Q:

Subject: tax preparer referral

 

Hi,, Simply need a referral for a tax person who also understands or can help with US and International strategies.  Would you be willing or know of anyone who I can engage with?

 

I have just formed an LLC.

 

I live in New Jersey and work in NY with property in London/Dubai and Canada.  Thanks

A:

Unfortunately, we don’t have anyone to whom we could refer you. If you haven’t already done so, you should check out my tips on how to select the right tax preparer for you.

I wish I could be of more assistance; but I wish you the best of luck.  

Kerry Kerstetter

Follow-Up:

Kerry, Thanks for reply…I did reach out to after I read this.  But one question, are there any organizations, such as Trade, or associations that you know of that cpa’s are usually a member of indicating some minimal standard? and thus credibility.  So far I have found

 

–Accountants World

–National Society of Accountants.

 

Do you think this is enough?

 

Thanks much.

My Reply:

Basically, to belong to any of the accounting organizations, including the AICPA and the state CPA societies, it just requires that the person be current with their CPA license.  To renew our CPA licenses, we are required to have a certain number of continuing education hours, usually 40 hours per year.  Those hours can be in a wide range of subjects, so they don’t indicate any kind of specialization. 

If there is a certain expertise you require, such as working with clients who have businesses in multiple countries, you should either ask other folks you know who are working in similar business conditions or work with the internet search engines to see if you can locate suitable professional advisors.

Good luck.

Kerry Kerstetter

From a client who had a large capital gains tax bill:

Kerry,

WHAT ABOUT “AMERICAN TAX RELIEF” 1-800-TAXHELP and those types of TV/websites??
Thanks. 

My reply:

Those companies that advertise an ability to settle IRS debts for pennies on the dollar are scam artists.  They charge advance fees and then do nothing.  Do an internet search and you will find a never ending list of people with complaints about these companies.

What they are pretending they can do is utilize the IRS’s Offer In Compromise program.  This is an actual IRS program, which I have used in past years for some clients.  However, it was always very difficult to have an offer accepted and has been tightened up even more in the past few years.  In fact, IRS just instituted a new policy a few weeks ago that it knows will discourage OICs.  They are requiring a nonrefundable 20% down payment with each offer.  Until now, there was never a requirement to submit any actual money with the offer.

OICs are generally most appropriate in cases where the outstanding tax debt is so large that, given the taxpayer’s net worth and earnings potential, it would literally be impossible to pay it off in the person’s lifetime.  By proving severe financial hardship and low expectations of future income, such as with health issues, IRS will occasionally allow an account to be settled for less than full value.  I don’t see that as appropriate in your case because IRS would demand a full listing off all of your assets and debts, and if there is a positive net worth, they will expect at least that much to be offered.

Let me know if you have any other questions.

Kerry

 

A reminder from our good friends at the IRS that, while murder and racketeering may be perfectly acceptable in our society, they draw the line at tax evasion. Just ask Al Capone which crimes will get a person into the most hot water with the Feds.

Q:

Subject: Capital Gains Tax for Elderly

I don’t know if you answer random questions but I thought I’d try.  My mom is 71, in declining health and needs to sell her house.  She’s been there about 35 years.  The house is in CA which means a huge sale price, and an anticipated profit of approximately $350K.  If I understand correctly she’ll be taxed on the amount of $$ she makes over $250K? Is that correct?

Thanks in advance.

 
A:

This is the exact kind of issue that you and your mom need to be working on with an experienced professional tax advisor.

Having handled hundreds of cases similar to your mother’s, my guess is that the profit won’t be as high as you think it is because you are most likely not properly calculating her cost basis in the house.  You are probably comparing the current value to what she originally paid for it 35 years ago. 

I am just guessing here, but if she has been there 35 years, odds are that she is a widow.  When her husband passed away, her new cost basis for the entire house was stepped up to its fair market value at the time of the death.  This means that it no longer matters one iota what she originally paid for the house.  If no estate tax return or other probate documents were prepared when her husband passed away, it is still possible to work with a Realtor who knows the neighborhood to reconstruct what it was worth back then.

That gives the starting point for her cost basis.  She can then add in the cost of any capital improvements made after her husband’s death, plus the cost of any furnishings and fixtures that she will be leaving with the house. 

Starting with the sales price, deducting selling expenses and the proper cost basis, I am willing to bet that the net profit won’t be as high as you think.  If the net profit does turn out to be more than $250,000, you are correct that the excess will be taxed at the special low Long term Capital Gains rates, which can be as low as five percent for IRS purposes.  There will also be California tax to pay.

Again, this isn’t very difficult to work out, and any experienced tax professional should be able to crunch the numbers for you to see if your mom has anything to worry about.

If you haven’t already checked out my website, I have some more detailed explanation on residence sales here and  some tips on finding a good tax advisor here.

Good luck.  I hope this helps.

Kerry Kerstetter

 

Q:

Subject: Quickbooks imported into Quicken

Kerry,

I read your page on http://taxguru.org/qb/qbvsquicken.htm and was hoping you could provide some guidance on this matter. I would like to export from quickbooks to quicken. Is it possible?

Thanks.

A:

The programs themselves do not allow for QB to Quicken data transfer.

However, there are some after-market utilities available on the web that seem like they can make that conversion in a multi-step process via Excel, such as these offered by Big Red Consulting.

Good luck.  I hope this helps.

Kerry Kerstetter

Follow-Up:

Kerry,

Thank you very much.

 

Strategies for Political Giving – Some useful tips from the WSJ.