There will always be questions when it comes to taxes and accounting... here are a few frequently asked questions we thought might help.
Should we wait until tax preparation time to contact you?
No, complicated tax questions come up during the year. It is much better to send a question to your tax preparer when an issue occurs than to inform them of it after the fact. We want to work with you to insure that you make decisions that make economic sense, help save you tax dollars and help prevent you from making bad tax decisions before the fact.
What pieces of paper do I need to keep in order to do my taxes?
Keep detailed records of your income, expenses, and 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 your trusty ally in case you are audited.
There are several types of records that you should keep. Most experts believe it's wise to keep most types of records for at least seven years, and some you should keep indefinitely.
How long should I keep my old tax returns?
You may want to keep your old returns forever, especially if they contain information such as the tax basis of your house. Probably, though, keeping them for the previous three or four years is sufficient.
If you throw out an old return that you find you need, you can get a copy of your most recent returns (usually the last six years) from the IRS. Ask the IRS to send you Form 4506, Request for Copy or Transcript of Tax Form. When you complete the form, send it, with the required small fee, to the IRS Service Center where you filed your return.
What entities will let me both limit my liability and avoid the double tax?
S corps (usually), and all the following types, assuming you don't choose to have them treated as corporations: LLCs; LLPs; and limited partnerships, for the limited partners. For sole owners, the choice is limited to S corps or, in states that allow single owners, LLCs. What are the federal tax consequences of changing your form of business organization? This is a critical decision that should be studied carefully with professional guidance. But briefly stated:
Who should form an LLC?
You should consider forming an LLC (limited liability company) if you are concerned about personal exposure to lawsuits arising from your business. For example, if you decide to open a store-front business that deals directly with the public, you may worry that your commercial liability insurance won't fully protect your personal assets from potential slip-and-fall lawsuits or claims by your suppliers for unpaid bills. Running your business as an LLC may help you sleep better, because it instantly gives you personal protection against these and other potential claims against your business.
What kind of records do I need to keep in my business?
Complete and accurate financial record keeping is crucial to your business success. Good records provide the financial data that help you operate more efficiently. Accurate and complete records enable you to identify all your business assets, liabilities, income and expenses. That information helps you pinpoint both the strong and weak phases of your business operations. Moreover, good records are essential for the preparation of current financial statements, such as the income statement (profit and loss) and cash-flow projection. These statements, in turn, are critical for maintaining good relations with your banker. Finally, good records help you avoid underpaying or overpaying your taxes. In addition, good records are essential during an Internal Revenue Service audit, if you hope to answer questions accurately and to the satisfaction of the IRS. To assure your success, your financial records should show how much income you are generating now and project how much income can you expect to generate in the future. They should inform you of the amount of cash tied up in accounts receivable. Records also need to indicate what you owe for merchandise, rent, utilities, and equipment, as well as such expenses as payroll, payroll taxes, advertising, equipment and facilities maintenance, and benefit plans for yourself and employees. Records will tell you how much cash is on hand and how much is tied-up in inventory. They should reveal which of your product lines, departments, or service are making a profit, as well as your gross and net profit. The Basic Recordkeeping System A basic record-keeping system needs a basic journal to record transactions, accounts receivable records, accounts payable records, payroll records, petty cash records, and inventory records. An accountant can develop the entire system most suitable for your business needs and train you in maintaining these records on a regular basis. These records will form the basis of your financial statements and tax returns. You should always keep enough cash on hand to cover expenses and as an added cushion for security. Excess cash should be invested in an accessible, interest-bearing, low-risk account, such as a savings account, short-term certificate of deposit or Treasury bill.
Are you available evenings and weekends?
Yes, my hours are very flexible. I am here to help you with your tax and financial needs.