Tax Guru – Ker$tetter Letter

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Archive for March 10th, 2007

Tax Prep Styles

Posted by taxguru on March 10, 2007

Q:

Subject: selecting a tax professional
 
Kerry,
 I take exception to your statement, “This means you need to work with a tax pro who will spend the time necessary to properly understand your situation and not just do your return as fast as possible, as is the case with the big assembly line franchise operations (H&R Block, Jackson Hewitt, Liberty Tax, etc).”  As with all groups you have bad apples, but there are those in this group that employ EA’s and CPA’s that are competent tax advisers.  I’d suggest sticking to your “selecting a tax professional” article. Find someone with the right qualifications and experience.  The sign on the door might surprise you.

 

A:

I’m sorry you were offended by my comments.  I have nothing against tax pros who work for the big franchise operations.  In fact, I had hired a number of Block alumni to work for me in my offices in the SF Bay Area over the decades and was quite happy with the quality of their work once I trained them in my way of doing things.

However, you must realize that the work environment is different in a high end CPA office, where we spend as long as it takes to properly address the client’s tax matters versus a store-front office that handles walk-in traffic and measures its productivity in number of returns prepared.  While I admit there are exceptions, most such offices do operate in an assembly line style that can’t possibly allow enough time for the kind of thorough work that more complicated clients require. 

If your office is an exception to that assembly line style that many people (not just me by any means) perceive of the big tax prep franchises, you should have a good marketing edge by pointing that fact out in your advertising.  As it is, most of those chains are more focused on emphasizing how fast they can prepare returns rather than how thorough they are in helping clients minimize their taxes.

I hope this helps you better understand the context of my comment.

Good luck.

Kerry Kerstetter

 

 

 

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Business Sale?

Posted by taxguru on March 10, 2007

Q:

Subject: Sales of business

Hi Kerry,
 
If we sold a business (C-corp) for $220k without realizing gain or loss.  $200K is for inventory & $20k is for goodwill. 
 
Which form should we use to report the sale?  On form 4797, there’s no section to report the sale of inventory of $200k.
 
Pls help us.  We’re filing form 1120-A.
 
Thank you very much for your assistance & wish you have a wonderful weekend.

 

A:

You need to be working directly with an experienced professional tax advisor because there are numerous critical aspects to this that you haven’t addressed and are obviously confused about. 

First is the issue of what was sold.  Did you sell your stock in the corporation to someone else?  If so, you need to properly calculate your cost basis in that stock and then report it on Schedule D or Form 4797 with your 1040.  If you are selling at a loss, you need to determine if it qualifies for the expanded loss deduction under Section 1244.  Was the full payment received in the year of sale or is it being spread out over a number of years?

On the other hand, do you still own the corp and it sold off its assets?  That’s reported on the 1120 and will also be affected by whether or not the full sales price was received in the sale year. 

There is no way you can properly handle this on your own.  You actually should have consulted with a tax pro prior to the sale.

Good luck.

Kerry Kerstetter

 

 

TaxCoach Software: Are you giving your clients what they really want?

 

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Tax Spreadsheets?

Posted by taxguru on March 10, 2007

Q:

Subject: Form 1040 & Other Estate Related Spreadsheets
 
Kerry,
 
I have browsed your 1040 Tax spreadsheet many years with interest.  I have recently been given the responsibility of preparing tax forms as an executor of an estate.  I have tried to find an EXCEL spreadsheet fhat addresses Form 1041, Depreciation, and other related forms and schedules.  Do you have any or know where I might look?  Any place I might get  assistance with questions regarding estate related taxes.  Every one seem to skirt the subject and tells me I need to consult a Tax Specialist or Lawyer.  That may be my only source.  How about it? 
 
Any spreadsheets for rental property management (inherited)?  I keep reading that Schedule E and other forms are made easier by using spreadsheets.  They must be out there somewhere?
 
Thanks for any help!

 

A:

I’m not sure what spreadsheets you are referring to because I don’t use any Excel sheets for tax return work. 

The absolute best way to prepare records for any kind of tax return is with everything entered into QuickBooks, with a Class set up for each schedule that does allow you to produce spreadsheet-like income statements with columns by Class. 

I have seen people try to set up Excel spreadsheets to do accounting; but they are much more work and much less reliable than what QB does automatically.  This is in addition to the fact that most home-made spreadsheets use very unreliable single entry accounting methods rather than proper good old double entry accounting that QB does automatically. 

Since you’ve never prepared a 1041 for this estate, you are taking an unnecessary risk by attempting to do this on your own.  There are too many variables to work with, starting with the choice of the estate’s fiscal year, for you to tackle this on your own.  As executor of the estate, you will be personally liable for any screw-ups you make; so the wisest move would be to use the services of a tax pro who has experience with 1041s to reduce your potential personal liability.

Any professional fees related to the settlement of the estate, including yours as executor, can be paid from the estate’s assets and deducted on the estate’s tax returns.  If you have to buy a copy of QB for this task, that cost would also be deductible by the estate.

These may not be the kinds of answer you were looking for; but they are the best I can provide.

Good luck.

Kerry Kerstetter

 

 

 

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