Here are the answers to some of the most Frequently Asked Questions my firm receives.
The information found on this website is general in nature and may not apply to the reader's situation. Therefore, the reader should not rely on the information on this website alone. For specific advice or service, please call me at 412-369-0829.
Q: What is the Annual Filing Season Program – Record of Completion?
A: The Annual Filing Season Program (AFSP) is a voluntary program launched by the IRS to recognize the efforts of non-credentialed tax return preparers who aspire to a higher level of professionalism.AFSP participants will be included in a public database on the IRS website (www.irs.gov).Since I had previously passed the Registered Tax Return Preparer (RTRP) exam, I am required to complete 15 hours of continuing education credits per year to maintain my AFSP status.I will have limited representation rights, meaning that I can represent clients whose tax returns I prepared and signed, but only before revenue agents, customer service representatives, and similar IRS employees, including the Taxpayer Advocate Service.
Q: Nothing happens when I click on the Fin. Calculators link, does this link work?
A: Yes it does! This link opens in a new browser window, if nothing happens when you click the link, hold down the CTRL key while you click, a new window should open with the calculator types across the top, select one and calculate away!
Q. How do I get to your office?
A. Directions to my office along with a map are located on my "Contact Me" page. Feel free to call for more detailed directions if necessary.
Q. I currently use an outside payroll service, and, frankly, have not been pleased for various reasons. What alternatives do I have?
A. I now have access to a very good payroll alternative that you can access and use right here on my webpage. This is a reasonably priced alternative, competitive with the nationally known services, and offers you the flexibility of running your own payrolls on YOUR schedule. Direct deposit, ACH tax payments and easy import to your QuickBooks or other accounting software are features of this very good software. Call me for additional information!
Q. It seems like everyone and his brother (except me!) has a retirement plan! Can you explain the various plans available?
A. A good retirement plan can be an essential weapon in your arsenal for accumulating wealth. I will go out on a limb...Every business owner with taxable income from some source (whether from the business or not) should have a retirement plan to help defer taxes and to accumulate savings tax free! I would be more than happy to review some of your options regarding saving for retirement. Give me a call so that we can discuss this!
Q. Do I need to visit your office to have my taxes prepared?
A. It is not necessary to visit my office. Many of my clients use my convenient drop box located next to my office door. My clients also utilize the mail and express services to send their information to me. In addition, emailing as well as scanning information and attaching it to an email to me is very effective. As a matter of fact, I deal with several clients from out-of-state who utilize these methods. For new clients, I encourage a personal meeting so that we can meet and discuss your tax situation.
Q. What size clients do you accept?
A. For the most part, I will accept the majority of clients. If the engagement is very large, I will accept it if I feel that I am capable of handling it. If I am unable to handle it in its entirety, I may collaborate with another firm or refer you directly to that firm. There is no account too small to be considered important in my office.
Q. Can I ever save tax by filing a separate return instead of jointly with my spouse?
A. In most cases, filing jointly usually yields a lesser amount of tax. You sometimes may benefit from filing separately instead of jointly. Consider filing separately if you meet the following criteria: One spouse has large medical expenses, miscellaneous itemized deductions, or casualty losses. The spouses' incomes are about equal. Separate filing may benefit such couples because the adjusted gross income "floors" for taking the listed deductions will be computed separately. I have the capability to take a joint return and split the return to determine which filing is most advantageous.
Q. How do you charge for your services and how does your cost compare to other tax preparation firms?
A. Primarily, I charge by the form, however, forms which require multiple entries may incur additional charges. If requested, I can provide my clients with a cost estimate to prepare their taxes. With lower overhead costs than popular chains or large firms, I am able to keep my fees at a fair and reasonable rate.
Q. Do you work with start-up businesses or companies?
A. Yes! Many of my clients have started small businesses over the years. I will lead you through the sea of necessary governmental forms.
Q. I want to start a new business. Can you tell me which type of business I should form?
A. Yes. When setting up a new business, it is crucial to set up the right type of business, such as corporation, S corporation, Limited Liability Company, limited partnership, partnership, sole proprietorship, etc. I can assist you in forming the right type of business based on your unique situation with consideration given to liability issues and tax advantages.
Q. How are Limited Liability Companies (LLC) taxed?
A. A single member LLC is considered a disregarded entity and is taxed as a Sole Proprietorship. Income/loss from the LLC is reported on Schedule C of the owner’s personal income tax return. A multi-member LLC defaults to being taxed as a Partnership. A Partnership tax return must be filed. The profit or loss is then reported on the owners’ personal tax returns. Any LLC can elect to be taxed as a corporation. To do so, one must file an election within 75 days of creating the LLC.
