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 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 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 Check Your Refund is to click this link IRS Wheres My Refund! 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.
You should keep your records and tax returns for at least 3
years from the date the return was filed or the date the
return was required to be filed, whichever is later. It is
recommended that you keep these records longer if
possible.
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?
It depends. is your contribution cash or non-cash?
I received tax statements from my employer or bank after I
filed my tax return. What should I do?
If we filed your return, bring the new tax documents to our
office. We will determine if it is necessary for you to file
an amended return.
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.
Is my social security taxable?
Usually if your income including social security benefits is
less than $25,000 if single or $32,000 if married, your
benefits are not taxable. If your income is higher than those
limits, there are formulas to determine what percentage of
your social security is taxable. Currently up to 85% of your
social security may be taxable.
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.
What are the tax consequences of selling a
home?
If you sell your personal residence you can totally exclude
from income up to $250,000 of gain if you are single, or
$500,000 if married, regardless of your age at the time of
the sale—if during the 5 years before the sale you
owned the home and lived in it for a total of any 24 months.
The exclusion is not a one-time election; instead it is
available once every 2 years. Recent tax law has adversely
changed the handling of gains on the sale of a home if you
rented the property before you made it your personal
residence. Please contact our office if you believe this
situation will affect you.
Do I have to file a joint return with my spouse?
No, you can file either as married filing joint or married
filing separate. If you file separately your taxes will most
likely be higher. Many credits—such as earned income,
education (Hope and lifetime learning), and child
care—are not allowed when you file separately.
There are special circumstances where people who are married,
but either do not want to or cannot file with their spouse,
can file as Head of Household, which therefore entitles them
to these credits and a lower tax bracket. In order to qualify
as a Head of Household you must meet the following
conditions:
§
You lived apart from your spouse for the last six months of
the tax year.
Temporary absences for special circumstances, such as for
business, medical care, school, or military service, count as
time lived in the home.
§
You filed a separate return from your
spouse.
§
You paid over half the cost of keeping up your home for the
year.
§
Your home was the main home of your child for over half of
the year.
§
You can claim this child as your
dependent.
If you do not meet all these conditions but are legally separated as of the last day of the year, you may also qualify to file as single.
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.