


First, I would identify areas on the return that are incorrect.  Your job is the advocate for the client.  I would not put myself in the middle, they need to acknowledge the mistakes and move forward.  Maybe a preparer penalty will open this person’s eyes and attend CPE.  As for car dealership, I believe there is an auto technique guide on that issue.


If you believe you need assistance on this matter, I would reach out and contract with another tax professional with IRS representation expertise to assist you with this matter.

Has anyone had any issues where they had an adoption credit that carried forward for 2021 that the IRS said was calculated wrong.  Since the child tax credit was fully refundable this past year and at the bottom of the 1040 page 2, Taxwise calculated the carryforward adoption credit towards all the tax due and the IRS is saying that you cannot do that.


Has anyone else had this issue?


That is how my program calculated it but the IRS is denying it.


Does the book have more info on taking the adoption credit?




The credit is non-refundable.  So, I believe that the credit carryforward should be the amount after you absorb the tax liability.  The additional refundable credit should not impact the computation of the adoption credit carryover.


Any credit leftover from their owed 2021 taxes can be carried forward for up to five years. Qualified expenses include Reasonable and necessary adoption fees. Court costs and legal fees.


Are they over the income limitations?

Looking at the Form 1040 after the Child Tax Credit was taken was there any tax liability left over. If not, the adoption credit would be carried forward as it is nonrefundable and would need tax liability over and above the child tax credit. is a link to more information general we updated the inflation adjustments, but rules remain the same.


If someone took the PPP loan, did they lower their income based on that?  I have a client that we have been fighting her earnings for social security.  They have her as zero and she had like 20-30k of self-employment and paid SE Tax.



NO, PPP LOANS DO NOT EFFECT SOCIAL SECURITY.  Was a W-2 ever filed with social security????


When did she file?


IRS needs time to process the return and then report to social security that can 6 months or more.


For capital losses carryforwards, do the losses transfer to the spouse upon death on a joint return?


Capital loss carryovers: Capital loss carryovers are also deductible only by the taxpayer who sustained the loss—again according to Rev. Rul. 74-175. Therefore, each year, any sales of capital assets should be tracked to determine which spouse generated the capital loss.

If a couple sell securities, property, or other capital assets held jointly at a loss, and the loss is not fully used in years before one spouse dies, half of the loss is allocated to the surviving spouse and can be carried over.

If just one of the spouses owned the asset that generated the capital loss carryover, any carryover is solely attributable to the spouse who owned the property and incurred the loss, and that carryover is lost if not absorbed in the joint return filed for the year of death.

Can you please let me know if there are any changes in Section 179 Deductions for vehicles over 6,000lbs,


Key Takeaways for Vehicles under §179 Deduction – § 179 of the tax code lets you write off some or all of the purchase price of vehicle you buy for your business, provided you meet the requirements.

In order to take the deduction, you must use the car for business more than 50% of the time, and you can only deduct the percentage that you use for work.

The vehicle must meet certain requirements, such as weighing between 6,000 and 14,000 pounds.

You cannot write off the purchase price and claim the standard mileage deduction in the same year.

You cannot deduct more than your business’s net income for the year.


Dollar Limits – The total amount you can take as § 179 deductions for most property (including vehicles) placed in service in a specific year cannot be more than $1,080,000.

In other words, all § 179 deductions for all business property for a year cannot be greater than $1,080,000 for the 2022 tax year. The dollar amount is adjusted each year for inflation. There is also a “phase-out” limit of $2,700,000.

In addition to the general dollar limits, the maximum § 179 expense deduction for sport utility vehicles placed in service in tax years beginning in 2022 is $27,000.


After all of the discussion the bottom line for 2022 is the vehicles with a gross weight above 6K but no more than 14K qualified for a deduction under IRC §179 if $27,000.



The §179 limitation imposed on sport utility vehicles (SUV’s) has an expense limit of $28,900 for tax year 2023!


