FAQs

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.

How long do I keep my records and tax returns?
You should keep your records and tax returns for at least 4 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.

When do I have to start taking IRA distributions?
You must start receiving at least the Required Minimum Distributions(RMD), as computed by institution where it is invested, by April 1st of the year following the year in which you reach age 70 1/2. This is called the Required Beginning Date.

How much can I take in Capital losses per year?
You are allowed a maximum of $3000 ($1500 if filing married separately) of losses above capital gains per year. Any losses above that are carried forward to subsequent years. Example 1: losses $8000 gains 5000 ----- losses allowed 3000----------------------------- Example 2: losses $8000 gains 4000 ----- losses allowed 3000 loss carryforward 1000

Are there plans with tax savings for college?
The main plans for saving for college are the 529 plans and the Coverdell plan.

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 do I need to keep for my charitable contributions?

First, is your contribution cash or non-cash?

  • If you make a cash donation, you must have a bank record or written communication from the charity showing the name of the charity and the amount of the donation. A bank record can be the cancelled check or a statement from a bank or credit union—so long as it lists the charity’s name, the date, and the amount of the contribution. Personal records such as bank registers, diaries and notes are no longer considered acceptable proof of contributions.
  • Any used items (such as clothing, linens, appliances, etc.) must be in good condition and may only be deducted at the price you could reasonably ask for the item in used condition. For contributions worth $250 or more, you must have a written receipt or letter from the organization. For contributions worth $500 or more, you must file Form 8283 (Noncash Charitable Contributions) and attach it to your Form 1040.

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.

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.

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 2010, you can make contributions from January 1, 2010 through April 15, 2011.

I donate my time and drive for charity wearing a uniform. What may I deduct?
If you drive to and from volunteer work, you may deduct either the actual cost of gas and oil or a standard amount of 14 cents per mile. Please note that any mileage reimbursement in excess of 14 cents per mile must be treated as income. You may also deduct the cost of buying and cleaning uniforms if the uniforms are not suitable for everyday use, and you must wear them when volunteering. You may not claim a deduction for the value of your time.

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.

If I buy a new home, can I deduct my moving expenses?

If you move to a new home because of a new principal

workplace, you may be able to deduct your moving expenses. To do so, you must meet the conditions for both the distance and the time tests.

The distance test is that your new principal workplace must be at least 50 miles farther from your old home than your old workplace.

You can claim this deduction even if you expect to work but haven’t started working at the time you file your return.

Expenses you can deduct are transportation and storage of household goods and personal items and travel including lodging from your old home to your new home. Expenses of trips for house hunting are not deductible.

If your employer reimburses you for these expenses, your deduction may be limited. If you spent less than the reimbursement you will have to report a portion for income.

Please do not hesitate to call us if you have any questions about these rules.


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.

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You filed a separate return from your spouse.

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You paid over half the cost of keeping up your home for 2008.

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Your home was the main home of your child for over half of the year.

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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.

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:

As your principal place of business for any trade or business.
  • As a place to meet or deal with your patients, clients or customers in the normal course of your trade or business.
  • The time test states that you must work full-time in the general area of your new workplace for at least 39 weeks during the 12 months right after you move.

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 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.

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!

  • The first option is to enter into an installment agreement with the IRS. To do this you need to fill out Form 9465, Installment Agreement Request. This form is fairly easy to complete, but we strongly recommend that if you owe a substantial amount of money you work with us to secure your agreement.

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.

  • The second option, which is much harder to get approved, is an offer in compromise. The IRS will be reluctant to do this if they feel you have the resources to eventually pay. You should not attempt an offer in compromise without professional help you can trust. The IRS has also issued a consumer alert, advising taxpayers to beware of promoters’ claims that tax debts can be settled for “pennies on the dollar” through the Offer in Compromise Program.