Tax return : the basics

Tax season always brings out talk about 1040 EZ forms and W-2s, but most of us are in the dark about what to do with our tax returns even with the long set of directions the IRS puts in with the forms. There is always the option of paying someone else to take care of it, and for many people it is best option. However, most people feel it is a little strange to pay someone to get their money back so they struggle through it on their own. If you worked at only one company and no deductions or supplemental income filling out your taxes is relatively simple, but this is not the case for most people. Most people have numerous deductions, credits, and supplemental income that require extra work when filing out a tax return. While filing out your tax return may not be the most fun thing to do, there are a few precautions that should be taken to avoid extra problems later on.

Check W-2 and 1099 Forms

W-2s and 1099 forms report the income of a taxpayer. The taxpayer receives a copy of this form, but that is not the only place these forms are sent. Companies and employers are also required to submit these forms to the IRS. When you receive your W-2 or 1099 it is important to check the numbers against your own records and make sure they are correct. You will need to inform your employer so that they can change the information with the IRS. If this is not done and there are discrepancies between the information the government has and the information you report, it could cause a lot of problems later on.

Dot your T’s

When paying for taxes you owe make sure that you make the check out to the United States Treasury. Writing it out to the United States Treasury instead of the IRS makes it harder for the check to be used by a thief who can easily change the To: line. The second common mistake with paying taxes is simple enough to avoid: always double check that you have signed it.

E-File

If you are worried about mistakes or have a difficult return, using e-file is probably the best bet. The e-file system will cut down on math mistakes and other errors. If something is left off of the return it will not file until it is fixed. The IRS also has set up a system where the return can be submitted and if there is a problem it will be returned within seventy-two hours. The taxpayer will also be notified of the problem and how to fix it. E-file is also much faster and free, so there isn’t really any reason not to use it.

Chris Simons is a prolific freelance writer. You are welcomed to visit http://tax.theconsumerguide.net, for more information on Tax Preparation.

Two things in life are certain - death and taxes. Here’s what to do if the two are combined as far as filing a tax return.

Tax Returns for the Deceased

If a person dies, their finances are immediately converted into something called an estate. The estate is then responsible for filing a tax return covering the finances including income and distributions to heirs and beneficiaries. However, a final personal tax return must still be filed for the deceased.

The final personal tax return for the deceased is known as Form 1040. Yep, you file the same tax form as you would for any personal tax return. It is hard to believe the IRS passed up an opportunity to create another form, but there you go. Miracles do happen.

When determining the income and taxes due for a person who passes away, the date of death is the cutoff. All income earned before that date for the year goes on the personal tax return. All income earned after death is the responsibility of the estate and will be reported on the estate tax return.

As to deductions, there is good news. Regardless of the time of the year when the grim event occurs, you can claim the full deduction for the year and any other expenses that occur prior to death. Put another way, you don’t have to calculate any ratios based on the number of months that have passed. If someone passes away in February, you still get the full write-offs for the rest of the year.

When a person passes away, an executor or trustee will be in charge of their estate. The exact designation depends on what type of estate planning they did. Nonetheless, this person will sign the tax return and note the person is deceased. This should take care of everything with the IRS excluding the estate tax return.

What happens if the deceased is due a tax refund? In such a situation, the IRS will not just kick out a refund unless the deceased was married. If married, the refund is sent to the spouse. If not, you must file a Form 1310 to get the refund. This form basically says you are claiming the refund, have the right to do so and absolve the IRS of any involvement in subsequent disputes.

Richard A. Chapo is with BusinessTaxRecovery.com - providing information on taxes. Visit us to read more articles about tax returns and our new tax preparation page.

After over thirty years advising small business it still comes as a surprise to see the number of small business owners who are only interested in their financial results when it is time to do their tax return.

Many still think that their accountant is there to ‘cook the books’ at tax time!

It is not surprising that almost invariably the business owners who approach their accounting in this way are those whose business is not doing well.

Three out of five businesses fail within the first three years owing to a lack of proper business planning and record keeping and many of them are those proprietors who adopt this ‘once a year’ method of accounting. That’s why they never improve.

Today’s accountant is more than just a ‘bean counter’. The new breed has developed expertise in many areas such as marketing, management, industrial relations law and computers. Indeed, the ‘number crunching’ that was such a large part of the accountant’s life has been largely taken over by computers. There is now no excuse for not receiving meaningful reports when they do actually mean something and not three months after the end of the period.

