Tucker Accounting Services LLC FAQ
What is the difference between a CPA and an accountant?
A CPA and an accountant are two different and vital professions in business. An accountant typically holds a bachelor’s degree in accounting, while a CPA (Certified Public Accountant) is a licensed professional who obtained a specific educational and work requirement and passed an exam. Each state has its own set of criteria. A CPA is permitted to represent their clients in different capacities that accountants cannot.
How long should I keep my financial records?
The length of time financial records is to be kept depends on the document. It should be held long enough time to defend tax audits, litigation, and possible claims. The typical length for individuals to hold records with no business income should be 3 – 5 years. Individuals with a business return as a part of their individual return, should hold documents for 5 – 7 years. A business with employees, the length should be at least 7 years.
What do I do if I can’t pay the taxes that I owe?
First, pay as much as you can when you file the return.
Second, the IRS has established payment plans to those who qualify that allows paying off outstanding balance over time. A Form 9465, Installment Agreement Request must be submitted to the IRS to begin the process. The types of online payment plans include the following:
i. Short-term payment plan – The repayment period is approved for 120 days or less, and the total amount payable in tax, penalties, and interest combined is less than $100,000.
ii. Long-term payment plan – This is requested of the IRS after approval of the Form 9465. The payment period would usually exceed 120 days up to 3 years and is paid in monthly installments. and the total amount payable is less than $50,000 in tax, penalties, and interest combined.
Why outsource my accounting department?
Outsourcing your accounting processes may bring several benefits, particularly for business owners who struggle to manage their operations and finances simultaneously. Because accountants are experts in this field, they take the burden of tracking the finances and give the business owner back the opportunity to better manage their business operations. The accountants will work to ensure that you are fully compliant with all applicable tax and financial regulations, and provide you access to valuable feedback and recommendations that will increase your profits.
How do I create tax forms for my employees and contractors?
To ensure the end of year Form W2 and Form 1099-NEC is completed, and filed correctly, a payroll service, accountant/bookkeeper, or others versed in the details of payroll filings should complete these reports for your business.
Tax forms that small business owners need for their employees and contractors typically include Form W-2 and 1099-NEC.
i. If your business pays contractors/subcontractors for services they perform, you will provide them a Form 1099-NEC at the end of January (following the year-end). The independent contractors that receive compensation of $600 or more from your business is required to receive a Form 1099-NEC. Business owners are required to maintain Form W-9 information on each contractor’s name, address, and Social Security number to complete the form.
ii. Employees that receive regular wages from your business will be given a Form W2 in January following the year end. It shows the total of employees’ taxable income and the respective taxes federal and state taxes withheld from their paychecks.
Consult an accountant for other forms that you may need to file.
How can you help me better manage my cash flow?
With the assistance of our team at Tucker Accounting Services, LLC, in managing your bookkeeping and accounting tasks, we work to provide you insight on the levels of cash needed to fulfill payroll and pay your other obligations on schedule. In addition, the preparation and analysis of monthly financial statements will provide you with a comprehensive insight of your business and assist you in making decisions to improve your profits while lowering your tax obligation. Know more about our services here.
What are my estimated taxes?
Estimated tax is a tax you pay on your behalf if you are self-employed, or if you have income other than your employment wages, you may need to pay estimated taxes each quarter. You may owe estimated taxes if you receive income that isn’t subject to withholding, such as:
1. Interest income
3. Gains from sales of stock or other assets
4. Earnings from a business
5. Alimony that is taxable
To determine whether you need to make quarterly estimates, answer these questions:
1. Will you owe less than $1,000 in taxes for the tax year after subtracting your federal income tax withholding from the total amount of tax you expect to owe this year?
2. Do you expect your federal income tax withholding to amount to at least 90 percent of the total tax that you will owe for this tax year?
3. Do you expect that your income tax withholding will be at least 100 percent of the total tax on your previous year’s return? Or, if your adjusted gross income (Form 1040, line 8b) on your tax return was over $150,000 ($75,000 if you’re married and file separately), do you expect that your income tax withholding will be at least 110 percent of the total tax for the previous year?
If you answered “no” to all of these questions, you must make estimated tax payments using Form 1040-ES
An easy way to compute your estimated taxes, sum your current-year tax liability payable (including self-employment tax, individual income tax, and any other taxes) and divide it by four.
What are the individual tax deadlines I need to know?
Most individuals file their federal tax return on a calendar year basis (starts on Jan. 1 and ends on Dec. 31) and the IRS sets the deadline for filing on April 15 each year.
However, if required, you can file a Form 4868, Application for Extension of Time to File an Individual Return, before the April 15th deadline. You are automatically approved with an extension to file with a deadline of October 15th.
What is the qualified business income deduction?
The qualified business income deduction (QBI) is a deduction of 20% of the qualified income. It is available to those who have “pass-through income.” The deduction is computed on the net profit of the business and is taken on the shareholders Form 1040, line 13 and can be taken in addition to the standard deduction or itemized deductions.
Do I need a bookkeeper or an accountant?