Can you also please let me know if SUV over 6,000lbs qualifies for special depreciation in 2022? Overall, vehicles that are not considered business vehicles are those operated as equipment (i.e., tractors) or those operated for hire (i.e., taxis or transport vans).


For new and pre-owned (used) vehicles, the maximum write-off for the first year is $10,200, plus an additional $8,000 in bonus depreciation. For SUVs with weights over 6,000 lbs., but no heavier than 14,000 lbs., the full 100% of cost can be depreciated.


Record retention-how long do you recommend we keep older tax returns for both current and former clients?


Generally, the statute is 3 years, however we recommend 7 years.  Anything related to basis, such as old 2119’s and old like kind of exchanges should be kept as long as the property is owned.


I have been trying to get an EFIN summary online at the IRS so I can e file 941 for almost one year.  The IRS said for me to create a personal online account, and the business account will pop up automatically.


It does not pop up.  Any suggestions how to get an EFIN summary so I can give EFIN summary to my software company so I can e file 941?


I am somewhat confused by your question. Please provide more information to Claudine at: [email protected]


I’ve been instructed to send the 1040X with the CP2000 and NOT file it.


If the CP2000 does not correct all the items property on the return, then attach the 1040X to the CP 2000 with additional explanation.  If the CP 2000 is correct with the changes to the return, NO 1040X is required. IRS will make the correction to the tax record and send an assessment or refund.
i have a couple reject with 1120S wrong status but when I changed them to 1120c the return was still rejected. Can you explained what cause that.


It could be a couple of different issues.

First have you updated your e-file profile that allows you to send corporate tax returns.  I assume you have.  If not you will need to call the e-services help line or go into eservices and check a box that allows 1120’s to be e-filed.  866-255-0654


If this is not the issue, then how did the entity apply for an federal identification number, did they state they were an 1120 entity and elect to be an S Corporation by filing the Form 2553.

When an EIN number is assigned, it is based on the application and the record is updated to the entity selected, i.e. Corporation.

If the computer mod stated it was assigned as a partnership 1065 filing, it will reject.


Finally, what did the reject acknowledgement state?


I can address further with more information from you. Pose your question at: [email protected] and I will try and address.

A client paid in Federal and Iowa estimates for the first 3 quarters.  Iowa checks have cleared the bank, but Federal have not.  They were mailed to the correct address and were for an individual single taxpayer.  Where should she go from here to handle this?


If the checks have not cleared the bank as of this date, I would make an appointment at the local IRS office.


Call 855-545-5640 to make an appointment. The client must have an appointment.


Is Form 4419 for tax preparers to file or is it for individuals to file themselves so they can electronically file their own 1099s?


Currently the Form 4419 is only for a “Revise Existing Transmitter Control Code (TCC) for Filing Information Return Electronically (FIRE).  An original application for a TCC code must be file online on the FIRE page on  Generally, this is for business and tax professionals who file for their clients.
I have a question regarding a client losing their refund check from the IRS. I had them fill out a Form 3911 and send it in the mail back in May. They still have not heard anything back regarding their lost refund check. The clients keep asking me what more can be done. I gave them a phone number to call, and they said they don’t get anywhere with the phone number. Any thoughts or ideas I could give them regarding this lost refund check. Thank you.


It does take some time to reissue a check.


I would have them make an appointment at their local IRS office.

Call 855-545-5640 to make an appointment. The client must have an appointment.


Does 8853 need to be filed if expenses are reimbursed and boxed is checked to indicate so? I was under impression that was the case.


That is correct.
If a person has 7 years of returns to file and the oldest returns were refunds with the others being taxes owed, will the IRS offset the tax due by the refund returns that are outside the statute of limitations?


Maybe.  You need to look at the refund situation because certain refund claims are barred because you did not timely file a return (withholding taxes).


Generally, if the refund amount is out of statute the refund is barred and lost.


If an individual sells a house on contract, are they required to file a form 1098 for mortgage interest?


I believe this would be the case if the sale and the debt obligation is a “Mortgage.”


