Choosing Which Is Right For You

Author: Keith Huggett

With dozens of tax preparation software choices available choosing the best one for you can be difficult. By not knowing which program to use mistakes are often made. Mistakes you inevitable have to pay for.  These mistakes can be easily avoided by hiring a qualified tax professional to prepare your taxes for you.

In comparison to the cost of using a qualified tax professional, the cost of using tax software may seem like a "no-brainer."  The initial cost of tax software ranges from $10 to $120 to websites offering free services.  In contrast, the initial cost of professional tax services may start at around $100 and go up from there.  The low cost is one of the most attractive benefits of using software to prepare your own taxes.

Accountants and tax preparers charge more for their services.  They have access to more sophisticated tax software that automates the data entry and organization required resulting in fewer mistakes made.  Consumer tax software cannot be compared to the software available to professionals.

It is impossible to form a relationship with your tax software, unless of course it frustrates you to no end.  This is not so with a professional tax preparer.  As your tax preparer works with you, he or she will become familiar with your personal situation, your family, and/or your business.  This provides them with the ability to make suggestions or ask questions that consumer tax software cannot predict.  You also have the ability to contact your tax preparer throughout the year to answer any questions that may arise.

As your tax situation becomes more complex, the amount of time spent to file your taxes increases dramatically.  Qualified tax preparers stay up to date on changes to the tax code, making it far easier for them to complete research tasks than the non-professional.  Isn't your time better spent on growing your business?  By paying an initial higher price for your tax preparation will save you time, stress, and money in the future.

So which solution is best for you? I can only answer that it depends upon your financial situation.  If your taxes are very straight forward, it may benefit you to use a commercial tax software.  As your taxes become complex, hiring a qualified tax professional may be in your best interest.  The more complex your situation the more you are going to need the assistance of a tax professional.  Your goal should always be focused on not paying more than you are required to.

If you would like to discuss your tax situation, please contact us either by phone at 916-773-7053916-773-7053 or online.  The professionals at The Tax Office, Inc. are here to help you grow your business and lower you tax liability.

It's That Time Again!

Author: Jenny Shilling

December is here and time is passing quickly. Sooner than you know it, April 15th will be here. Now is the time to start organizing your tax information. Here are some tips to ease the process:

• What is your filing status? Did you marry or divorce? Has the stork dropped off any bundles of joy this year? Any big change to your life can dramatically change your filing status.
• Receipts! If you made any significant donations to charity you will need to have documentation. Did you engage in any business travel or entertainment? The IRS requires documentation to back up any deductions in this area. Your smartphone can help you keep track of your receipts.
• How did you file last year? Did you have your taxes prepared by a qualified tax professional or did you file them on your own. While using a qualified tax preparer may cost you a it in the short run, they are up to date on tax changes and can save you more in the end.
• Tax payments - when taxes are due in April you certainly don't want to be accruing penalties and interest. To make tax payments easier start setting money aside from your paychecks. This way when April gets here you will be prepared.

The Responsibility for What Goes Into Your Tax Return Ultimately Lies On You

Author: Keith Huggett 

When tax season comes around, the thought about who is going to prepare your taxes this year becomes a more pressing decision. Your financial status may have changed. You may have married, bought or sold a home, or had fantastic luck on the stock market. Or, things might have gone the other way. Either way, it's time to decide who is going to prepare your tax return. When choosing your tax preparer there are many qualifications you should consider. Here are the top ten:

1. What are your preparer's qualifications? Does your taxman belong to any professional organizations? Does he continue his education in any way?
2. What is his professional history like? The Better Business Bureau is there for a reason. See if there have been any issues raise with the BBB, the IRS, or the Board of Accountancy.
3. Will you be able to contact your preparer after the 15th? What happens if the IRS decides to audit your return?
4. Will there be any service fees? You should be able to receive your entire refund, assuming you are getting a refund. 
5. Provide documention. A reputable preparer is going to ask you for your tax documents. He is also going to be asking you questions about your documents and receipts, and any qualifications you may have for deductions, credits and other tax issues.
6. If you are ever asked to sign a blank return, that is a big clue to walk away.
7. Be sure to review your return with your preparer, before you sign it. Also be sure to ask questions, should you have any. Your preparer is there to answer your tax questions.
8. Your tax preparer needs to sign the return and include their PTIN.
9. You have the option to e-file your return. This is the easier and quicker option for filing your tax return. You may also choose to paper file, however, the IRS prefers e-filing.
10. Report abusive tax preparers to the IRS.You can report abusive tax preparers and suspected tax fraud to the IRS on Form 14157, Complaint: Tax Return Preparer. If you suspect a return preparer filed or altered a return without your consent, you should also file Form 14157-A, Return Preparer Fraud or Misconduct Affidavit. Download the forms on the IRS.gov website or order them by mail at 800-TAX-FORM800-TAX-FORM FREE (800-829-3676800-829-3676 FREE).

