Frequently Asked Questions

•  Do I have to pay estimates, and if so, when are they due?

If you did not pay enough tax throughout the year, either through withholding or by making estimated tax payments, you may have to pay a penalty for underpayment of estimated tax. Generally, most taxpayers will avoid this penalty if they owe less than $1,000 in tax after subtracting their withholdings and credits, or if they paid at least 90% of the tax for the current year, or 100% of the tax shown on the return for the prior year, whichever is smaller. Higher income individuals must pay in 110% of the prior year tax liability to avoid a penalty. Waivers for failure to pay estimated tax are rare, but certain circumstances such as a casualty or disaster or other unusual circumstances. Waivers may also be granted if you were retired or became disabled during the tax year.

Estimated tax payments are due April 15, June 15, September 15 and January 15 (of the following year).

•  Can I claim my child as a dependent, even if he/she files their own return and claims themselves?

You are not allowed to claim as a dependent any individual filing their own return and claiming their own exemption. We recommend consulting with us prior to filing the dependents return to ensure the maximum tax benefit to the family.

•  How long should I retain tax and financial records.

There are a number of web sites that contain record retention guides. For most bank, tax and accounting records the answer is 7 years. The general statute of limitations for most tax laws is 6 years, so we recommend maintaining a minimum of one year beyond the statute. Certain documents should be kept permanently such as birth and death records, annual retirement plan statements, complex tax returns, marriage and divorce documents and estate planning documents.

•  Is the gain from the sale of my home taxable income?

The sale of your principal residence generally is not reported on a taxpayer’s return.  However, if a portion of the home was used for business, such as office in the home or a rental, this may trigger a taxable gain.  The taxpayer must have lived in the residence for at least two of the last five years, and can only claim this exclusion for one sale every two years.  There is a maximum exclusion amount and other criteria that need to be checked., which may be required to be reported, but may still not result in any tax liability.

•  I’m starting a new business, should I form a corporation, LLC, partnership or sole proprietorship?

Starting a new business and determining the type of entity for it requires careful planning. We recommend consulting with us prior to taking any steps regarding the operating entity to avoid unwanted pitfalls.