Q. Should I keep my old tax returns? If so, for how long?
A. Yes, you should keep your old tax returns for at least 7 years. When a return contains information pertaining to the basis of property owned, it should be kept until that property is sold. One of the benefits of keeping your tax returns from year to year is that you can look at last year’s return while preparing this years. If you do throw out an old return you may fill out form 4506, Request for Copy or Transcript of Tax Form, and send it to the IRS service center where you filed your return.
Q. What pieces of paper do I need to keep in order to do my taxes?
A. Keep detailed records of your income, expenses, and any other information you report on your tax return. A good set of records can help you save money when you do your taxes and will be a trusty ally in case you are audited.
Q. How do I know when certain taxes are due?
A. You can check out the Due Date Calendar located on my website or you may give me a call at 412-369-0829.
Q. What is the Social Security wage base and rate?
A. The social security wage base for 2021 is $142.800. The FICA rate is 7.65% for employees and 15.3% for self-employed individuals. The Social Security portion is 6.2%(12.4% for self-employed) of wages up to the wage base. The Medicare portion is 1.45% (2.9% for self-employed) of wages with no ceiling.
Q. What is the standard mileage rate?
A. For 2020, the standard mileage rate is 57.5 cents/mile. For 2021, the standard mileage rate is being reduced to 56 cents/mile. The IRS has the authority to change the mileage rate, either up, or down, in accordance with the current costs of operating a vehicle. Call me at 412-369-0829 to find out if there has been a change.
Q. What is the annual gift tax exclusion?
A. The annual gift tax exclusion for 2021 is $15,000 per donee, with an annual maximum of $30,000 per donee applicable to spouses who utilize gift splitting. Additionally, there is an unlimited exclusion for payments of tuition and medical expenses.If planning to give gifts larger than the exclusion amount, the donor is required to file a gift tax return.
Q. When should I give you my tax information?
A. You should bring all your information in as soon as you have it all together. The sooner you bring it in to me, the better chance we have at making sure I've done the best possible job for you.
Q. What do I need to do to start a new business?
A. Typically, some people will go to their lawyer first, get the business set up and then contact an accountant. I would rather that you contact me at the beginning. There are many different kinds of companies and I can help you select the best one for the type of company that you will be setting up. At that time, I can assist you in the set-up of your company. Then I will continue to help you with payroll, tax returns, monthly accounting, and financial statements to whatever degree you need.
Q. Should I use a lawyer or an accountant to incorporate my business?
A. Although lawyers can get the paperwork together to make your incorporation happen, they may not know all the different tax laws that can apply to the different kinds of incorporations. Therefore, I suggest you contact me first to find out exactly which kind of incorporation you should pursue. Then I can complete the necessary paperwork or direct you how to proceed in completing the required paperwork on your own.
Q. How can I pay my taxes by credit card and which credit cards are accepted?
A. Credit card payments can be made by phone (1-888-PAY1040) or Internet (www.officialpayments.com) using American Express, Discover, MasterCard or Visa. You will be provided a confirmation number at the end of the payment transaction and your credit card statement will provide confirmation of your electronic payment. The payment and return are reconciled based on the social security number entered and type of tax selected during the transaction.
Q. Is the IRS storing credit card information?
A. No. The IRS does not have access to credit card numbers or directly participate in the credit card transactions. The IRS relies on private credit card processors to verify the validity of the card and line of credit. The processors forward the appropriate tax payment information to the IRS.
Q. Is there a fee charged for using my credit card to pay my taxes?
A. The company that processes your credit card payment charges a convenience fee. You are informed of the convenience fee amount before you authorize the payment. The fee is in addition to any charges, such as interest, that may be assessed by your credit card issuer.
Q. Where can I get additional information about IRS e-file?
A. You can visit the IRS website at www.irs.gov - or feel free to call my office at 412-369-0829 for additional information.
Q. If I owe, how do I pay my taxes electronically?
A. Taxes can be paid to the IRS and the States using the ACH Direct Debit. Using this method, the tax will be deducted from your checking or savings account on a specified date. You can also e-pay by credit card. If you e-pay by credit card, you delay out-of-pocket expenses and may earn miles, rewards or money back from your credit card issuer. Payment by check or money order is acceptable. Your return can be e-filed at any time before April 15, and then you can mail your payment in later - as long as it is postmarkedby April 15.
