FAQ

Here are the answers to some of the most Frequently Asked Questions our firm receives.

 

T G Johnson & Associates REMEMBER:
The information found on this website is general in nature and may not apply to the reader's situation. Therefore, the reader should not rely on the information on this website alone. For specific advice, please call us at 510-32-3272


Q:  Nothing happens when I click on the Fin. Calculators link, does this link work?

A:  Yes it does!  This link opens in a new browser window, if nothing happens when you click the link, hold down the CTRL key while you click, a new window should open with the calculator types across the top, select one and calculate away!

 

Q. HOW DO I GET TO YOUR OFFICE?

A. Directions to our office along with a map are located on our "Contact Us" page. Feel free to call for more detailed instructions if necessary

 

Q.  Can you help me with my investments?

A.  We have a Certified Financial Planner (CFP) on staff, as well as being well acquainted with a number of registered investment advisory firms in the area. We can set up an appointment with either our own CPF, or with one of the registered advisory firms who can help you determine your goals and the strategies that you are comfortable with. If you are pleased with the recommendations, we will assist you with the implementation of the suggested strategies.

 

Q.  I currently use an outside payroll service, and, frankly, have not been pleased for various reasons. What alternatives do I have?

A.  We now have access to a very good payroll alternative that you can access and use right here on our webpage. This is a reasonably priced alternative, competitive with the nationally known services, and offers you the flexibility of running your own payrolls on YOUR schedule. Direct deposit, ACH tax payments and easy import to your QuickBooks or other accounting software are features of this very good software. Call us for a demonstration!

 

Q.  I am concerned that my business is not as profitable as I would like it to be. What can you do to help me?

A.  We offer an operational auditing program where a team of our professionals come into your business to assess your company's operational strengths and weaknesses. We breakdown your business into the areas that are mission critical and offer recommendations (that we can help you to implement!) to get your business on track. Organizational efficiencies and profitability structuring are the keys to your business working FOR YOU rather than vice versa.

 

Q.  What is all this that I hear from your firm about "wealth accumulation and retention?" Come on...Is there really any thing that we can do these days?

 A.  The answer to your question is an unequivocal "YES". Obviously, the markets have been tough on all of us over the last few years. But we have strategies available to us still that can get you on the road to developing a wealth base, and then in helping you to develop that base and RETAIN IT! Please give us a call and we will set up a time to discuss this.

Q.  It seems like everyone and his brother (except me!) has a retirement plan! Can you explain the various plans available?

A.  A good retirement plan can be an essential weapon in your arsenal for accumulating wealth. I will go out on a limb...Every business owner with taxable income from some source (whether from the business or not) should have a retirement plan to help defer taxes and to accumulate savings tax free! We can help design the PERFECT plan for your business and your circumstances. Give us a call so that we can discuss this!

 

Q.  What is a reasonable wage for S corporation owners?

A.  Ideally, the best way to set pay is to use an amount comparable to an individual being paid similar rate in your industry. Otherwise, we use a standard rule of 50\50. Basically, 50% of income available to owners should be taken as wages and the other 50% may be taken as dividends.

 

Q.  Which items qualify for a cafeteria plan deduction?

A.  The main items consist of qualified dependent care costs, disability income, accidental insurance, group-term life, dental & health insurance premium costs, and medical cost not covered by insurance. Any unused amounts in a particular category are lost by the employee and reverts to employer by the end of the plan year


Q.  Do I need to visit your office to have my taxes prepared?

A.  It is not necessary to visit our office. Many clients utilize the mail, fax, and express services to send their information to us. In addition, email, faxing, as well as scanning information and attaching it to an email to us is very effective.  As a matter of fact, we deal with clients all over the world utilizing these methods.  For new clients, we encourage a meeting so that we can discuss your unique tax situation.

 

 

Q.  What size clients do you accept?

A.  We accept any clients within our service range. If the engagement is very large, we will accept it if we feel we have the staff to handle it. If we don't have the appropriate staff, we may form an alliance with another CPA firm and perform a joint engagement. There is no account too small to be considered important in our office.

