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 long do I keep my records and tax
returns?
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 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.
An amended return is simply a return filed with the IRS
and/or state because of an error or an omission on your
original return. You should file an amended return if there
is a material difference between the original return and your
new changes. As of now, an amended return cannot be
electronically filed, and any expected refunds will take
longer to receive than the original return (2-3 months,
according to the IRS). Generally to claim a refund, your
amended return must be filed within 3 years from the date of
your original return or within 2 years from the date you paid
the tax, whichever is later.
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.
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.
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.
I owe the IRS money. What are my
options?
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.