Makes use of knowledgeable, professional advice and expertise in order to take advantage of all current tax laws and tax planning
Reduces the possibility of an IRS audit
If there is an audit, you can select to be represented by professionals who know intimately how your return was prepared
Professional appearance, computer generated and accurate
Financing of home or business borrowing may be easier with professionally prepared tax returns
You gather the data, bring it in for a meeting with one of our professionals and leave the preparation and electronic filing to us
No hassle, no headaches

Q: How long should tax returns and records be kept?

A: Tax returns should be kept a minimum of 7 years. Records or documents related to an asset (property) should be kept indefinitely. Other records should be kept a minimum of 7 years.

Q: What is alternative minimum tax?

A: There are actually two separate ways of calculating tax liability. One is “regular” tax and the other is “alternative minimum” tax. Alternative minimum tax (AMT) really isn’t an “alternative”. It is a mandatory tax that is only paid if it exceeds the regular tax liability. Congress introduced AMT into the tax code in 1969. The purpose of AMT is to shift some of the tax burden to taxpayers with substantial income who would otherwise avoid a tax liability through excessive deductions, exclusions and credit.

Q: How long will it take to receive my refund once I file my taxes?

A: There are some variables that impact that timeline, as shown below:

	Paper Check Mailed	Direct Deposit
Mailed Return	4 – 6 weeks	2 – 4 weeks
Electronically Filed	2 – 4 weeks	1 – 2 weeks

Q: What are the advantages of electronic filing of tax returns?

A: Some of the advantages are:

Faster refund (see question above)
Proof of return acceptance
Less expensive, less hassle (no postage or wait at the post office)
More secure through direct deposit or withdrawal of funds
Paperless

Q: I am very low income. Can I qualify for an Earned Income Credit?

A: The Earned Income Credit (EIC) is designed to provide tax relief to low-income taxpayers. However, there are certain rules to qualify for the credit. The term “earned income” is a hint at one of the requirements to qualify. The taxpayer must have earned (through work or self-employment) a minimum amount depending on whether there are also qualifying children. In addition, age is a factor. The taxpayer must be between the ages of 25 and 65. There are other restrictions that will need to be ruled out, as well, to make sure that the EIC is available. For example, if the taxpayer is married but filing separately, he/she is not eligible for the credit.

Q: If I receive a notice from the IRS that I owe additional taxes, should I just pay them?

A: The easy answer to that questions is “NO”! The IRS may have received information that is erroneous and doesn’t match what is reported on your tax return. Always carefully read and analyze the notice and, if in doubt, consult with a tax professional.

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Q: I want to start giving away some of my assets to my children and grandchildren. How much can I give away each year before being taxed on my gift? Do my children/grandchildren have to pay taxes on my gifts to them?

A: You may gift up to a certain limit per person each year without incurring gift taxes. Please contact us to find out the limits for the current tax year. Your children and/or grandchildren do not have to pay taxes on the gifts you make to them

Q: Why is it a tax advantage to own my own home rather than rent?

A: If you rent your home, you probably will never have enough itemized deductions to report on Schedule A to exceed the standard deduction. Each taxpayer, as you know, is eligible to decrease their taxable income by the standard deduction, which varies depending on filing status. If you own your own home, the mortgage interest you pay, as well as the property taxes you pay, are deductible. Quite often those two items will make the itemized deductions you can claim exceed the standard deduction for your filing status, thereby further decreasing your taxable income and your net tax liability. In addition, under certain circumstances, up to $500,000 (married filing joint) of gain on the home is not taxed when the home is sold.

Q: What happens if I can’t pay all the tax due by April 15th?

A: You should pay as much as possible by the due date of the return. If you cannot pay everything that is owed, you can file a form to request to pay through installments.

Q: How much can I make working before my social security benefits are reduced?

A: The amount that is allowed changes each year, adjusted primarily for inflation. Please contact us or the Social Security Administration for the current amount allowed.