Here a quick comment from research – The seller of the home providing the owner financing is required to report the amount received as income on their taxes. They must also send you a Form 1098, Mortgage Interest Statement, by Jan. 31 for any interest paid to them on the loan for the previous year if it was more than $600.


However, the IRS website also provides “Who Must File” – File this form if you are engaged in a trade or business and, in the course of such trade or business, you receive from an individual $600 or more of mortgage interest (or $600 or more of MIP, if section 163(h)(3)(E) applies for the reporting year) on any one mortgage during the calendar year. See the instructions for box 5, later, for MIP reporting requirements.


You are not required to file this form if the interest is not received in the course of your trade or business. For example, you hold the mortgage on your former personal residence. The buyer makes mortgage payments to you. You are not required to file Form 1098.  NOTE THAT THE KEY POINT IS “YOU ARE ENGAGED IN A TRADE OR BUSINESS”


Sorry for “beating this horse to dead”, but this discussion is appropriate for your question –


Not in the lending business. If you receive mortgage interest of $600 or more in the course of your trade or business, you are subject to the requirement to file Form 1098, even if you are not in the business of lending money.


For example, if you are a real estate developer and you provide financing to an individual to buy a home in your subdivision, and that home is security for the financing, you are subject to this reporting requirement. However, if you are a physician not engaged in any other business and you lend money to an individual to buy your home, you are not subject to this reporting requirement because you did not receive the interest in the course of your trade or business as a physician.


Is there a holding time to keep 8879 signed forms?


It is a three-year time period.
Is printed preparer signature ok on the client’s copy or the 8879.


Absolutely – most of us don’t sign the 8879 on any version.


Does CFS have a security plan in their software?


Does not appear to have this plan in their toolbox.


MFJ taxpayers / clients decide to file for divorce.  Do I need permission to release a copy of their tax return to one spouse?


Maybe.  Here is situation that you as the professional need to figure out was if most appropriate.  What is the appropriate communication given the nature of the situation, the relationship of the parties, etc.


Generally, the answer is no, as they filed a joint return, but to avoid any conflict of interest it is best to work through the attorneys and supply the information to them upon an official request.  If that is the case, you would need permission to provide the file to the attorneys from each spouse.

Are the mortgage assistance payments paid by the state considered taxable income to the recipient?


No sure under the fact of your question “… paid by the state …”.  However, the general rule for mortgage assistance payments (after the federal level) is – Under the so-called general welfare exclusion, the IRS has held that payments by governmental units under legislatively provided social benefit programs cannot be included in the recipient’s gross income.

To qualify under this administrative general welfare exclusion, the payments must:

(1) be made to individuals;

(2) come from a governmental fund;

(3) promote the general welfare based on individual or family need; and

(4) not represent compensation for services.


Follow up answer on the deductibility side – If the mortgage assistance payments are made by the Department of Housing and Urban Development (HUD) under § 235 of the National Housing Act, the taxpayer-mortgagor cannot take an interest deduction. IRS regulations bar any interest deduction with respect to a taxpayer’s indebtedness due to HUD assistance payments under Sec. 235 of the National Housing Act (Reg § 1.163-1(d)).

However, if the taxpayer-mortgagor actually paid a portion of the mortgage payment, participated in an HFA Hardest Hit Fund program in which program payments could be used to pay mortgage interest, and meets the rules to deduct all of the mortgage interest on the loan, all of the mortgage insurance premiums, and all of the real property taxes on his or her main home, he or she would be entitled to a safe harbor deduction of the lesser of:

a. The amounts actually paid during the year to the mortgage servicer, HUD, or the State HFA on the home mortgage, or

b. The sum of the amounts shown on Form 1098 as interest, real property tax, and deductible mortgage insurance premiums.


Our firm is having issues with the IRS sending several clients change of address notices that are incorrect including multiple address notices issued on the same day.

Is there an issue in the IRS databases and how do we go about keeping the proper address after the multiple address change letters?