 

Q.  Can I ever save tax by filing a separate return instead of jointly with my spouse?

A.  You sometimes may benefit from filing separately instead of jointly. Consider filing separately if you meet the following criteria: One spouse has large medical expenses, miscellaneous itemized deductions, or casualty losses. The spouses' incomes are about equal. Separate filing may benefit such couples because the adjusted gross income "floors" for taking the listed deductions will be computed separately.

 

Q.  Do we service clients outside of the Bay Area?

A.  Our practice services clients in many other areas. We have several clients in the Sacramento area, the Peninsula, the South Bay, and Southern California. We also serve numerous clients out of California and have tax software to prepare returns in all states.


Q.  How do you charge for your services and how does your cost compare to other tax preparation firms?

A.  We charge by the hour. We can give you a quotation of our expected costs. When providing our services, if we can help you reduce our time, we will tell you how. Our support, such as our tax organizer, is designed to offer professional, fast, and accurate services and to minimize our charges to you. Our overhead is kept low to allow us to pass our cost savings onto our clients. Our charges are normally less than other quality firms.


Q.  Do you work with Start-up Companies?

A.  Yes! Many of our clients are just starting in business. We will lead you through the necessary governmental forms. Through our networking, we can also assist in finding you other necessary professionals to deal with (lawyers, insurance agents, mortgage brokers, etc.) throughout the state.

 

Q.  I want to start a new business. Can you tell me which type of business I should form?

A.  Yes. When setting up a new business, it is crucial to set up the right type of business, such as corporation, S corporation, Limited Liability Company, limited partnership, partnership, sole proprietorship, etc. Our consulting services will help you form the right type of business based on your unique situation with consideration given to liability issues and tax advantages.

 

Q.  How are Limited Liability Companies (LLC) taxed?

A.  A single-owner LLC defaults to being taxed as Sole Proprietorship. Income/loss from the LLC is reported on the owner’s personal income tax return. A multi-member LLC defaults to being taxed as a Partnership. A Partnership tax return must be filed. The profit or loss is then reported on the owners’ personal tax returns. Any LLC can elect to be taxed as a corporation. To do so, one must file an election within 75 days of creating the LLC.

  

Q.  Is there any non-tax record that I should keep?

A.  There are other records you should keep, even though they don't appear to have any use for your tax returns. Family documents, certain medical records, insurance policies, records of major purchases, are just a few examples. These documents will be needed in the case of any emergency that may arise.

 

Q.  Should I keep my old tax returns? If so, for how long?

A.  Yes, you should keep your old tax returns for at least 7 years. When a return contains information pertaining to the basis of property owned, it should be kept until that property is sold. One of the benefits of keeping your tax returns from year to year is that you can look at last years return while preparing this years. If you do throw out an old return you may fill out form 4506, Request for Copy or Transcript of Tax Form, and send it to the IRS service center where you filed your return.

 

Q.  What pieces of paper do I need to keep in order to do my taxes?

A.  Keep detailed records of your income, expenses, and any other information you report on your tax return. A good set of records can help you save money when you do your taxes and will be a trusty ally in case you are audited.

 

Q.  How do I know when certain taxes are due?

A.  You can give us a call or check out the Due Date Calendar on this website.

 

Q.  What is the Social Security wage base and rate?

A.  The wage base is $94,200 for 2006. The FICA rate remains the same: 7.65% for employees and 15.3% for self-employed individuals. The Social Security portion is 6.2% of wages up to the wage base. The Medicare portion is 1.45% (2.9% for self-employed) of wages with no ceiling.

 

Q.  What is the standard mileage rate?

A.  The standard rate is 48.5 cents/mile for the last four months of 2005, and is 44.5 cents/mile for 2006.  The IRS has the authority to change the mileage rate, either up, or down, in accordance with the current costs of operations of a vehicle.  Call us at 510-632-3272 to find out if there has been a change.