Business Category

Q: I’m starting a new business. Should I start out as a sole proprietor?

A: Every business is different and the decision about what kind of an entity to select for your business is important. Most businesses can begin as sole proprietorships, but some should immediately form as an LLC (Limited Liability Company), a partnership or even a corporation. If incorporation is the best decision, then there is still the decision of whether to form as a C Corporation or an S Corporation. You should consult with a tax professional and/or an attorney before deciding what kind of entity the business should be.

Q: What do I need to do to register a new business?

A: Depending on the entity decision that you make (see question above) and the type of business you will be operating, you may have very little or quite a bit to do to register the business. Most sole proprietorships may only need to acquire a business license in their city and/or county and, possibly, register the name they intend to use with the state. Other business entities will require that additional forms be filed with government agencies and some businesses even require special licensing. If you have employees, you also need to register separately for payroll and related taxes, both Federal and State. At Wilkinson & Associates we can help you figure out what your business registration will entail and provide assistance.

Q: What is the advantage of incorporating my business?

A: There are several advantages, but also some disadvantages of incorporation. Further, when you incorporate you must decide whether the company should be a C Corporation or an S Corporation. In general, the advantages of incorporating are

Limited liability
Number of owners greater than one possible
Compensation of employee with equity
Can split income between family members
Assures continuity of business

Q: How can I deduct expenses incurred for my new business before I actually “open the doors”?

A: Expenses you incur prior to actually opening your door to customers are considered pre-opening or start-up expenses. These expenses may include professional fees, research costs, etc. With the filing of a special election, a portion of the pre-opening expenses can be deducted in the year the business opens its doors. Any costs in excess of that allowance must be amortized over 180 months.

Q: How can I qualify for a home office deduction?

A: The home office must be a principal place of business and be used regularly and exclusively for business. If you have inventory, you may also claim a portion of your home for storage of the inventory or product samples even if that area is not used exclusively for business (i.e. garage, basement).

If your home office is used for administrative functions only, it can still qualify as a principal place of business as long as it is used exclusively and regularly and there is no other fixed location where you conduct those activities.

Q: What is a like-kind exchange?

A: Property that is held for business or investment purposes is exchanged for property that is of the same nature or character and is also being held for business or investment purposes. By exchanging property rather than selling it, the taxpayer may defer capital gain taxes. The process and rules governing each exchange are complicated and must be followed explicitly in order for the exchange to be “successful”.

Q: What is personal property?

A: Personal property is tangible and is not a structural component of a building. In other words, it must be something that can be moved. If the property is designed or constructed to remain permanently in place, then it is considered real property rather than personal property.

Q: How can professionally prepared financial statements help ensure the success of my business?

A: There are several reasons to have financial statements prepared by a professional on a regular basis:

Comfort level that your management decisions are based on accurate and timely information
Professional image
Along with preparation of the financial statements, professionals can help you analyze your business and plan for the future.
Banks are more comfortable knowing that the financial statements have been prepared by a professional; therefore, business loans may be acquired more easily.

Q: I’m planning to hire someone to work in my business. Is it pretty easy to run payroll if I only have one employee?

A: Actually, payroll is complicated no matter how many employees you have. You must learn about all the applicable payroll taxes and reporting requirements. You need to calculate payroll taxes accurately and report and pay them in a timely manner. You must abide by fair labor practices and standards established by the state department of labor, which are constantly changing. If you want to run payroll yourself, you should at least have a professional review the work you have done to make sure that it is correct.

Q: Can I have someone work for me as a contractor rather than putting them on payroll?

A: If you contract with someone to do work for you, it is critical that you make sure that the person is in business for themselves and is doing similar work for at least one other customer. The distinction between a contractor and an employee is not very clear. Wilkinson & Associates has a 20-step worksheet analysis that helps determine whether a worker is a contractor or an employee. You may be at risk if you pay someone who should have been put on payroll. You may owe back taxes, as well as penalties and interest on those taxes.