This is a common identity theft issue. Every time a change of address is given to IRS, they are required to send out a notice of confirmation.


This prevents scammers from changing addresses to get IRS correspondence and using information to create a fake identity.


This can also happen if you are using different addresses on lets say the 1120 but filing under a different address for the Form 941.  There needs to be consistency.


IRS needs to confirm the correct address.

If a client begins taking Social; Security in November and received a CRP payment in March.  Will the CRP payment qualify for exemption for SE tax even though it was received BEFORE the taxpayer began SS draw?


IRS Website on CRP “Annual Rental Payments” may be includible in net income from SE for purposes of SE Tax – Unless the taxpayer is receiving Social Security retirement or disability benefits, CRP “annual rental payments” are includible in net income from self-employment subject to self-employment tax.


Note: Payments that are for the permanent retirement of cropland base and allotment history are not includible in net income from self-employment subject to self-employment tax because they are for the sale of section 1231 property or a capital asset. It appears that the CRP received in March when the taxpayer was not on social security would not be able exclude from SE tax. 


Can you provide additional information as to how make a CAF Client Listing Request and what the procedure is to remove yourself from a former client’s POA request?



What form do you use to report home sale that qualifies for the up to $500,000 exclusion?


Form 8949, use code H to exclude the $500K.


For S Corp shareholders does a partner have debt basis even if he didn’t loan it directly to the S Corp, but it instead went to the S Corp, and he signed a guarantee on it?


The Eighth Circuit affirmed a Tax Court ruling that held that a shareholder’s guarantee of a loan to an S corporation was not an actual economic outlay and therefore did not increase the shareholder’s debt basis in the S corporation (Hargis, No. 17-1694 (8th Cir. 6/22/18), aff’g T.C. Memo. 2016-232).


This item discusses that case and how a back-to-back loan is a viable option for shareholders who want to increase their debt basis in an S corporation. However, care must be taken to ensure that a loan to an S corporation is treated as a back-to-back loan from the shareholder.


If EFTPS is going away, will we have to create entire new logins/passwords, etc. for the new system or will those transfer across??


I doubt anyone knows that at this point.


Client goes out to lunch for the office people. They buy lunch for everyone in the office as a convenience. 10 people in the reimbursement that person through cash app. They do this once week. They receive 1099K how should they report non income expense?


If the income is reported on Schedule C, just put “Reimbursed” or some such thing on the second page and subtract out the amount that was reimburse. The main point here is that gross income should include everything that’s being reported to the IRS, then use the second page to adjust it to the correct income amount.


How do you transfer ownership from deceased shareholder (100%) of S-Coro to wife during 2022 on Form 1120-S?


Per share per day, your software should facilitate this.


Do we have obligation to report improper reporting for an individual who is not our client?


Not in my opinion



Employee Retention Credit (ERC)


Do you know or have any experience with the ERC amounts effecting the QBI wage amount?  Does the QBI W-2 amount get reduced by the ERC credit amount?


Not aware of any reduction to QBI W-2 wages for ERC amounts based on the statutes under IRC §199A.


There is a new guide out:


If ERC received in 2022, do I need to go back and amend returns for the years the ERC pertained to?


Yes, you must amended those years.


Energy Credits – New for 2023


Does the increase to 30% start in 2023 for the Energy Efficient Home Improvement Credit?


Beginning in 2023, the Energy Efficient Home Improvement Credit will be worth 30% of the total cost of eligible projects up to $1,200 per year (or $2,000 per year for heat pump water heaters and heat pump space heaters). New guidance has been issues


Clean Vehicle credit – starts in 2023, not in 2022?


That is correct.
I have a client who installed geothermal system, and the unit was a lemon and had to be replaced. Are they eligible for the credit?


Just curious- did they take the credit previously.  Did the company replace the unit due to it being a lemon?  Or did they go to another company.  I need to do some research in the background.


Can you use the Geothermal Tax Credit more than once?