 

Q.  What is the unified credit shelter amount?

A.  The applicable credit amount for estates of decedents dying during 2002 or 2003 is $345,800, which would shelter $1,000,000 from gift and estate taxes. For 2004 and 2005, the credit increased to $555,800, sheltering $1,500,000 from estate tax.  For deaths occurring in 2006, 2007, and 2008, the credit is $780,800, sheltering $2,000,000 from estate tax.   For gift tax purposes, the exclusion remains at $1,000,000.

 

Q.  What is the annual gift tax exclusion?

A.  The annual exclusion is $11,000 for 2004 and 2005; for 2006, the exclusion increases to $12,000 per donee, with an annual maximum of $24,000 per donee applicable to spouses who utilize gift splitting. Additionally, there is an unlimited exclusion for payments of tuition and medical expenses.

 

Q.  When should I give you my tax information?

A.  You should bring all your information in as soon as you have it all together. The sooner you bring it in to us the better chance we have at making sure we've done the best possible job for you.

 

Q.  What do I need to do to start a new business?

A.  Typically, some people will go to their lawyer first, get the business set up and then contact an accountant. We would rather that you contact us at the beginning. There are many different kinds of companies and we can help you select the best one for the kind of company that you will be setting up. Then we will continue to help you with payroll, tax returns, monthly accounting, and financial statements to whatever degree you need.

 

Q.  Should I use a lawyer or an accountant to incorporate my business?

A.  Although lawyers can get the paperwork together to make your incorporation happen, they might not know all the different tax laws that can apply to the different kinds of incorporations. Therefore, we suggest you see an accountant first to find out exactly which kind of incorporation you should pursue. Then we can direct you how to proceed in completing the required paperwork.

 

Q.  Are QuickBooks or Peachtree good products?

A.  QuickBooks and Peachtree can help you with your small business accounting, but they cannot think for you. The software has to be set up properly from the beginning or you will have problems. We find that by setting it up yourself, it can cost you more in accounting fees because it takes longer for us to resolve those errors. We advise that if you are going to use one of these products you have your accountant help you set it up. We can help you with this process.

 

Q.  By using QuickBooks Pro, can I reduce my fees?

A.  Our experience shows us that if you know something about accounting AND your computer software is set up properly from the beginning, it is possible that we don't need to spend as much time on your accounting. But in some cases, the initial set up was not done properly and we end up spending more time 'cleaning up' the errors than if we had just entered the detail from the beginning.

 

Q.  How can I pay my taxes by credit card and which credit cards are accepted?

A.  Credit card payments can be made by phone (1-8002PAY-TAX or 1-888-ALLTAXX, toll free) or Internet (www.officialpayments.com or www.1888ALLTAXX.com) using Discover, American Express, or MasterCard. You will be provided a confirmation number at the end of the payment transaction and your credit card statement will provide confirmation of your electronic payment. The payment and return are reconciled based on the social security number entered and type of tax selected during the transaction.

 

Q.  Is the IRS storing credit card information?

A.  No. IRS does not have access to credit card numbers or directly participate in the credit card transactions. The IRS relies on private credit card processors to verify the validity of the card and line of credit. The processors forward the appropriate tax payment information to the IRS.

 

Q.  Is there a fee charged for using by credit card to pay my taxes?

A.  The company that processes your credit card payment charges a convenience fee. You are informed of the convenience fee amount before you authorize the payment. The fee is in addition to any charges, such as interest, that may be assessed by your credit card issuer.

 

Q.  Where can I get additional information about IRS e-file?

A.  You can visit the IRS website at www.irs.gov - or feel free to call our offices to ask us questions as well (510-632-3272).

