What is the difference between a CPA and an accountant?
An accountant goes to College and gets a degree in Accounting. A lot of them go to work in the various industries doing various accounting function. A CPA is an accountant that decided they want to go to the next level and get certified. The current requirements for a CPA are to get a degree in accounting then a two year master program. They can then sit for the CPA exam. They have to work for a CPA firm or another individual CPA to work a number of hours before they can be certified.
How long should I keep my financial records?
The minimum you should keep your financial records is three years from the date of filing that tax return. The IRS has three years to audit you or your company from the date you filed that tax return. So, if you filed your 2019 tax return in September 2020, you need to keep those financial records until October 2023. If you amend a tax return that resets the date. Most people will keep those records like 5 years to be safe, but never volunteer that you have that information that is more then three years old or the IRS can ask for it and you would be required to produce it.
What do I do if I can’t pay the taxes that I owe?
The first thing I always tell people if you owe money file that tax return on time. Nothing worse then having to pay a penalty for not filing on time on top of what you already know you owe. The penalties can typically be 20% or more of what you owe. If you do not file, they hit you with penalties, if you do not pay, they hit you with interest. Interest on tax debt is typically like 3-4% per year. The next thing is lets look at what created the issue and lets discuss ways to 1) stop the issue from continuing and 2) find a way to work out of the problem. It may be as simple as setting up a payment plan with the IRS. The IRS will be glad to help you get current and give you some time to do so. They are typically more concerned with the ones that refuse to pay. I would also suggest that you have someone review that return that is creating the issue with a knowledgeable tax professional. I find a lot of time people that self-prepare won’t ask for tax advice and they pay more then they need to pay. I see it with small businesses all the time.
Why outsource my accounting department?
Most smaller companies can’t afford to keep an accountant on staff. They will usually find a bookkeeping service or try to do it themself. I tell my small clients stick to what you are good at and outsource the items you are not. The other issue with trying to do it yourself, I find it takes 2-3 years for most entrepreneurs to admit they can’t handle the tasks and they are facing having to pay hefty fines for non-compliance by the time they come to see me. Some are good at handling parts of the process but need help with other parts of the process. The first process that should be outsourced is payroll because the fines that the state and IRS impose are so hefty for missed filings or deposits.
How do I create tax forms for my employees and contractors?
My first suggestion for most small companies out-source your payroll. Find a professional. Payroll is a process full of rules and filing deadlines that need a full-time focus. If you don’t have someone that is fully focused on payroll you will be paying fines and penalties. Most companies that do there own payroll, when looking at whether they should outsource or keep staff on to handle find that they can save money by outsourcing by not paying anymore fines and penalties.
How can you help me better manage my cash flow?
The cash flow of a business is huge. It is nice to be able to give your customers time to pay you but your vendors still want to get paid, your landlord still wants his check on the first of the month and the utilities will shut you off if you don’t pay this months bill.
Are there any industry-specific tax regulations that I should know about?
There are industry specific regulations for a lot of different industries. Which industry are we speaking about?
What are my estimated taxes?
When you get paid as a W2 employee, your employer will withhold taxes on your behalf and deposit them with the various taxing authorities. When you go into business for yourself, you need to continue to pay those taxes but since you don’t have your employer making those tax deposits on your behalf, you should be doing that yourself as an estimated tax payment. They can be calculated a number of ways and will be dependent on 1) if you are paying yourself through payroll, 2) your corporate tax structure 3) and how much net income your business is producing.
What are the individual tax deadlines I need to know?
There are individual deadlines for estimated tax payments, filing a tax return, paying your taxes. If you file for an extension, those are normally good for an additional six months.
What is the qualified business income deduction?
The QBI is a nice little gift from the 2017 Trump tax changes. Also known as the section 199A, It gives businesses up to an additional 20% of net income as a deduction on their tax return. There is some income requirements and payroll requirements. This is strictly for sole proprietors, S Corp, partnership or other pass through entities. This excludes 1120 corporate returns.
Do I need a bookkeeper or an accountant?
I would say both depending on the business and the amount of accounting that needs to be done. The bookkeeper can keep track of the day to day transactions, pay the bills, collect the revenue reconcile the books. The accountant takes care of the planning, review, financial statements and filing of the tax return.
What should I do if my business experiences and audit?
My suggestion is to try to get ahead of the audit by getting an EA or CPA involved from the beginning. The IRS will normally give you at least 1-2 months to get your information organized and into them for that audit. If the business is larger, we can request the IRS examiner to come to the company location or force them to choose which items they want to review in advance. I have had tax examiners want me to bring all tax records, receipts invoices with me to an audit. A lot of time that is not practical. I have also had them request I copy every item and send it to them. I then explain it will be a couple thousand items and request they send me to a location that will handle at there expense, which usually stops that kind of thinking.
Am I required to file an estate tax return?
While you are still living you are not required to file an estate tax return. If you die, your heirs may have to file an estate tax return on your behalf depending on whether your estate is still generating income. If your estate generates more then $600 in income after you die you will be required to file the estate tax return.
When can I expect an Estate Tax Closing Letter?
The normal wait time for an Estate tax closing letter is 4+ months from the date requested. With that said, due to corona virus issues, those are more like 6-8 months right now. This is an important step before making final distribution to the beneficiaries.
How much does tax resolution cost?
This can cost several thousand dollars depending on what is involved. To help a client setup a payment arrangement with the IRS will be a couple of hundred dollars. To do a simple offer in compromise we are up around a thousand dollars and to a complicated offer in compromise for a business could run as high as 3-4k. Typically we require a down payment up front before any work is started and the whole thing needs to be paid before anything is filed.
What is tax resolution?
I look at tax resolution as a process to help the client overcome their hurdles that have been created by working with the IRS or the various state taxing authorities. It is also a process to help clients clear tax liabilities in a way to minimize the amount the clients will end up paying to wipe the slate clean and start fresh.