Making business decisions has always been difficult. Small business owners without the resources of large firms have always needed to stretch beyond the limit of their expertise in making many decisions. That’s what makes managing a small business so exciting. That’s what makes it so dangerous too!

Seminar participants say, “My accountant knew all the answers, “but I didn’t know all the questions”. Time after time our new clients tell us that they are seeking an accountant who will give them good advice when they need it - not when they ask for it!

But in a small business the buck stops with you, if you are not receiving the service you want - don’t just ask for it - insist on it!

One of the problems is knowing what to ask for! Your advisors should anticipate your need and supply you with what you need before you need it.

A new trap for small business proprietors that is becoming increasingly prevalent is for those who computerize for the first time. Many of the packages claim that you do not have to have any accounting knowledge to operate them and sales people use this as a selling tool. It is a half-truth at best!

Just knowing how the pieces move doesn’t mean you can play chess and we are seeing an increasing number of proprietors who have computer generated financial statements which are meaningless for tax purposes and give misleading information for management purposes.

This isn’t the fault of the computer package or the operator using it. It happens because the operator doesn’t know or understand some of the accounting principles necessary to make the system work.

Computers are supposed to make it easier but they are like any other tool which relies on the skill and knowledge of the operator. Your accountant should be involved in the initial planning regarding the requirements of the business. He/she should also be involved in the installation and training of the operator so that this valuable tool is used to the advantage of your business.

Remember, good advice doesn’t cost, it pays!

About the author
Kelvyn Peters CPA is one of Australia’s longest serving Tax Agents. He was registered in 1962 and accepted as a CPA in 1964.

He is well-known speaker and educator and is famous for his ability to rescue ailing small businesses.

http://profitstrategies4business.com

Yes, the tax season is upon with the first filing date for
some businesses being March 15, 2005. If you can’t imagine
getting your tax returns together by that date, you need not
worry. The IRS automatically gives you an extension if your
file the appropriate form. As you might expect, there are
different forms for different businesses.

An Important Note

It is vitally important that you understand that an
extension to file taxes is not an extension to PAY taxes.
The IRS will give you a break on the filing date, but it
wants the money now! If you anticipate that you will owe
taxes, you need to send in the appropriate payment. Failure
to do so could result in interest charges when you
eventually get around to filing your returns.

Corporations

If you conduct business as a corporation with a fiscal
year-end of December 31st, you are required to file your
2004 tax returns on or before March 15, 2005. You can get an
automatic extension, however, by filing form 7004 before the
March 15 deadline. Form 7004 applies both to “C” and “S”
corporations and grants you an automatic 6-month extension
to September 15, 2005.

While this automatic extension applies to “S” corporations,
you should be aware of a quirk in the tax code. Since “S”
corporations “pass through” taxes to your personal returns,
the six-month extension is really only a five-month
extension. To file your personal tax returns, you must
report information from the K-1 issued from the “S”
corporation. Unfortunately, the IRS only grants automatic
extensions for filing personal tax returns to August 15,
2005.

Limited Liability Company

The IRS has never really figured out to how to handle
limited liability companies. It has settled on a policy of
avoiding the issue and simply treating the entity as a
corporation or partnership.

Limited liability companies with more than one owner
typically elect to be treated as partnerships for tax
purposes. If this describes your situation, the LLC is
required to file tax returns by April 15, 2005. You can
obtain a 3-month extension by filing form 8736. Although
form 8736 contains language regarding partnerships, you will
still use this form since the IRS classifies you as a
partnership for tax purposes.

If you are the sole owner of an LLC, you may be in for a
surprise. The IRS doesn’t recognize LLCs owned by one
person. Instead, it simply considers you a sole proprietor
and the rules for sole proprietorships apply. These are
discussed below.

Partnership

If your business is a partnership, you are required to file
tax returns by April 15, 2005. You can use form 8736 to
obtain a 3-month extension.

Self-Employed/Sole-Proprietor

If you are not using a business entity, your business tax
information should be reported on your personal tax return.
The due date for filing your personal tax returns is April
15, 2005. You can obtain a four-month extension by filing
form 4868.

Summary

Regardless of how your business is organized, the IRS will
automatically grant you an extension to file your tax
returns. By sending in the appropriate form, you can avoid a
mad rush that will inevitably result in missing deductions
and overpaying your taxes. Just make sure you pay any taxes
you anticipate owing by the appropriate date.

Richard A. Chapo is with http://www.businesstaxrecovery.com - recovery of business taxes through tax help and tax relief. Visit http://www.businesstaxrecovery.com/articles to read more business tax articles.