 

Q.  If I owe, how do I pay my taxes electronically?

A.  You can e-pay by credit card. If you e-pay by credit card, you delay out-of-pocket expenses and may earn miles, rewards or money back from you credit card issuer. Payment by check or money order is acceptable. If you do owe money, T.G. Johnson & Associates will provide you with a voucher and addressed enveloped to mail your check into the IRS. Your return can be e-filed at any time before April 15, and then you can mail your payment in later - as long as it is postmarked on or by April 15.

 

Q.  What do I gain by using IRS e-file?

A.  Accuracy! Security! Electronic Signatures! Proof of Acceptance! Fast refunds with direct deposit! Electronic Payment Options! Federal/State e-file! Only IRS e-file offers these advantages.

 

Q.  What is an Authorized IRS e-file Provider?

A.  An Authorized IRS e-file Provider is a tax professional or firm who is accepted into the IRS electronic filing program. One type of Authorized IRS e-file Provider is an Electronic Return Originator (ERO). An ERO is a person or firm that taxpayers entrust with tax information for the purpose of filing income tax returns electronically to the IRS. T.G. Johnson & Associates is an ERO.

 

Q.  Can I pay my balance due by phone or Internet with a credit card if I'm a 'married filing joint' filer?

A.  Yes. Just be sure to enter the Social Security number of the first taxpayer listed on the return's pre-printed mailing label or postcard. This is usually the taxpayer listed on the return.

 

Q.  Do I really get my refund faster?

A.  With IRS e-file you get it back in half the usual time. It's even faster and safer if you have your refund deposited directly to your bank account in as few as 10 days. ask you Authorized IRS e-file Provider for the estimated date of deposit. For more information about Direct Deposit, go to the Financial Management Service (FMS) web site, www.fins.treas.gov/eft .

 

Q.  Should I wait until April 15 to file electronically if I owe taxes?

A.  No. You can e-file your return as soon as it is completed. Then send your payment in on or before April 15. T.G. Johnson & Associates will give you a payment voucher and addressed envelope to make sure it goes to the correct IRS center.

 

Q.  What is a Form 9465, Installment Agreement Request?

A.  This form is available to our firm. An approved Installment Agreement allows you to make a predetermined series of partial payments after April 15. Regardless of how you pay, you are responsible for paying the amount of tax due by April 15 of each year or you will be subject to late payment penalties and interest.

 

Q.  Do I have a greater chance of getting audited by the IRS if I use IRS e-file?

A.  No. The chance of an audit of an e-filed return is no greater than with a paper return.


Q.  How do I know that the IRS really has my return?

A.  The IRS notifies your Authorized IRS e-file Provider within 48 hours of transmission that your return information was received. If the IRS detects any errors, it sends a message back to our firm indicating the error. Our firm will correct the error and notify you to let you know what the error was. We will then retransmit your returns to the IRS.

 

Q.  Can my state tax return be e-filed with my Federal return at the same time?

A.  There are 37 states and the District of Columbia currently participating in the IRS e-file program. California actually requires income tax preparers to e-file your California return if it is prepared using computer software and by a preparer that produces more than 100 returns per year.  T.G. Johnson & Associates is required to e-file your return unless you sign Form 8454 affirmatively electing out of the CA E-File program.\.

 

Q.  What if I owe and cannot pay the full balance due on my taxes?

A.  The tax preparation software used by our firm can allow you to make partial payments. In this case, you can make a payment for less than the balance due amount on your return. If you cannot pay in full by April 15, you can file Form 9465, Installment Agreement Request.

 

Q.  What happens if my return is filed electronically, I am receiving a refund, and I owe taxes from previous years?

A.  The amount owed on back taxes is automatically deducted from your refund just as if you filed a paper return.

 

Q.  Do you work with Start-up (new companies)?

A.  Yes! Many of our clients are/were new entrepreneurs that are just starting in business. We will lead you through the necessary governmental forms. Through our area networking, we can also assist in finding you other necessary professionals to deal with. (Lawyers, Insurance agents, Mortgage brokers).