Q. What do I gain by using IRS e-file?
A. Accuracy! Security! Electronic Signatures! Proof of Acceptance! Fast refunds with direct deposit! Electronic Payment Options! Federal/State e-file! Only IRS e-file offers these advantages.
Q. What is an Authorized IRS e-file Provider?
A. An Authorized IRS e-file Provider is a tax professional or firm who is accepted into the IRS electronic filing program. One type of Authorized IRS e-file Provider is an Electronic Return Originator (ERO). An ERO is a person or firm that taxpayers entrust with tax information for the purpose of filing income tax returns electronically to the IRS. I am an ERO and an authorized IRS e-file provider.
Q. Can I pay my balance due by phone or Internet with a credit card if I'm a 'married filing joint' filer?
A. Yes. Just be sure to enter the Social Security number of the first taxpayer listed on the return's pre-printed mailing label or postcard. This is usually the taxpayer listed on the return.
Q. Do I really get my refund faster?
A. With IRS e-file you get it back in half the usual time. It's even faster and safer if you have your refund deposited directly to your bank account in as few as 10 days. Ask your Authorized IRS e-file Provider for the estimated date of deposit. For more information about Direct Deposit, go to the Financial Management Service (FMS) web site, www.fins.treas.gov/eft .
Q. Should I wait until April 15 to file electronically if I owe taxes?
A. No. You can e-file your return as soon as it is completed. You can either have your tax due direct debited from your bank account on April 15 or you can send your payment in on or before April 15. If you prefer to mail your payment, I can provide you with the payment voucher and addressed envelope to make sure it goes to the correct IRS center.
Q. What is a Form 9465, Installment Agreement Request?
A. This form is available to my firm. An approved Installment Agreement allows you to make a predetermined series of partial payments after April 15. Regardless of how you pay, you are responsible for paying the amount of tax due by April 15 of each year or you will be subject to late payment penalties and interest.
Q. Do I have a greater chance of getting audited by the IRS if I use IRS e-file?
A. No. The chance of an audit of an e-filed return is no greater than with a paper return.
Q. How do I know that the IRS really has my return?
A. The IRS notifies your Authorized IRS e-file Provider (my firm) within 48 hours of transmission that your return information was received. If the IRS detects any errors, it sends a message back to my firm indicating the error. My firm will correct the error and notify you to let you know what the error was. I will then retransmit your returns to the IRS.
Q. Can my state tax return be e-filed with my Federal return at the same time?
A. Yes, both returns can be e-filed at the same time.
Q. What if I owe and cannot pay the full balance due on my taxes?
A. The tax preparation software used by my firm can allow you to make partial payments. In this case, you can make a payment for less than the balance due amount on your return. If you cannot pay in full by April 15, you can file Form 9465, Installment Agreement Request.
Q. What happens if my return is filed electronically, I am receiving a refund, and I owe taxes from previous years?
A. The amount owed on back taxes is automatically deducted from your refund just as if you filed a paper return.
Q. Do you offer free business consultations?
A. Yes, I offer a free one-hour consultation. The consultation is to gather information about you and your business, while you find out more about me. I can usually answer a few questions at that time and determine if you have done the necessary registrations and filings. I request that you bring your last two income tax returns and financial statements (if any). Also bring anything else that you may have a question on.
Q. I prepare my own tax return, why use your services?
A. Many times you are correct and you can prepare and file your own return. But did you take all the deductions? Did you take any available tax credits? I find that many returns can be self-prepared but many are lacking in all the deductions/credits that can be taken.
Q. What is ACCOUNTING RELIEF?
A. ACCOUNTING RELIEF is a very comprehensive bookkeeping and trial balance system that resides on fully secure web servers - more secure than PC-based bookkeeping systems - providing anywhere, anytime access while eliminating the need for daily backup and importing or exporting data hassles. It is a password-protected system that allows different levels of authorized access for each user as you determine. It is so easy to understand and can be set up to run for your business in minutes.
Q. What is PAYROLL RELIEF and how can it ease my payroll task?
A. PAYROLL RELIEF is a comprehensive payroll solution. PAYROLL RELIEF is your anywhere, anytime online payroll department. Instant paychecks, free Direct Deposit, free electronic tax deposits, completed tax forms and live customer support makes payroll chores easy. Email reminders and custom To-Do lists ensure what to do and when. Signature-ready payroll tax forms are completed automatically, including 940's, 941's and W-2's. PAYROLL RELIEF prepares and files Forms 1099-MISC as well. PAYROLL RELIEF can be set up where the client does some of the work or where my firm processes your entire payroll.
