Individual Taxation Questions
- Should I make estimated tax payments?
- I sold my principal residence this year. What forms are required to be filed with my tax return?
- What are the tax implications for refinancing my home?
- I use my automobile for business purposes. Can I take a tax deduction?
- Should I consider donating my automobile to a charitable organization?
- When are Appraisals Required for Non-Cash Charitable Contributions?
Business Questions and Compliance Issues
Is the person providing services for my business an employee or independent contractor?
What are the advantages and disadvantages of C-Corporations, S-Corproations and Limited Liability Companies?
How can I deduct the business use of my personal vehicle?
I operate my business from my home. Can I take a deduction?
What documentation is required to substantiate this deduction?
- Employee or Independent Contractor
- Entity Selection and Business Formation
- Standard Mileage Rates for 2019
- Home Office Deduction
- Meals Deduction
1. Question: Does the IRS ever contact a tax payer or the tax preparer by email or phone to initiate an audit?
Answer: Should your account be selected for audit, you will be notified:
- First by direct mail, the letter will request that you contact the agent assigned to the case. After the initial contact, the agent assigned to your case may contact you by telephone.
- Should a tax payer not respond to the audit letter sent by the Internal Revenue Service, an agent does have the authority to contact you by telephone.
- E-mail notification is not used by the IRS.
2. Question: Does filing an amended return affect the return selection process for an audit?
Answer: Selecting a return for audit does not always suggest that an error has been made; returns are selected using a variety of methods, including:
- Random selection and computer screening - sometimes returns are selected based solely on a statistical formula.
- Document matching - when payer records, such as Forms W-2 or Form 1099, don't match the information reported.
- Related examinations - returns may be selected for audit when they involve issues or transactions with other taxpayers, such as business partners or investors, whose returns were selected for audit.
3. Question: How far back can the IRS go to audit my return?
Answer: The tax laws require you to retain all tax related documentation utilized to prepare your return, those records generally should be kept for three years from the date the tax return was filed. Our recommendation is to maintain these records for seven years.
If records are kept electronically, the IRS may request those in lieu of or in addition to other types of manual records. Contact your auditor to determine what can be accepted to ensure a software program is compatible with the IRS's.
4. Question: If I can’t pay my tax liability, can I make installment payments?
Answer: If you're financially unable to pay your tax debt immediately, you can make monthly payments through an installment agreement. As long as you pay your tax debt in full, you can reduce or eliminate your payment of penalties or interest, and avoid the fee associated with setting up the agreement.
Before applying for any payment agreement, you must file all required tax returns.
5. Question: Can I receive a tax refund if I am currently making payments under an installment agreement or payment plan for a prior year’s federal taxes?
Answer: No. A condition of your installment agreement is that the IRS will automatically apply any refund due to you against taxes you owe.
- Because your refund is not applied toward your regular monthly payment, you must continue making your installment agreement payments as scheduled and in full.
- Regardless whether you are participating in an installment agreement or other payment arrangement with the IRS, you may not receive your refund if you owe certain past-due amounts, such as federal tax, state tax, a student loan, or child support. Contact our office if you have any questions.
6. Question: I receive child support from my ex-spouse, is that money taxable?
Answer: No, for purposes of calculating the earned income credit, child support is not considered earned income.
7. Question: What are the best methods to notify the IRS of an address change?
Answer: The two recommended methods are:
- Tax Return: Providing the new address on your tax return and marking the "address change"
- IRS Form:Completing Form 8822, Change of Address or Form 8822-B, Change of Address or Responsible Party - Business
8. Question: Do I have to pay taxes on my Social Security benefits?
Answer: Social Security benefits include monthly retirement, survivor and disability benefits. They do not include supplemental security income (SSI) payments, which are not taxable. The amount of Social Security benefits that must be included on your income tax return and used to calculate your income tax liability depends on the total amount of your income and benefits for the taxable year.
To find out whether any of your benefits may be taxable, compare the base amount for your filing status with the total of:
- One-half of your benefits.
- All of your other income, including tax-exempt interest.
The base amount for your filing status is:
- $25,000 if you are single, head of household or qualifying widow(er),
- $25,000 if you are married filing separately and lived apart from your spouse for the entire year,
- $32,000 if you are married filing jointly,
- $0 if you are married filing separately and lived with your spouse at any time during the tax year.
- If you are married and file a joint return, you and your spouse must combine your incomes and Social Security benefits when figuring the taxable portion of your benefits. Even if your spouse did not receive any benefits, you must add your spouse's income to yours when figuring on a joint return if any of your benefits are taxable.
Please contact our firm with questions regarding the taxability of your Social Security benefits.
9. Question: What other scams can I avoid?
Answer: Fraud involving IRS impersonators spikes during tax season. Remember:
- The IRS never asks for personal or financial information via email, text, or social media and it will never contact you by phone to demand payment. Report suspicious email to https://www.irs.gov/uac/Report-Phishing.
- The agency will never ask for credit-card numbers over the phone, require payment without allowing you to question it or appeal, or threaten you with arrest for nonpayment.
Report fraud to the IRS at 800-366-4484 and at treasury.gov/tigta/contact_report_scam.shtml.
10. Question: What has changed about the new IRS 2019 Form W-4 for reporting and withholding federal taxes?
Answer: Several changes were made to the previous W-4 and we strongly reccomend updating your form if you have not. The form eliminated and added a number of various lines to help the taxpayer more clearly indicate their tax circumstances for more accurate withholding calculation. The following changes were made: number of allowances were eliminated, several new lines were added such as: additions to income, itemized and other deductions, tax credits, and additional household income due to multiple jobs. Please click here to view the updated form and instructions.