Frequently Asked Questions
If you get an audit by the
IRS, can both of them represent you?
CPAs are authorized to
represent taxpayers in an IRS audit, as are attorneys and other
professionals known as enrolled agents (EA).
An EA is an individual who
has demonstrated technical competence in the field of taxation and
is the only taxpayer representative who receives their right to
practice from the U.S. government. An accountant can only represent
a taxpayer before the IRS if he or she is an EA.
How do I know if I can do
my own taxes or if I need to consult a certified public accountant?
The IRS estimates that it
can take 28 ˝ hours to research tax law, organize your records, and
complete a standard 1040 return with three common schedules. Tax law
is constantly changing, so it is important that you are educated
about these changes so you correctly fill out your forms. Being
technologically savvy is also important as tax preparation software
can help eliminate errors, both mathematical and technical. If
you’re not comfortable with using this type of software, you may
want to contact a professional.
If you’re a salaried
employee who takes the standard deduction, your return is likely to
be simple. However, if you’ve encountered a major life change, such
as marriage or divorce, or own a vacation home or rental property,
your tax situation may be more complicated. Self-employed
individuals and small business owners are more likely to be audited
by the IRS, and working with an accounting professional will help
lessen that risk. In addition, if you have a high income, live in a
state with high income taxes, or have a lot of miscellaneous
itemized deductions, you could be subjected to the Alternative
Minimum Tax (AMT). The AMT, which eliminates many itemized
deductions and was created to ensure that the wealthy pay their
share of taxes, is now affecting more middle-class taxpayers. If you
think this might affect you, consult an accounting professional.
Should I consult
accounting professional if I am starting a new business?
It is imperative that you
contact a accounting professional. You will need to discuss the
organization of your company for tax purposes as well as numerous
other issues relating to operations, not the least of which will be
setting your target pricing and gross profit margins. Don’t wait
until the year-end to have this discussion. You could be making
decisions without the proper advice, and that could wind up hurting
you financially or legally.
How long should I keep my
All business records,
especially sales and payroll must be kept for seven years. The
Social Security Administration requires discrepancy be resolve
anytime within this seven year window. The IRS and the states will
audit within the seven year window. Keep all federal, state and
local returns indefinitely and the all supporting documents for
seven (7) years. Real Estate and stock market transactions records
should be kept. Tax consequences of a transaction can depend on
events that happened years earlier. Taxpayers often keep files in a
single, easily accessible location. Consider keeping your files in a
safe deposit box or other safe place outside your home.
What is a business
The family strategic plan
establishes policies for the family’s role in the business and is
needed to maintain a healthy, viable business. For example, it
should include the creed or mission statement that spells out your
family’s values and basic policies for the business, and it may
include an entry and exit policy that outlines the criteria for
working in the business. The plan should consider which family
members desire to have a part in management of the business versus
those who desire a more passive role.
What is an estate plan?
An estate plan is a
written document that outlines the disposal of one’s estate and
includes such things as a will, trust, power of attorney, and a
living will. An estate plan is critical for the family and the
business because without it, you will pay higher estate taxes than
necessary, allocating less of the estate to your heirs. The estate
plan should be used in conjunction with the succession plan to see
that the family business is transferred in a tax effective manner.
Northwest FL EA Accounting Firm
If you’d like to know more
about Accounting & Management Services, Inc. and our accounting
services, please give us a call at
850-994-5691. We look forward to showing you how we can help
you save time and money by partnering with a top Northwest Florida