Q. How can I contact the IRS about my tax return?
A. You can call the IRS at its toll-free line at 800-829-1040. To be ready to respond, you should have your Social Security number, your filing status and your refund or payment due amounts. Allow between 4 to 6 weeks before you contact the IRS.
Q. How can I obtain a copy of my tax return?
A. Of course, I supply you with a copy and if you lose it, I can furnish you with another copy for a small fee. If I did not prepare the return, and for some reason you do not have a copy in your possession, you will need to file form 4506, Request for Copy or Transcript of Tax Forms, with the IRS service center where you filed your missing return.
Q. Can I deduct child support payments?
A. No. Child support payments are not deductible, because they represent a pre-existing legal obligation to support your children.
Q. In a divorce who is entitled to the child dependency exemption?
A. The parent who had custody of the child for the greater part of the year is generally treated as the parent who provided over one-half of the child's support and will claim the exemption if other tests are met. Custody is usually determined by the divorce, separate maintenance or custody decree or agreement. If no decree or agreement establishes custody, then the parent who had physical custody for the greater part of the year is entitled to the exemption.
Q. What is the most tax efficient way to save for my children's education?
A. The educational savings area is very complicated. I recommend that taxpayers seek professional assistance for their child’s education savings. Although a Section 529 plan, under the 2001 Tax Act, is an extremely flexible and tax effective plan, there are other plans to be considered. Also when considering any educational savings plan, consideration should be given to the impact on financial aid qualification requirements.
Q. What is the best way to borrow for consumer purchases?
A. I would generally discourage borrowing for consumer purchases unless absolutely necessary. However, I recognize that often there is no alternative. When it is necessary to borrow for large consumer purchases, I recommend a home equity loan or line of credit. However, interest on home equity are no longer deductible unless they are used solely for improvements to the home.Interest on consumer loans, such as car loans and credit cards, are not tax deductible.
Q. Do you provide prospective clients with estimates of your fee?
A. When appropriate, I prefer to provide a fee estimate. I always provide a fee range estimate for the preparation of tax returns and typically indicate which forms are inclusive of the fee.
Q. What is Long Term Care insurance?
A. Long Term Care insurance covers an individual for the costs of home health care, community based care (such as assisted living)and nursing home care. It works in conjunction with Medicare and/or private insurance. It is a contract between an individual and an insurance company that, in exchange for premiums, provides daily health benefits. For a man over the age of 65, the odds are one in three (33%) that he will need long term care; for a woman, the odds are one in two (50%).
Q. What if I am audited?
A. In the event of a federal or state audit of a return, I will meet with you to review the issues of the audit, provide research and documentation for the items in questions, and assist in preparing all needed information for the audit.
Q. Will you go with me to the audit?
A. At your discretion, I will go with you to the audit or I will meet with you to review the issues of the audit. Since I am not a CPA, attorney or enrolled agent, I cannot represent you without your being at the audit.I do charge a separate fee for assistance in an audit.
Q. On a 1099-NEC, do we put the person's name or DBA?
A. If people work for themselves, use the individual's name and Social Security number. If the person is an employee of the business, use the business name and federal EIN.
Q. Can we report part-time employee wages on a 1099-NEC?
A. Report employee wages on a W-2, never on a 1099-NEC.
Q. Do we report a $1,000 gift to an employee on a 1099-MISC?
A. Report cash payments to employees on a W-2 as income, not on a 1099.
Q. Are per diem reimbursements wages subject to FIT, FITW, FICA, and FUTA?
A. Per Diem reimbursements for travel are not wages—if the travel is properly substantiated (for time, place and business purpose) and the amount does not exceed the maximum federal rates for the location of travel. Room tax above the federal rate may be reimbursed separately and is nontaxable if receipts are provided.
Q. Should I ask employees to complete a new W-4 each year?
A. Employees need not complete a new W-4 unless they claimed exempt from FIT withholding the prior year, changed marital status or number of personal exemptions.
Q. Can an unsubstantiated auto allowance be reported on a Form 1099-MISC?
A. If an employer gives an auto allowance unrelated to actual vehicle expenses incurred and does not require the employee to substantiate or return unused amounts, the entire allowance is wages and is reported on the W-2, not the 1099.
Q. What do I do about an employee's incorrect W-2 if copies have not gone to the SSA?
A. Tell the employee about the error and that you will provide another W-2 (not W-2c) to file with his/her1040. Include the new W-2 with the W-2s and W-3 sent to the SSA.