 

Q.  Do you offer free business consultations?

A.  Yes, we offer a free half hour consultation for businesses. The consultation is to gather information about you and your business, while you find out more about us. We can usually answer a few questions at that time and determine if you have done the necessary registrations and filings. We request that you bring your last two income tax returns and financial statements (if any). Also bring anything else that you may have a question on.

 

Q.  I prepare my own tax return, why use your services

A.  Many times you are correct and you can prepare and file a return. But did you take all the deductions? Did you take the available tax credit? Did you go to a tax course in the past 12 months? We find that many returns can be self-prepared but many are lacking in all the deductions that can be taken.

 

Q.  What is ACCOUNTING RELIEF?

A.  ACCOUNTING RELIEF is a very comprehensive bookkeeping and trial balance system that resides on fully secure web servers - more secure than PC-based bookkeeping systems - providing anywhere, anytime access while eliminating the need for daily backup and importing or exporting data hassles. It is a password-protected system that allows different levels of authorized access for each user as you determine. It is so easy to understand and can be set up to run for your business in minutes.

 

Q.  What is PAYROLL RELIEF and how can it ease my payroll task?

A.  PAYROLL RELIEF is your anywhere, anytime online payroll department. Instant paychecks, free Direct Deposit, free electronic tax deposits, completed tax forms and live customer support makes payroll chores easy. Email reminders and custom To-Do lists ensure what to do and when. Signature-ready payroll tax forms are completed automatically, including 940's, 941's and W-2's. PAYROLL RELIEF prepares and files Forms 1099-MISC as well.

 

Q.  Can PAYROLL RELIEF handle Household Employees?

A.  PAYROLL RELIEF Home online service is specifically designed to lead the way for paying all types of household employees such as nannies, health aides, private nurses, maids, caretakers, babysitters, etc. The Home service is currently available on a limited state basis including New York, Florida, Virginia, Georgia, Tennessee, California, Texas, Michigan and Indiana.

  

Q. How long should I keep my tax records?

A. We at T.G. Johnson & Associates recommend keeping your tax records for ten years. This is longer than recommended by the IRS, but we feel this is the safest length of time. However, documents in support of the purchase of a depreciable asset should be kept until the asset is disposed of and documents in support of loans and mortgages should be kept until the loan or mortgage is liquidated  

 

Q. Can I save taxes by filing a separate return?

 A. It depends. For example, if both parties' income is approximately the same, but one has extraordinarily large itemized deductions subject to income limitations (medical expenses, casualty losses, miscellaneous deductions, etc.) it is possible to save taxes by filing separately. We at T.G. Johnson & Associates always compute the tax result both ways, as jointly and married filing separately, to ascertain which filing status is more beneficial to our client 

 

Q. How can I contact the IRS about my tax return?

A. You can call the IRS at its toll-free line at 800-829-1040. To be ready to respond, you should have your Social Security number, your filing status and your refund or payment due amounts. Allow between 4 to 6 weeks before you contact the IRS  

 

Q. How can I obtain a copy of my tax return?

A. Of course, we at T.G. Johnson & Associates supply you with a copy and if you lose it, we will furnish you with another copy. If we did not prepare the return, and for some reason you do not have a copy in your possession, you need to file form 4506, Request for Copy or Transcript of Tax Forms, with the IRS service center where you filed your missing return.  

 

Q. What records do I need for a CPA to file my tax return?

A. We at T.G. Johnson & Associates will provide a data collection form for your convenience, which contains most of the items which you will need. However, a detailed record of your income and expense items will be required to support our entries and in addition, a record of any other items reported on your tax return. Since totals of each category of income and expense will help us save time and cost, it is the preferred method of information submission  

 

Q. Can I deduct child support payments?

A. No. Child support payments are not deductible, because they represent a pre-existing legal obligation to support your children 

 

Q. In a divorce who is entitled to the child dependency exemption?

A. The parent who had custody of the child for the greater part of the year is generally treated as the parent who provided over one-half of the child's support and will claim the exemption if other tests are met. Custody is usually determined by the divorce, separate maintenance or custody decree or agreement. If no decree or agreement establishes custody, then the parent who had physical custody for the greater part of the year is entitled to the exemption  

