Frequently Asked Questions

• How long should I keep my tax records?

  Tax records should be kept for at least as long as tax authorities can audit your return. Generally, the IRS has three years (from the later of the due date or date of filing) to audit your return. However, if more than 25% of your gross income has been omitted from your return, the IRS has six years to examine your return. Therefore, to be safe, tax records should be kept for seven years after the return is filed. Copies of actual returns should be maintained indefinitely. Records that establish the basis (or value) of property for depreciation deductions or for calculating the gain or loss at sale should be kept as long as you have the property plus the same seven years established above.

• What documents do I need to keep in order to prove I made charitable contributions?

  For cash donations less than $250, a canceled check or receipts from the organization is acceptable. For cash donations of $250 or more to one organization in a single contribution, written substantiation from the organization is required (a canceled check is not enough). Generally, for all noncash contributions, a record should be kept of the name of the charitable organization, the date and location of contribution, a reasonably detailed description of the donated property, and the fair market value of the property. Additional requirements are as follows: for noncash donations greater than $250, a receipt is not required where it is impractical to get one. For noncash donations greater than $250, written acknowledgements must be obtained from the charitable organization. For noncash donations greater than $501, the taxpayer’s records must also show the acquisition method, date, and adjusted basis of the donated property. For noncash donations greater than $5,000, a written appraisal is also required.

• Do I need to make estimated tax payments?

  Generally, you must pay estimated tax for the current year if you expect to owe at least $1,000 in tax for the same year (after subtracting your withholding and credits), and you expect your withholding and credits to be less than the smaller or 90% of the tax liability for the current year or 100% if your prior year. For more information, see IRS Publication 505.

• What is the difference between an independent contractor and an employee?

  The IRS uses a set of 20 factors to differentiate between employees and independent contractors. These factors include

  • Behavior Control: an employer controls how an employee does the work;

  • Financial Control: an employer controls how the business aspects of an employee’s activities are conducted;

  • Relationships: an employee generally has access to benefits, and the employment is more likely long-term.

  We can analyze your situation to determine if you have or should have employees or independent contractors.

• Can I take deductions for having a business office in my home?

  You may qualify to take deductions for using your home for business. Expenses of maintaining the home are usually deducted based on the business use percentage of the home. For any of a home to qualify as business use, the area used for business must be used regularly and exclusively as the principal place of business.

• Should I adjust my income tax withholding during the year?

  The IRS has created a very easy-to-use withholding calculator to determine your tax liability for the year. If adjustments to your withholding are necessary (based on your current withholding rates), the IRS website will recommend increases in withholding that should be withheld for the remainder of the year. We can also help you estimate if your withholdings will be sufficient to cover for your liability.