While bookkeepers and accountants have shared goals, they support your company at various stages of the financial cycle. Bookkeeping is more transactional and administrative, with an emphasis on recording financial transactions. Accounting is more subjective, delivering insights into your company’s financial health based on bookkeeping data. Often accountants are versed in tax laws and prepare tax returns.
What should I do if my business experiences an audit?
When the IRS asks for an audit, it means that they will be examining your financial records to ensure that you are paying and reporting taxes in accordance with US tax laws. To ensure that the process goes as smoothly as possible while minimizing any negative impact on your business when an audit notice is received, you should: read and understand the audit letter received; organize and prepare your records for the tax year(s) addressed in the letter in case the auditor asks for documentations; and keep your tax professional involved.
Am I required to file an estate tax return?
According to IRS, an estate tax return must be filed:
i. When the deceased is a U.S. citizen, or resident, and the gross estate exceeds the estate tax exclusion of $11,700,00 for the year of death. A Form 706 would be filed with the decedent’s gross estate, increased by the decedent’s adjusted taxable gifts and specific gift tax exemption.
ii. If the estate elects to transfer any deceased spousal unused exclusion (DSUE) amount to a surviving spouse, regardless of the size of the gross estate or the amount of adjusted taxable gifts. The portability election is the decision to transmit a DSUE amount to a surviving spouse.
When can I expect an Estate Tax Closing Letter?
According to the IRS website, a fiduciary should wait at least nine months after the filing of the Form 706 to request the Closing Letter. Closing Letters will only be issued upon request by the fiduciary or their representative
What is tax resolution?
Taxpayers who are struggling with the complex process of resolving back tax issues are more likely to seek services such as tax resolutions. A tax resolution is the process of dealing with the IRS and tax specialists to find a solution to your tax concerns. The IRS may have a problem with your tax return or situation for some reasons, including underreporting income or claiming invalid deductions.
What are the tax return filing deadlines for business returns? (Partnership, S-Corporation, and C-Corporation)
- Most partnerships file their federal tax return on a calendar year basis (starts on Jan. 1 and ends on Dec. 31). Their Form 1065 tax return will be due by March 15 of each year.
- Most businesses filing as an S corporations will use the calendar year unless the firm can justify a business need for using a different tax year. The Form 1120-S filing deadline is on March 15 of each year.
- C-Corporations may choose between a calendar and a fiscal tax year (starts on any day and ends precisely 365 days later). The IRS sets a deadline for Form 1120 tax returns to be filed on the 15th day of the fourth month following the end of corporation’s tax year.
- Businesses that require an extension of time to file their tax returns will complete Form 7004, Application for Automatic Extension of Time to file Certain Business Income Tax. This applies to all corporations and partnerships. The extension has to filed on or before March 15 for partnerships and S-corporations for an automatic 6-month extension to September 15 of the same year. On the other hand, C-corporations using calendar year should file on or before April 15 and it will be due on October 15 of the same year. Those operating on a fiscal year must file an extension on, or before, the 15th day of the fourth month after fiscal year ends. They also get the 6-month extension.
When should I file an amended tax return?
Some errors, such as minor math errors (the IRS will often correct those), may not need a submission of an amended return. Here are some typical scenarios that necessitate an amendment:
- You failed to include some taxable income on your tax return. Examples of this:
- A K-1 from a business or trust received after you filed
- A Form 1099B that was received after you filed
- A Form 1099-NEC received after you filed your return. This could have an impact on Schedule C, Profit and Loss from Business
- You claimed (or failed to claim) a tax deduction or credit in error.
- You used the incorrect tax filing status.
- You misreported your dependents.
Am I required to file an amended tax return?
The IRS may audit your returns from the past three years which could possibly result in additional tax liability. It is strongly advised to file an amended tax return as soon as possible. That way, you may stay ahead of any potential tax liabilities and minimize penalties.
What is the time limit for filing an updated tax return?
The amendment must be filed within three years from the date of filing of the original tax return or within two years from the date you paid the tax, whichever is later.
Can I file my amended return electronically?
Yes, within the following time frame.
- Amendments to Form 1040 and 1040-SR returns that are more than three years old, as well as Form 1040-NR and 1040-SS/PR returns that are more than two years old. Any subsequent tax years or tax forms must be filed on paper.
- However, if you are amending a prior year’s return that was originally submitted on paper during the current process year, you must also file the updated return on paper.
Record retention general guidelines
How long should I keep tax returns and records?
As to your tax records, the statute of limitations period for income tax returns is generally three years. It is six years if there is a substantial understatement of gross income. A good rule of thumb is to add a year to the statute of limitations period. Using this approach, taxpayers should keep most of their income tax records for a minimum of four years, but it may be more prudent to retain them for seven years.
- If you file a claim for credit or refund after you file your return, keep records for 3 years from the date you filed your original return or 2 years from the date you paid the tax, whichever is later.
- If you file for a bad debt deduction or loss from worthless securities: Keep records for seven years.
- If you filed a fraudulent or no return at all: Keep tax and supporting documents indefinitely.
- If you have employees: Retain employment tax records for four or more years after the tax was due or paid, whichever date is later.
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