Choosing a tax preparer is often a worrisome task that comes up once a year. Either you stick with the preparer you have had for years, whether you think they are going a good job or not, because it's easier than finding a new one, or you do your taxes yourself, or perhaps you go to one of the large franchise tax services. 

At the Tax Office, Inc. our highly educated tax specialists go the extra mile to make certain that you are taken care of. If you have unanswered tax questions, contact us.

Mistakes Can Flag You for an Audit!

Author: Keith Huggett

A lot goes into tax preparation, especially if you have a small business. Many large issues, like mixing personal and business deductions or making mistakes with payroll taxes, can be significant red flags that increase your risk of an IRS audit. On the other hand, there are a number of small errors that you can make that can cause just as much trouble. Here are a few common errors you should be on the lookout for:

• Matching numbers: The IRS frequently checks your return against informational returns like 1099, 1098 and W-2 forms. If they don't match, it becomes a red flag.
• Correct filing status: If you claim the "Married Filing Jointly" status but are single, you can probably expect a call or letter from the IRS.
• Accurate name and Social Security number: Your return can be refused if your name does not match the name on your Social Security card. Entering an incorrect Social Security number or filing a return without one could also lead to a rejection.
• Correct calculations: If you make a math error anywhere on your return, it could have a significant impact on your bottom line. Even if you don't catch it, the IRS probably will.
• Complete packages: When you file your return, remember to enclose every attachment and to collate the forms together in the correct order as determined by the "attachment sequence" number printed on each form's front face.

Getting What You Pay For

Author: Keith Huggett 

It's tax season again and the air waves are filled with advertisements for tax preparers. Everyone needs to have their taxes prepared but how to choose which service is the right one for you?

When you are choosing a tax preparer there are certain qualities you want to consider. What do you want to take away from the experience?  A correctly filed tax return? Most certainly! But that should not be the only criteria used to make your decision. While cost is also a factor, it too should not be the only factor weighing in.

While some firms offer you a speedy return, or an RAC (a return advancement check) for what seems to be a low cost initially, that low cost may come back to hurt you later in the form of hidden fees or missed deductions. RAC's used to be called an RAL, or a Return Advancement Loan. 2012 is the last year that these loans are available so most firms have chosen to change the form of the advance to a check instead of the loan.  Instead of loaning you your return money at a high rate of interest, your return is put into a temporary bank account, in the form of a debit card, which you use until the card is emptied and the account is closed. Fees are accrued when you open the account, or if you try to transfer the balance to a different account, called a closing fee. After opening the account, using the card until empty causes no additional fees. It is in your best interest to look into direct deposit for your refund rather than an RAC, as it takes as little as 8-10 days now for direct deposit to take effect, rather than paying a $30-$35 service charge on top of the charge for the return.

If you have questions about your taxes, and like to play a part in your tax life, the cost of your return tends to go up.  Tax planning costs a little extra. Do you like to spend an hour or more with your tax professional going over your return? Do you discuss what deductions are available to you? Or do you just accept what your prepared tells you? Here's your return, you owe $200, do not pass Go!  Time spent with your tax preparer discussing your year, what you did, what you can do differently next year could be what sets the bar between one business and another. Customer service, tax knowledge, knowing exactly what your client needs is the difference between a good tax preparer and a great one.

All of these criteria should be applied when choosing a tax preparer. It may cost a little more, but remember: A little knowledge goes a long way, and you get what you pay for.

At the Tax Office, Inc., we will gladly review your prior year returns to be certain that they were filed properly, and make the corrections if there were errors. For your tax needs, please contact us today.

