Helping you get all of your deductions while filing for taxes

“You must pay taxes. But there’s no law that says you gotta leave a tip.”
–Morgan Stanley advertisement

While it is a duty of all Americans (and many foreigners) with U.S. source income to pay taxes, there is no legal obligation to pay more than you actually owe. Determining the correct amount of income tax to pay is an important consideration for individuals and businesses.

Form Preparation

A predominant part of my practice is preparing income tax returns to assist taxpayers in determining their correct amount of tax. This includes the following forms in order of preparation frequency and generally includes relevant state returns:

  • Form 1040 (Individual Income Tax Return)
  • Form 1120S (Income Tax Return for an S Corporation)
  • Form 1065 (Return of Partnership Income)
  • Form 1120 (Corporation Income Tax Return)
  • Form 990 (Return of Organization Exempt from Income Tax)
  • Form 1041 (Income Tax Return for Estates and Trusts)

Should I Self-Prepare?

I performed consulting services for a large tax software company over multiple tax seasons. I processed a high volume of tax questions during each tax season that I worked for the company. Through this experience, I learned that there are many taxpayers with basic income tax returns who are capable of managing their own tax preparation needs. However, what I found frequently with callers who dialed the hotline is that it is quite possible to make a multitude of mistakes on a tax return.

Some of the common mistakes I observed in providing remote assistance to self-preparing taxpayers were:

  • Missed deductions (especially depreciation for business and rental income)
  • Performing incorrect overrides in the software that resulted in overreporting or underreporting income, sometimes by drastic amounts
  • Reporting income items in the incorrect part of the return, which could affect the rate of the income tax for that income
  • Missing carryforwards of losses in subsequent years
  • Deducting losses for which the taxpayer has no basis or amount at-risk
  • Incorrectly classifying Form K-1 income as passive or nonpassive
  • Failing to utilize available net operating losses
  • Missing credits and deductions or improper splitting of credits and deductions for divorced/separated parents
  • Failing to utilize tax strategies that would be beneficial from a tax standpoint for their particular situation (investment vs. ordinary income, incorporating a business when it makes sense, using a pass-through when it makes sense, buying a home, etc.)
  • Self-preparing entity returns that they do not understand
  • Estimating expenses rather than maintaining records
  • Taking an excessive amount of particular deductions which is generally unreasonable for their type of business and likely to raise an audit flag
  • Confusing start up costs with business losses, and deducting start up costs before a trade or business legitimately begins
  • Completely omitting income that should have been reported
  • Reporting income in the incorrect tax year

The bottom line in each of the scenarios above is that it oftentimes results in reporting an incorrect amount of tax for that taxpayer’s situation. Reporting too much tax is a pay day for the government and an unnecessary expense for the taxpayer. Reporting too little could mean an IRS audit with penalties and interest tacked on years down the road. While I am happy to assist taxpayers with their IRS representation needs, an ounce of prevention equals a pound of cure! Although not all tax notices and audits are preventable, it is at least helpful to have support for what you file and a reasonable basis for what is reported.

While hiring a tax preparer does not guarantee that the correct amount of tax will be reported (this preparer is relying on the reporting of the taxpayer), it does provide assurances that a second set of eyes (usually more qualified eyes) is looking at the income and deduction items for that taxpayer and helping to provide the taxpayer with advice on changes in lifestyle, entity formation, and Internal Revenue Code information that can decrease the amount of tax paid.

Firm Pricing for Tax Preparation

The firm has moved to a subscription billing model for tax preparation services. Please contact us for more details.

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