The Importance of A CPA For Small Business Owners

May 24th, 2024

The exclusive purpose for the information which is provided from this website is to disseminate information, and not to provide tax advice.

Medium and large-scale business entities have accounting departments (or functions), finance departments, and access to important financial management resources from their staff – i.e. Auditing.  Additionally, almost all large businesses began many years ago as a small business. How did they make this transition and expand their business operations? Where can the business owners, who don’t have a strong financial management background, obtain this knowledge and information?  Where can these resources be obtained to assist in the management of the daily business operations? What about the payroll and tax return reporting?

The solution for many of these business issues can be obtained from someone in the public accounting profession – a “Certified Public Accountant” or “CPA”.  During the past almost fifty years I have personally assisted many small businesses in addressing and solving the above business “challenges”.  If your CPA does not have the required knowledge or experience, he/she should have contacts in their network who can fulfill these requirements.  You can access these business resources on as “As Needed” basis to minimize the costs for your business operations. Read the rest of this entry »

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You Just Received A Letter From The IRS-What Should You Do?

May 10th, 2024

The exclusive purpose for the information which is provided from this website is to disseminate information, and not to provide tax advice.

If you just received a letter from the IRS, and you’re not sure what action you should take.  Among the possibilities are:

  1.  Ignore it  (Never a good idea.  One of the worst decisions to make)
  2.  Shred it (Never a good idea.  See #1 above)
  3.  Open it  (Best decision to make)

In todays world anything is possible, especially with “Artificial Intelligence” (AI).  Specifically, the IRS does not communicate with taxpayers via telephone (at this stage), e-mail, text message, Facebook, or any other electronic methods.  The next step is to determine if it’s authentic (not a scam, phishing, imposter, fraud, etc.)  Verification can be easily accomplished using the information provided in the upper right-hand corner of page one of the letter.

The fact that you did receive a letter does not necessarily mean that your tax return is being audited.  It could indicate that the IRS needs additional information to support and approve data that you included in your income tax return:

“The IRS sends notices and letters when it needs to ask a question about a taxpayer’s federal tax return, let them know about a change to their account or request a payment. Don’t panic if something comes in the mail from the IRS – they’re here to help.”

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Posted by Bill Seabrooke

When Should A Taxpayer File An Amended Federal Income Tax Return?

April 25th, 2024

The exclusive purpose for the information which is provided from this website is to disseminate information, and not to provide tax advice. 

There are several situations in which a taxpayer, after filing their tax return, determines that there is information available now that was not available when the original tax return was prepared. While this often occurs when third parties notify taxpayers that they are providing the taxpayer with a “Corrected” form (Form W-2, Form 1099 B, 1099 INT, 1099 DIV, etc.).  There are also additional circumstances:

When a taxpayer realizes that their federal tax return has a math error, missing income or other mistake, they should file an amended tax return.

A taxpayer must file an amended return if they need to correct:

  • Filing status
  • Income
  • Deductions
  • Credits
  • Tax liability

Generally, a Federal income tax return can be “Amended” up until three years after the original tax return due date.

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Posted by Bill Seabrooke

Qualified Charitable Deduction (QCD)-A Tax Benefit For Senior Americans

November 19th, 2022

The exclusive purpose for the information which is provided from this website is to disseminate information, and not to provide tax advice. 

There is a provision in the income tax laws for American taxpayers who are 70 1/2 years old and older.  It’s the “Qualified Charitable Distribution” or QCD.  It works or provides tax benefits for taxpayers who have an annual “Required Minimum Distribution” or “RMD” and make donations to charitable organizations.  This tax benefit became really important with the “Tax Cuts and Jobs Act” that was enacted on December 17, 2017.  The TCJA became effective on January 1, 2018, and if not extended, will expire on December 31, 2025.

Prior to the enactment of the TCJA taxpayers made their charitable donations and entered the data on Schedule A (“Itemized Deductions”) of their individual tax returns, usually a Federal Form 1040, along with medical expenses, state and local taxes, mortgage interest, etc.  Then the taxpayer compared the itemized deductions total to the standard deduction total and used the higher amount.  However, the TCJA substantially increased the standard deduction for all taxpayers wherein, it may no longer be beneficial to use the actual itemized deductions. To illustrate, I’ll provide examples for two different taxpayers, both are “Married Filing Jointly”, have an RMD of $100,000, donate a total of $15,000 for all of their charities.  Their “Standard Deduction” is $25,100.  Their “Taxable Income” is $200,000 without the tax benefit of the QCD.

Taxpayer A– does not use the QCD.  Receives the required $100,000 RMD, records the $15,000 in donations on Schedule A.  However, the total “Itemized Deductions” are less than the “Standard Deduction”  His/Her “Taxable Income” is $200,000.

Taxpayer B-has his/her IRA Custodian send checks directly to each of the charitable organizations.  He/she receives the full benefit of the QCD.  However, his/her “Taxable Income” is now reduced by $15,000 (the QCD) to $185,000.  He/she also used the “Standard Deduction”.

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Posted by Bill Seabrooke

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