Starting Off the New Year Right

Author: Jenny Shilling

While many people think of April 15 as their tax preparation day, small business owners know that Dec. 31 is the day that really matters. After all, the end of the year is when your income and expenses get rolled over into a new tax year. With that in mind, tax planning needs to start before the end of the year. Here are a few ways that you can get started now.

• Contact your CPA or tax professional to start building strategy for the rest of the year. You might want to prepay expenses, buy large items or accelerate billing depending on whether you want to earn more income this year or defer it to next year. A tax professional can help you figure out what to do between now and the end of the year.
• Start compiling your records. Even if you plan to file an extension so that you can delay your tax preparation and send in your return as late as October, you will still need to pay any tax due on April 15. If you get a head start on putting your tax records together, it will be easier for you to figure out what, if anything, you owe.
• Plan on making capital expenditures. The Section 179 deduction, which lets small businesses expense certain capital expenditures instead of depreciating them, will go down from the 2012 level of $125,000 to $25,000 in the 2013 tax year, barring Congressional action. With this in mind, 2012 is a great year to offset profits by buying large items like vehicles for your company, computer equipment, machine tools and the like.
• Shift your income and expenses. If you are enjoying an extremely profitable year, it might make sense to delay billing customers until next year while paying extra expenses. Conversely, if you know that next year will be especially good, you might want to move income into this year.

... And How To Avoid Them

Author: Keith Huggett

When it comes to preparing your company's income taxes, you know how easy it is to make errors. IRS forms and schedules are complex, and you can overlook numerous details.

The simplest thing you'll do in this process is the cause of one of the most common income tax mistakes: forgetting to sign the return. After you've finished the tax marathon, you may be so relieved that you don't remember this basic step until it is too late.

This completely avoidable omission is actually quite a serious income tax mistake, because if you don't add your signature, the IRS will bounce your carefully-prepared tax return right back to you. So always have a fresh set of eyes look it over, or put it aside and check it thoroughly later on.

Sole proprietors and other very small businesses often fall prey to another income tax mistake. You must track business and personal income and expenses separately. There are many reasons for this, not the least of which is that it can simply look unprofessional and small-time at best, or even fraudulent at worst.

The IRS carefully scrutinizes small businesses, looking for any signs that your part-time company is actually just a pastime that you want to avoid paying taxes on. In order to separate legitimate business deductions from personal expenses, keep two distinct sets of books and bank cards -- and never cross the line between the two.

And document everything. Make a note every time you buy something related to work, because you may well forget a purchase's purpose at tax prep time.

A third common income mistake is not correctly distinguishing between employees and independent contractors. This can be a very complicated issue, and it's one that the IRS takes quite seriously. This form can help you make the correct determination.

Better yet, let us sort it all out for you. There are numerous other income tax mistakes that can get you in hot water with the government. At The Tax Office, we've been preparing business tax returns for decades. Contact us today for a free consultation -- before the tax deadline gets any closer. 

What Every Small Business Owner Should Be Aware Of

Author: Keith Huggett

Tax mistakes are every small business owner's biggest nightmare. Unfortunately, they're easy to make, especially for business owners who handle their own bookkeeping and accounting. The consequences can range from leaving money on the table, at best, to owing significant penalties or triggering an audit.

Becoming aware of the possible mistakes can help you avoid them:

• Personal deductions: Business expenses are deductible, but personal expenses are not. Mixing these two can result in more paperwork and red tape if you trigger an audit. Claiming excess deductions is a red flag for the IRS. Keeping your business expenses legitimate can help you avoid an audit and protect you in the event of one.
• Incorrect or missed payments and filing: Depending on your business, you may be required to file and pay payroll tax, sales tax, and estimated income tax. Some of these may require monthly or quarterly payments for which you can be penalized if they are late or underpaid.
• Updating tax tables: Tax laws change constantly, even in the middle of the year, and it can be too cumbersome for business owners to keep up with the changes.

One solution to all of these potential tax mistakes is outsourced accounting. A dedicated team of tax professionals stays up to date on tax legislation that may affect your business. Regular reporting also helps you manage cash flow so you have enough to cover your tax liability when the time comes. They can also help ensure that you don't claim expenses that you should not.

Outsourced accounting also frees up more time for you and your administrative staff to improve efficiency and focus on other business processes that will help your company grow. The Tax Office Inc. can help you navigate all these tax mistakes so you can keep more money in your pocket and avoid future penalties and fines. Contact us today to schedule a consultation.