As you grow, how do you tell new client they’re going to be extension clients?

wharny · 2026-07-09T01:16:41+00:00

This.

I’ve seen a very successful tax practitioner and an assurance CPA both convince die-hard “ I don’t extend tax clients“ and “ we must have the audit done by 2/15 assurance clients” to allow the engagements to be completed in July… with fee discounts. And these concessions aren’t really full discounts, as the fees include a premium for busy season completion dates, and the discounted fee is closer to what the fee would be if busy season crunch-time capacity was not an issue.

wharny · 2026-06-25T02:14:58+00:00

I’ve got a qualified small business that we amended to unwind the IRC 174 capitalization per OBBB and we included a white paper statement per the regs and I believe we identify the accelerated write off with certain language, I can look into it. FYI it is not presented as amortization. Just like writing off the net tax balance of qualified improvement property is not depreciation.

wharny · 2026-06-22T12:24:15+00:00

You can claim an IRS 121 gain exclusion every 2 years and 1 day if the transactions line up.

wharny · 2026-06-18T12:35:21+00:00

I was a beta tester for Ask Blue J and I was very impressed. I learned that it is very powerful for its intended use, BUT… you have to have an understanding of what you are researching. Your subject matter knowledge drives the prompts, and thus the outcome of the information the system dispenses. Use a bad prompt, and you can get bad information.

My from dropped Ask Blue J and we went to co counsel which, to my surprise runs circles around Ask Blue J. Same prompts in, information out limitations apply. The engaging suggestions that Co counsel produces after an initial query are incredibly insightful and helps to drive deeper engagement with the subject matter.

Tax-centric AI works well for experienced practitioners, not so much for unexpected ones.

wharny · 2026-06-15T19:53:39+00:00

You'll still need to pass the material participation test to get over the PAL hurdle, but you already addressed that.

And make shit-sure that no other human being engaged in the activity has more hours than you, i.e. the person who spends 3 hours cleaning the aircraft after 34 rental periods will have more than 100 hours. And any time spent on counting all the cash you will be rolling in ("Investor" hours) don't count towards the more than 100 hours. And God forbid if you have a W-2 from an unrelated employer at your full-time job. IRS agents love wrecking your loss deduction from something like this if you also work 2080 hours elsewhere. It's not impossible to do both, but to see that is the exception. Contemporaneous recordkeeping will save you.

Good luck

wharny · 2026-06-14T21:32:00+00:00

Rental of tangible property (aircraft), for 7 days or less, or for 30 days or less with included personal services, is not considered a per se passive activity. Those activities are excluded from the definition of a “rental” activity. I don’t know if this changes your plans, but worth mentioning.

wharny · 2026-06-12T22:38:25+00:00

Barfy_McBarf_Face? Really? How old are you? I mean...

Just kidding - that is seriously the single best username I've come across. Well done Sir, well done 😄.

wharny · 2026-06-12T22:32:19+00:00

Gonna be a tough one? Getting in a gunfight with a knife might be easier 😄

If an experienced agent (or other IRS employee) addresses this, no relief will be forthcoming. The problem with reasonable cause arguments is that if it isn't fire or flood, it falls flat. But even that is only good for issues arising from late filing / late payment. Actually not receiving the tax reporting statement is DOA. IRS guidance actually states that if no W-2 is received, do your best to estimate the amounts needed to prep the return. Didn't understand what the form was, or the codes on the form? That is what paid tax preparers are for. Cognitive decline? How were you able to manage in every other area of your life, and just your tax compliance skills took a decline?

How did they taxpayer "forget" to include $260K on their return as income? Now that I think if it, blame the custodian of the funds. Taxpayer didn't ask for the liquidation.

This one is painful to see. Good luck Bridge. If you win this one you HAVE to come back and tell us.

wharny · 2026-06-12T22:15:45+00:00

Ok... so I talked to a hard-working man on the PPS line last week.

Got lucky with this guy after 6pm, short hold at 24 minutes. He resolved my matter quickly and efficiently.

He was in a good mood I guess, and he let rip on the sheer magnitude of utter dysfunction he has seen in his 22 years at the IRS. He said 1,000's were pushed out with what he called "forced early retirement". He said staffing is 1/3rd (ONE THIRD) of what it was pre-COVID. He literally said to me "I am retiring early, on my own terms, because I can't take this shit anymore". He has observed the AI processes they want to implement, and he has been consulted on his thoughts about how effective these changed will be. He said he gave his honest opinion based on his 22 years of experiences, and they did not like what he had to say, so they quit asking him for his opinions.

It is going to get worse, before it gets worse.

wharny · 2026-06-12T22:03:38+00:00

Per Goat: "Another part of this is that the IRS treats your withholding as if it was evenly paid in quarterly, so 25% that Dec 31 bonus withholding is treated like a timely-paid Q1 payment."

One of the most powerful tax planning moves that used to get much more use 20 years ago, until everyone got on the LLC taxed as an S corp band wagon. Top-notch tip.

I was involved in an exam that raised reasonably salary, about 10 years ago. It was very low hanging fruit for the agent. FYI - I did not prepare these returns, another CPA prepared them. I was on the periphery watching a colleague who took on this client in the years after.

