Discussion:Help needed on a really ugly tax return
From TaxAlmanac
| Revision as of 09:50, 3 May 2008 Smokeytax (Talk | contribs) (Actionbsns - S) ← Previous diff |
Revision as of 13:33, 3 May 2008 RJM (Talk | contribs) (Action- I had v) Next diff → |
||
| Line 19: | Line 19: | ||
| }} | }} | ||
| + | |||
| + | {{ForumReplyPost|UserID=RJM|Date=3 May 2008|Text=Action- | ||
| + | |||
| + | I had very similar situation and numbers a few years back. Ended up reviewing/adjusting detailed QB accounting for current corp from day 1 to best of my ability, trying to tie to prior year tax returns. QB files from client did not match tax returns prepared by CPA firm (2 tax accountants earlier), and CPA firm refused to provide any reconciling data and worksheets (couldn't believe it). While this was going on, and reviewing current year QB entries for preparation of current returns, I saw that client was not consistently and properly taking medical premiums into his W-2 income. By looking closely at these items from 2001 thru 2002 in QB entries, I was able to recreate nearly exactly the 2001 and 2002 tax return income and balance sheets. The prior accountants were coming up with the right tax numbers, but were not giving prior year adjusting entries to the corporation for updating the QB files. Unfortunately this is a common practice by accountants. I have done it myself with QB clients who are really inept at accounting.... explaining adjusting entries to some clients is so time-consuming it is tempting to just skip it. But I will never skip it in the future !}} | ||
Revision as of 13:33, 3 May 2008
Discussion Forum Index --> Basic Tax Questions --> Help needed on a really ugly tax return
Discussion Forum Index --> Tax Questions --> Help needed on a really ugly tax return
Actionbsns (talk|edits) said: | 3 May 2008 |
| I'm going to try to explain this clearly, but feel free to ask for clarification. I've been working on this return for a month or so. The main problem is that the prior CPA was not using Quickbooks to prepare his TR and his financials don't tie into my QB data file without an adjustment to AAA of $21,847. My problem is where do I book that for the TR? I can put it in distributions, but this client has taken distributions way in excess of basis already and that exascerbates the problem I think. On the personal side, I've temporarily put the excess distributions in as capital gain, but it seems unfair to pay cap gain tax on an amount that is essentially a journal entry to make a couple sets of books balance to each other. The other choice would be to make an adjustment to shareholder basis, but my reason seems funky "To adjust to prior accountant's books". Seems like I might as well put a note on the return that says "please audit me".
The history of the QB data file is that it is about five years old and started life as another corporation. The client created a new corporation effective 01/01/06 and continued using the same data file. They use AR and AP, so the history was still there. On Jan 1 06, they had all their outstanding receivables still waiting to be collected, it didn't make sense to go back and re-enter invoices for the new corp, which BTW is the same business, new name and ID #'s etc. They also brought in some assets and debt from a sole proprietorship they ceased to use at the time of the new corp. When all that filtered into the QB books, in order to tie to the 06 TR, we now have this adjustment. I would appreciate any thoughts and help in identifying this weird transaction on my TR. | |
| 3 May 2008 | |
| Actionbsns -
So, essentially, $21,847 is gone and you don't know what happened to it? Perhaps you should come up with a starting balance for shareholder's basis from the information you have records for from previously filed tax returns - contributions, distributions, income, loss, etc, and also adjust the starting AAA. What I'm getting at is your going forward & reporting current & future figures correctly & not try to identify errors from previous years, plus adjusting the starting balances so that they tie into something you can back up with prior tax returns and actual balance sheet amounts. Does that make any sense? | |
| 3 May 2008 | |
| Action-
I had very similar situation and numbers a few years back. Ended up reviewing/adjusting detailed QB accounting for current corp from day 1 to best of my ability, trying to tie to prior year tax returns. QB files from client did not match tax returns prepared by CPA firm (2 tax accountants earlier), and CPA firm refused to provide any reconciling data and worksheets (couldn't believe it). While this was going on, and reviewing current year QB entries for preparation of current returns, I saw that client was not consistently and properly taking medical premiums into his W-2 income. By looking closely at these items from 2001 thru 2002 in QB entries, I was able to recreate nearly exactly the 2001 and 2002 tax return income and balance sheets. The prior accountants were coming up with the right tax numbers, but were not giving prior year adjusting entries to the corporation for updating the QB files. Unfortunately this is a common practice by accountants. I have done it myself with QB clients who are really inept at accounting.... explaining adjusting entries to some clients is so time-consuming it is tempting to just skip it. But I will never skip it in the future ! | |
