"Harlan Lunsford" <hlunsford[at]bellsouth.net> wrote:
- quote -

Could this be a grantor trust, where all the income and
deductions are reported on the grantor's 1040?

If that is the case, then the sch h would be appropriate on
the 1040 & no 940 or 941's needed

Only state payroll tax returns... and I'm not overly
familiar with CA payroll taxes for domestic employees

--
<<< Benjamin Yazersky CPA [NJ & NY] > >
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Harlan Lunsford wrote:
- quote -

Household employement, form 1040 schedule H (which would be
attached to the 1041, if the 1041 was otherwise required).

Sorry I didn't make that clear. The trust has no other
(paid) employees, so the 941 and 940 are unnecessary.
(And I didn't maintain my CA tax preparer registration
while I was in AZ, so I can't charge for preparing the
trust's income tax returns.)

This also has the benefit of making the tax payments
annually (by April 15 for the Federal, and January 31 for
California), rather than quarterly.

- quote -

But they don't have the check digit on the letter. The
letter only has nnn-nnnn, the correct number is nnn-nnnn-6,
and the 2002 1040 Schedule H has nnn-nnnn-8. (I can't find
my copy of the 2003 1040 Schedule H, so I don't know if I
did it right.)

....

- quote -

The trust can do some things which could not be done with a
only a durable POA in case MIL is legally incompetant. But
we may have wasted the money, especially since the trust
document doesn't seem to provide for adding additional
trustees, which would be the simplest long-term solution.
I'm listed as an alternate trustee, rather than as an
additional trustee.

My best guess is that, in order for me to be added as a
trustee, my wife would have to sign for MIL, using the
durable power of attorney, to amend the trust agreement.

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Arthur L. Rubin wrote:

- quote -

The trust files a 1040? I would think that it would use
the usual 941,940 forms as appropriate.

- quote -

So that's what cause the original problem. IRS couldn't
match anything with the state DOL #

- quote -

I think that's the best way to handle it, wait till your POA
is recorded. AFter all, time is not at a premium on
something like this.

- quote -

No way. (unless the exception might prove the rule.)

- quote -

Old rule of thumb, don't cash an incorrect refund check.
(grin

- quote -

I'm still wondering why a schedule H? Or even why a 1040?

Of course I don't handle these every day, just maybe once a
year, and in all my cases, the daughter has POA from father
and files his 1040 form. She never did even consider a
living trust, etc, since that costs MONEY! And I agree.

ChEAr$,
Harlan Lunsford, EA n LA
Fri, 14 Jan 2005

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OK, this is the first IRS letter I've got on my wife's
mother's trust's employment tax returns, and after talking
with the IRS, I'm even more confused.

Background: My MIL is unable to take care of herself. I
don't know if she's still legally competant, but all bank
accounts she has control of are joint with my wife, so that,
unless she takes it upon herself to withdraw the money and
give it to someone, she should be OK. As she doesn't
remember the account numbers, anyway.

In any case, we set up a living trust so the my wife can
manage her accounts. That (grantor) trust hired a live-in
caretaker, and has been filing the appropriate Federal
(stand-alone 1040 Schedule H, W-2, and W-3) and California
(DE3 series, and DE7) forms.

Aside from some confusion as to where the Schedule H's are
to be sent, we haven't had any problems. Until now.

We got a notice about the 2002 Schedule H, saying that,
after receiving information from California, they've
recalculated the return. What it appears they've done is,
for the "original" return, they've copied the net FUTA into
the gross Federal employment tax field. (We qualified for
the simplified calculation in part II Section A of the form,
so that the net tax of 0.8% is all that appears on the
form.) The "new" return seems to have section B filled out,
but lost the Social Security and Medicare taxes, so they
want to send us a large refund.

The only additional anomaly on the return is that I put the
wrong check digit on the state reporting number on the
original return. The agent and the number on the letter
referred me to the direct number at the employment tax
office in Ogden, which seems to be a voice mail drop. As
both my wife and I have to be on the phone to deal with the
issue, a callback wouldn't work. (I'm not an employee of
the trust, so I am not eligible for a full
power-of-attorney. I've sent in the forms for a "preparer"
power-of-attorney, but they haven't been processed yet.)

1. Aside from working through a lawyer, EA, or CPA, what
are my options in getting this resolved. Could we actually
go into an IRS office and get it resolved?

2. In the event it ISN'T resolved, and they send the refund
check, what can I do to avoid having a large penalty if the
IRS ever figures out what they're doing.

3. Should the 1040 H also be in the grantor's name, rather
than in the trust's name. (This would screw up the matching
even more, as the state employment accounting is in the
trust's name.)

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