Yes, you can use the tax credit multiple times if you install geothermal in more than one home. There is no limit to the number of times or a maximum amount you can claim for the tax credit.  Check state issues, some states also allow the credit.  Just another question I would ask the client, since it was a lemon did, they get the cost back from the company?


New guidance has been issues


Is there a recapture requirement if you sell the vehicle within a certain time frame?  Client bought qualifying vehicle in 2022 will be trading in and purchasing another qualifying vehicle in 2023.


There was one previously, but I am not sure that is still in play.  I would have to do some research under the new IRA act and what was retained or removed.


New guidance has been issued:


On energy credit for 2023, if the client received insurance proceeds from hail damage to their home, do you have to reduce the credit?


This is a complex issue.  Was the loss in a federally declared disaster area and was a loss claimed.  This would reduce the basis in the home. I assume this occurred in 2022.


Was the insurance money used in 2023 to repair the home and what type of repairs were done? Bottom line you cannot double dip, if the insurance paid for the repairs no credit.

Can the credits be taken on new construction?   (Sold old house and instead of buying built new)


It is not a rental.  Residence took MAJOR damage in storm and the family decided to tear down and build entire new house instead of trying to repair.



New guidance has been issued:


That would only matter for the final years of the credit because it reads “Placed in Service” not “Paid for” correct??


“Expenses related to new home construction are claimed when “the original use of the constructed.

Or reconstructed structure by the taxpayer begins.” So presumably that’s correct. I just always worry when it’s a new credit and we don’t have as much IRS guidance as we’d like.


Can you direct me to the Energy tax credits that were reviewed in the webinar?  I can’t seem to find them in the material.


New guidance has been issued:




K2 and K3 Issues

What if somebody requests a K3 when you have no foreign dealings whatsoever?


You must provide.
Are you required to have a K-3 in order to claim your RIC foreign tax credit on form 1116?


You will need the information on the K-3 to properly complete the 1116.

Even if dividends from a foreign company, held by Edward Jones or some other broker, with foreign taxes withheld, will require a K2/K3? Are you serious? There is no foreign ownership involved, except shares of a foreign company.  Remember, as the owner of the shares, I do not prepare the K-1; this foreign tax is shown on a 1099-Div – no K1 is issued. 1 the shareholder received the letter or email and 2.  you know whether or not they are requesting the K2 or K3 rather than just wait until the due date that they have not responded.   DO NOT understand what this person wants or is just complaining. Hence, no answer provided.


So, if only one requests, the K-2 only has their amounts, not the totals.


That is correct.


How do you complete the corresponding forms for the taxpayer when they receive a K-2? And must they complete Form 1116.


Enter the totals generally at the bottom of the page.


Does the foreign ownership involve dividends from an investment located in a foreign country?


Is the investment for ex with Ed Jones but is a foreign stock – no that is tracked by Ed Jones and reported accordingly on 1099. Most foreign issues are not tracked and then they must file the deemed documents.

Often the information flows from the K-1 and self populates the forms.  But if foreign tax and 1116 is required to be filed, K-2 and K-3 apply


If a partnership has no foreign income, pays no foreign taxes, has no foreign interest at all, do they still have to send the letter to partners?


No, I think you meet the exceptions.


What is the timeframe for reporting changes?  If a beneficial owner dies do, they only have 30 days to report the change??


Yes, they have 30 days to report the change.
So… If a partner has 30 days from Feb 15 to request a K-3… what if they request on March 15 that they want one…. then do you file extension to avoid the lack of …. No, the partner has 30 days from January 15th to request a K-3.   I’m reading an article on this right now and it says “The notice to partners no longer must be issued by January 15, 2023.

Rather, it can be issued as late as the date the Schedules K-1 are provided to the partners and even provided as an attachment to the Schedule K-1”


Then is says “The 1-month date, for both the domestic filing exception and the Form
1116 exception, will now be one month before the Form 1065 is filed, so
as late as August 15, 2023, for a calendar year partnership return placed

on extension.”

if partnership return was extended and notice goes out to partners on January 15, what is the latest date the partner can request the K-3 and trigger a requirement to file the k-2 with the IRS? February 15 or August 15?