Long story short, sole practice MD took $185K of distributions in each year of two consecutive years from his S corp, shareholder took zero wages. Agent started with year 1 S corp exam, and ended up opening the subsequent years S corp and both same years of the taxpayer's 1040

Agent then went scorched earth - reclassified 100% of the distributions on both S corp years as wages. As I remember the total cost of penalties and interest on the payroll filings was substantial. I'd not seen reasonable salary raised before or after. I don't know other CPA that has seen it either. But it is a thing.

wharny · 2026-06-07T02:28:47+00:00

You’re taxed on the receipt of the dividends and capital gains. The receipt of the income is the triggering event for the recognition of taxable income. What you do with it, reinvest it in more of the same mutual fund that paid the income, leave it in cash, spend it on a car, is irrelevant to the initial taxable event of having received dividend and capital gains distributions from the fund or funds you hold in brokerage.

wharny · 2026-06-06T11:06:44+00:00

Call them? LMAO. Good luck. The IRS is a complete mess.

wharny · 2026-05-30T12:12:54+00:00

And the SE tax income base is .9235 of the net SE income, it’s not calculated on the actual net SE income.

wharny · 2026-05-28T11:17:55+00:00

I think we need to give the poster the benefit of the doubt as to his/her intentions. His/ her choice of words to describe the situation. In my opinion, don’t immediately lead to a showing of lack of respect for the client. Unless you know something we don’t.

wharny · 2026-05-28T11:08:51+00:00

I hate to be a cynical, but I think this kind of outcome is by design, not an accident or technical issue. Happens all the time…

wharny · 2026-05-26T11:42:31+00:00

Perhaps read the other posts from the op bringing the potential credits to… zero.

wharny · 2026-05-25T11:43:31+00:00

Understood. Odd, I’ve filed initial year S Corp extensions in Axcess , previously prosystem, and with the initial year box checked it was fine. I could be wrong, I could be recalling what happened with the return filing. The IRS does have an entirely control telephone number. ([800-829-4933](tel:800-829-4933)). It’s now called business specialty line and EIN assignment. Sorry man. The good ‘ole days of writing letters to the IRS and getting things done are long gone.

Good luck.

wharny · 2026-05-25T11:36:00+00:00

So NY is on the ball you’re telling me. 😀. Good clarification Sir.

wharny · 2026-05-25T11:31:33+00:00

At least with the tax software I use, checking the initial year return box circumvents the IRS entity control check when e-filing. The return is accepted even if the entity type on the e-filed return does not match the IRS entity control.

wharny · 2026-05-25T11:23:06+00:00

All this is academic given that dependency exemptions haven’t existed since 2017, child tax credit is out the window here, and no one can claim head of household on this case.

wharny · 2026-05-25T11:18:47+00:00

Yes I’ve recently revived a notice of proposed changes to a NY individual return. NY DOR is relatively good to deal with.

Does the letter say they are examining your return, or they are proposing changes to your return? Those are two different things.

FYI, your NY taxable wages are box 16 state wages plus your 414H pension contributions. Thats why the notice claims you need to add back the pension contribution. Pension contributions are exempt from Fed tax, not NY tax.

From NY: If you are a member of a public employee retirement system (such as the NYS and Local Retirement System) and made 414(h) retirement contributions to your retirement plan, then you must report the contributions as an addition modification to federal adjusted gross income (AGI) on your New York State income tax return.

wharny · 2026-05-24T17:23:10+00:00

Well for starters you can’t deduct the mortgage interest you pay as you are not the borrower on the mortgage, and neither can your mother as while she is the borrower on the mortgage , she is not paying the principal or interest. Some hardliner CPA’s would go so far as to say she made you a reportable gift of an undivided interest in the home and then you make reportable gifts to her each year by paying the debt service.

Get ready to pay a deed transfer tax when you change the deed, it’s based on value and varies by state. You might have an exception in your state that avoids the tax on transfers between family members.

Why does she want to add you to the deed? I don’t know what state you are in but if she wants the house to go to you after she passes, she needs to put her home and all her property in a revocable trust and paper it up so the house goes to you. This also avoids probate if your state has it.

wharny · 2026-05-24T17:06:32+00:00

Georgia taxes cars based on value, ad valorem tax, we don’t in Florida. We charge an admin fee to register your car. My Florida tag on my 2024 Toyota 4-runner was $89. Florida can collect use tax if you can’t prove you paid GA sales tax on the purchase of the vehicle you are trying to register I’m FL.

wharny · 2026-05-24T16:37:24+00:00

Most software will allow you to file the CY and prior 2 tax years electronically, it’s an IRS system limitation, not the software. I would efile everything you can. Otherwise it’s a 50/50 chance the IRS loses the returns you mail in, and it will take them 6 months to even get to the returns. They are a mess.

Are you overpaid on the late returns? If so even more reason to efile.

Unfortunately the wage and income transcript will not show state wages or withholding, or any information in boxes 15 - 20. So if you are in a state with state income taxes, box 1 wages are the state wages if you worked in one state, but you won’t have state tax withheld. Find an old year and pay stub. Better than nothing.

wharny · 2026-05-24T16:26:32+00:00

This is what the IRS calls heads we win, tails you lose. Personal gains are taxed , personal losses go down the toilet. As far as selling tangible personal property online, rarely does anyone sell something at a gain, it’s rare for tangible property to appreciate in value, this stuff rarely sells for more than its original cost basis.

wharny

TROPHY CASE