 

Q. What is the most tax efficient way to save for my children's education?

A. The educational savings area is very complicated. We at T.G. Johnson & Associates recommend that taxpayers seek professional assistance. Although a Section 529 plan, under the 2001 Tax Act, is an extremely flexible and tax effective plan, there are other plans to be considered. Also when considering any educational savings plan, consideration should be given to the impact on financial aid qualification requirements  

 

  

Q. What is the best way to borrow for consumer purchases?

A. We at T.G. Johnson & Associates generally discourage borrowing for consumer purchases unless absolutely necessary. However, we recognize that often there is no alternative. When it is necessary to borrow for large consumer purchases, we recommend a home equity loan. Interest on home equity loans, within limits, are tax deductible, while interest on consumer loans, such as car loans and credit cards, are not tax deductible  

 

Q. Do you provide prospective clients with estimates of your fee?

A. When appropriate, we prefer to provide a fee estimate. We always provide a fee range estimate for the preparation of tax returns. Where appropriate, we also provide written fee estimates to business clients  

 

Q. What size clients do you accept?

A. We accept any clients within our service range. If the engagement is very large, we will accept it if we feel we have the staff to handle it. If we don't have the appropriate staff, we may form an alliance with another CPA firm and perform a joint engagement. There is no account too small to be considered important in our office  

 

Q. What is Long Term Care insurance?

A. Long Term Care insurance covers an individual for the costs of home health care, community based care (such as assisted living)and nursing home care. It works in conjunction with Medicare and\or private insurance. It is a contract between an individual and an insurance company that, in exchange for premiums, provides daily health benefits. For a man over the age of 65, the odds are one in three (33%) that he will need long term care; for a woman, the odds are one in two (50%).  

 

Q. WHAT IF I AM AUDITED?

A. In the event of a federal or state audit of a return, we will meet with you to review the issues of the audit, provide research and documentation for the items in questions, and prepare all needed information for the audit.

 

Q. WILL YOU GO WITH ME TO THE AUDIT?

A. We actually ask that you let us go and you stay home. We know what the IRS is looking for. We will know all the answers to your return. We don't want them on a fishing expedition with you. We will have you sign a Power of Attorney giving us the right to represent you.

 

Q. On a 1099-MISC, do we put the person's name or DBA?

A. If people work for themselves, use the individual's name and Social Security number. If the person is an employee of the business, use the business name and federal EIN.

 

Q. Can we report part-time employee wages on a 1099-MISC?

A. Report employee wages on a W-2 and never on a 1099-Misc.

 

Q. Do we report a $1,000 gift to an employee on a 1099-MISC?

A. Report cash payments to employees on a W-2 as income, not on a 1099.

 

Q. Are per diem reimbursements wages subject to FIT, FITW, FICA, and FUTA?

A. Per Diem reimbursements for travel are not wages—if the travel is properly substantiated (for time, place and business purpose) and the amount does not exceed the maximum federal rates for the location of travel. Room tax above the federal rate may be reimbursed separately and is nontaxable if receipts are provided.

 

Q. Should I ask employees to complete a new W-4 each year?

A. Employees need not complete a new W-4 unless they claimed exempt from FIT withholding the prior year, or changed marital status or number of personal exemptions.

 

Q. Can an unsubstantiated auto allowance be reported on a Form 1099-MISC?

A. If an employer gives an auto allowance unrelated to actual vehicle expenses incurred and does not require the employee to substantiate or return unused amounts, the entire allowance is wages and is reported on the W-2, not the 1099.

 

Q. What do I do about an employee's incorrect W-2 if copies have not gone to the SSA?

A. Tell the employee about the error and that you will provide another W-2 (not W-2c) to file with his/her1040. Include the new W-2 with the W-2s and W-3 sent to the SSA