FAQ

What do I do if I receive a notice from the IRS about my taxes?
Don’t panic! the first thing to do is carefully read the notice—to determine why it was sent, what the IRS is requesting, and what they want you to do. It may be nothing of importance; it may even be a notice in your favor. After reading it you should bring it to our attention.

What is the difference between a C and an S corporation?
A C Corporation and an S Corporation are exactly the same in respect to liability protection. The difference is in how you are taxed. A C Corporation has what is referred to as a double taxation. First the corporation is taxed, and secondly the dividends are taxed on the shareholders’ tax returns. An S Corporation is not taxed at the corporate level, only at the shareholder level. Most small businesses are eligible to file as S corporations. But the appropriate election must be made.

What do I need to bring when I am having my taxes prepared?
Following is a list of the more common items you should bring if you have them.
- Wage statements (Form W-2)
- Pension, or retirement income (Forms 1099-R)
- Dependents' Social Security numbers and dates of birth
- Last year's tax return
- Information on education expenses
- Information on the sales of stocks and/or bonds
- Self-employed business income and expenses
- Lottery and/or gambling winnings and losses
- State refund amount
- Social Security and/or unemployment income
- Income and expenses from rentals
- Record of purchase or sale of real estate
- Medical and dental expenses
- Real estate and personal property taxes
- Estimated taxes or foreign taxes paid
- Cash and non-cash charitable donations
- Mortgage or home equity loan interest paid (Form 1098)
- Unreimbursed employment-related expenses
- Job-related educational expenses
- Child care expenses and provider information And any other items that you think may be necessary for your taxes.

How do I find out about my refund?
The best way is to use the Check Your Refund link from the Resources pages of our website! To look up the status of your federal or state refund, you will need your social security number, filing status, and exact amount you’re expecting back.

What are the consequences of early withdrawals from my retirement plans?

If you withdraw money from a 401(k) or an IRA before age 59 ½, the distribution is taxable and there is a 10% penalty on the taxable amount. The main exceptions that let you withdraw money early without penalty are as follows:

What is a 529 plan?
A Qualified Tuition Program (QTP), also called a "529 plan," is established and maintained to let you either prepay or contribute to an account established for paying a student's qualified higher education expenses at an eligible institution. States and eligible educational institutions can establish and maintain a QTP. You do not get any federal deductions for the account, but any income earned in it is tax-free. One of the big advantages of a 529 plan is that many states allow you to deduct some contributions to the plan from your state tax return.

What college expenses may I deduct?
There are several ways you can claim deductions for college expenses on your tax return. They are the tuition deduction, the HOPE credit and the Lifetime Learning Credit. If we are preparing your return we will determine which ones you qualify for and which one gives you the greatest tax benefit.

What is the child tax credit?
The child tax credit is a credit of $1000 per child from the IRS. In order to qualify the child must: 1. Be under 17 at the end of the tax year 2. Be a citizen of the United States 3. Be your child 4. Live with you for more than half the year 5. Not be treated as the qualifying child of someone else.
 
What medical expenses are deductible?
A deduction is allowed only for expenses paid for the prevention or alleviation of a physical or mental defect or illness. Medical care expenses include payments for the diagnosis, cure, mitigation, treatment, or prevention of disease, or treatment affecting any structure or function of the body. Except for insulin, only prescription drugs are deductible. The cost of health insurance is deductible. You may also deduct the cost of traveling to and from the care provider. You can deduct only the part of your medical and dental expenses that exceeds 7.5% of your adjusted gross income.

What do I need to keep for my charitable contributions?

First, is your contribution cash or non-cash?

 

All contributions must be made to qualified charitable organizations.

What are the tax consequences of buying a home?
The main tax consequence of buying a home is that you may be able to deduct the property taxes you pay and any mortgage interest you pay. Points you pay may also be deductible. Please contact our office to determine the eligibility. Normal expenses for maintaining a home are not deductible, but you should keep records of any major expenses for repairs or improvements. I you have a taxable gain when you sell your home, these expenses may be deductible.

I haven’t been filing my tax returns what should I do?
First, you must determine if you were required to file in the years you did not file. There are many different items that could figure into this—such as your filing status, your sources of income, whether you had any tax withheld, etc. This is a link to the IRS instructions for filing requirements for 2007: http://www.irs.gov/individuals/article/0,,id=96623,00.html. If you determine you should have filed, contact us and we can handle all of your prior year filings. It is very important that you do not just continue to not file. If you owe money the penalties for not filing are high. If you are owed a refund you will lose your claim to it 3 years after the due date of the return.

When can I make contributions to my IRA?
Generally for any tax year, you can make a contribution to your IRA up until the original due date of the return (usually April 15). Thus for tax year 2007, you can make contributions from January 1, 2007 through April 15, 2008.

What are the differences between a Roth and a conventional IRA?
A traditional IRA lets you deduct contributions in the year you make them, and the distributions are included as income on your return when you withdraw from the IRA after reaching age 59½. A Roth IRA does not let you deduct the contributions, but you also do not report the distributions as income, no matter how much the Roth account has appreciated. With a Roth, you can exclude the income earned in the account from being taxed.

How should I keep records for my business driving?
Keep a log in your vehicle and record the purpose and mileage of each trip. You also need to record the odometer readings at the beginning and end of each year, as the IRS will ask you for total miles driven during the year. Keep your repair bills as these normally record odometer readings when the car is serviced.

Can I deduct expenses for a business run out of my home?

If you use a portion of your home for business purposes, you may be able to take a home office deduction whether you are self-employed or an employee. Expenses you may be able to deduct for business use of your home may include the business portion of real estate taxes, mortgage interest, rent, utilities, insurance, depreciation, painting, and repairs.

You can claim this deduction only if you use a part of your home regularly and exclusively:

Generally, the amount you can deduct depends on the percentage of your home that you used for business. Your deduction will be limited if your gross income from your business is less than your total business expenses.


What is depreciation?
For tax purposes, depreciation is the expensing of the cost of an item over its estimated useful life. If property you acquire to use in your business is expected to last more than one year, you generally cannot deduct the entire cost as a business expense in the year you acquire it. You must spread the cost over more than one tax year and deduct part of it each year. This method of deducting the cost of business property is called depreciation. There are many different methods of depreciation and other rules that allow you to claim the expense in one year.

I owe the IRS money. What are my options?

If you can afford to pay the amount you owe, it should be paid. But many times that is not the case. If you cannot afford to pay, you have several options. Ignoring the IRS should not be one of them!