Category: Uncategorized

  • The Documents You Need to File

    The single biggest cause of a slow return is a missing document. Not a complicated situation, not an unusual deduction. Just one form that nobody thought to look for. Here is what to gather before your first appointment.

    Everyone needs these

    • Photo identification.
    • Social Security numbers, or ITINs, for everyone who appears on the return.
    • Last year’s return, especially if someone else prepared it.
    • Bank account and routing numbers, if you want a refund by direct deposit.

    Income, in whatever form it arrived

    • W-2 forms from every employer you had during the year, including jobs you left.
    • 1099 forms of every kind: contract work, interest, dividends, retirement distributions, government payments.
    • K-1 forms if you hold an interest in a partnership, an S-corp, or a trust.
    • Records of income that never generated a form at all. Cash work counts, and so does income from an app that did not meet a reporting threshold.

    That last point matters more than people expect. Income being unreported by the payer does not make it untaxable, and it is the category most likely to surface later as a notice.

    Whatever supports a deduction or a credit

    • Mortgage interest and property tax statements.
    • Student loan interest and tuition statements.
    • Childcare costs, with the provider’s tax identification number.
    • Charitable donations, with receipts for the larger ones.
    • Medical expenses, if they were substantial relative to your income.
    • Retirement contributions made outside your workplace plan.

    If you are self-employed, add these

    • A summary of business income and expenses for the year.
    • Mileage records, with dates and purposes, not just a total.
    • Home office measurements, if you claim one.
    • Records of any estimated tax payments you already made.
    • Statements for business accounts and cards.

    A note on records you cannot find

    Missing a form is not a reason to delay. Most income documents can be retrieved, either from the payer or from your IRS account transcript. Tell your preparer what you think is missing rather than filing without it and amending later.

    How we handle it

    After your free consultation we send a checklist built around your actual situation, so you are not hunting for forms that do not apply to you. Documents come to us through a secure portal, not email attachments.

    Sources

  • Got an IRS Letter? Read This First

    An envelope from the IRS is one of the more unpleasant things to find in a mailbox. The good news is that most notices are routine, most are resolvable, and almost none of them require you to panic. What they do require is that you read the letter and respond on time.

    First, do not ignore it

    Nearly every notice has a deadline printed on it, and the options available to you shrink once that date passes. A letter that could have been answered with one document can turn into a bill that is much harder to unwind. Open it the day it arrives.

    Second, do not pay it just because it asks

    A notice is the IRS telling you what it currently believes. It is not always right. Common causes include a form that arrived after you filed, a figure reported under the wrong year, or a mismatch between what you reported and what a third party reported about you. If the notice is wrong, paying it is the expensive way to close the file.

    Find the notice number

    Every letter carries a notice or letter number, usually in the top right corner. It looks like CP followed by digits, or LTR followed by digits. That number tells you exactly what kind of letter it is, and the IRS publishes a plain-language explanation for each one. It is the single most useful thing on the page.

    What a typical resolution looks like

    1. Identify what the IRS thinks is wrong, using the notice number and the explanation section.
    2. Compare it against your own records for that year.
    3. If they are right, agree and arrange payment, including an installment plan if you need one.
    4. If they are wrong, respond in writing before the deadline with the documentation that shows it.

    Most cases end at step three or four. Relatively few become anything larger.

    When to bring in help

    Bring the letter to a preparer before you respond if the amount is significant, if it covers a year someone else prepared, if it proposes changes you do not understand, or if it mentions an audit or an examination. A reply that concedes the wrong point is difficult to take back.

    We read the notice, tell you what it actually means, and handle the correspondence so you are not writing to the IRS on your own.

    Sources

  • LLC or S-Corp: A Plain-English Guide

    If you run a small business, someone has probably told you to “just become an S-corp.” It is common advice, and sometimes it is right. But the election has real costs, and the point where it starts paying off comes later than most people expect. Here is the decision without the jargon.

    An LLC is a legal wrapper, not a tax status

    By default, a single-member LLC is taxed exactly like a sole proprietorship. All the profit flows to your personal return, and it is subject to self-employment tax on top of ordinary income tax. The LLC protects your personal assets. On its own, it does not lower your tax bill at all.

    That surprises a lot of owners, because forming the LLC felt like the big step. It was, legally. It just was not a tax move.

    What the S-corp election actually changes

    An S-corp election tells the IRS to treat your business as a corporation that pays you a salary. You pay payroll taxes on that salary, but the remaining profit passes through to you free of self-employment tax. The gap between a reasonable salary and your total profit is where the savings live.

    The catch is that the election brings obligations that cost money whether or not you save any:

    • You must run real payroll, with withholding and quarterly filings.
    • You must file a separate corporate return each year.
    • In California you owe the annual franchise tax and a state-level S-corp tax on net income.

    Those costs are largely fixed. At low profit they can swallow the savings completely, which is why the election is not automatically a good idea just because it is available.

    The question is never “is it better,” it is “at what profit”

    For most California businesses the election starts to make sense somewhere in the range of moderate, consistent annual profit, once the payroll and filing costs are comfortably outweighed. The exact figure is different for every business, because it depends on your profit, on what counts as a reasonable salary for the work you actually do, and on what your state filings cost.

    Consistency matters as much as size. An election made in a strong year still carries its costs in a weak one.

    Two things people forget

    First, the IRS requires your salary to be reasonable for your role. Paying yourself an artificially low salary to shift more profit into the untaxed bucket is exactly the thing that draws scrutiny.

    Second, the election interacts with your retirement contributions and with the qualified business income deduction. A change that looks like a saving in one column can cost you in another. That is why the whole picture has to be modelled before anyone recommends it.

    What we do

    We run your actual numbers, both ways, and tell you honestly whether the election pays off for you this year. If it does not, we say so. The consultation costs nothing.

    Sources