Under the new draft instructions, I believe it will be August 15, 2023.
Could you request that the shareholder give you a courtesy response prior to the Feb 15th date so that you know:


1.  The shareholder received the letter or email and 2.  You know whether or not they are requesting the K2 or K3 rather than just wait until the due date that they have not responded.



This is a free country.  What you propose is feasible.  Does meet your goals and objectives for K2 K3 filing.


Does this law only apply to taxpayers who file Schedule A of Form 1040?


What if partnership’s only income is from rents do K-2 and K-3 still need to be filed?


So, file an extension and give yourself more time but file return so they can get personal taxes in time?


Very good point after reviewing these new draft rule instructions.
Still clear as mud.  Can we just send the letter out to both S Corp Shareholders & Partnership partners by 1/15/2023 and require response by 2/15/2023?


Not sure about this, because the IRS rules say that the partner can request by as late as August 15, 2023, and still be compliant.


So if you have a family owned S Corp or partnership, the K2 K3 letters have to be sent to themselves?


To the individual partners or shareholders.


Will tax software include the Sch K2 & Sch K3 notifications for partners within the filing of the 1065 from that software? Or do you need to attach the notification letters to the Sch K1? All if the 1065 is filed by 02/15/23.


Just my opinion, the software companies will not be able to provide this correspondence piece.  I’d be prepared to have this correspondence developed by the required date.


Is there any flowcharts that help get through the situation of an exception of having to issue K-2/K-3 for a partnership and an S-Corp?


Not that we are aware of at this time.


You must meet the 4 criteria as laid out in the Final 1065 & 1120S instructions. See instructions for criteria on Domestic Filing Exception


Do the tax software programs automatically complete the K-2’s and K-3?


Some programs do this, not sure all do.


Do you sent the letter to the general partner or do you need to send to each partner/ shareholders?


I believe you will need to send to the partner / shareholders.


They are the ones that my need the K-3 information for their returns even though the entity meet the filing exception for K2 K3.

What happens to CTA requirement when you retire?


We haven’t seen the forms yet, but presumably there will be a way to update your account to show that the business is now inactive. We’ll know more once the forms are available.


During 2023 I plan on becoming more knowledgeable about Schedule K-2, Schedule K-3, Form 7203 & CTA.


I think you can be sure that we’ll be talking about those subjects quite a bit!


Isn’t faster just to do the K-2 and K-3 for all the returns.  The software does all the work, and you can still bill for the extra forms.


Most of us would agree with you!


Are we as the preparer required to send the notice or is the “Responsible Partner” the actual required individual.  Wondering if we can give the copies of notice to the partner or if we must send them ourselves??


My understanding is that it’s the partnership/S Corp’s responsibility, but you know this will translate into it  being our responsibility to – at a minimum – make sure the tax matters partner or tax matters shareholder knows of the requirement. It may be that the partnership or shareholder asks you to send out the letters.





Pass Through Entity Tax Issues


With the entities that can pay tax at the entity level, can partnerships do this and avoid s/e tax?


I believe the payment of the state entity tax liability will reduce entity level income,


For partnerships and LLC (that generate SE income; an S corporation will not create SE income at this time) will reduce the amount of income subject to SE tax.


The reduced income flows through to the taxpayer.


How do you know if the PTE deducted the tax?  Do we assume they will deduct?


Unless otherwise, I would assume if the entity is following the PTE methodology.
Please comment about PTE tax is not same as “Composite” tax, or are some states’ composite taxes considered PTE tax (i.e., deductible by the PTE)?


Composite taxes are different and not deductible on Federal.



Premium Tax Credit


If the income limits have been lifted with regards to the PTC and a person qualifies within the FPL does that mean the PTC was available to those who had insurance from the marketplace? Not sure tax software handled correctly.


It depends on many factors. The FPL still is a factor.  We would need more information to fully address question.