As we begin our departure out of tax season, I think it is important to wrap up any questions that one might have about being self-employed and tax preparation.
Our last blog entry touched on the definition of being self employed, tax obligations and making quarterly payments. Part II will cover business structures, joint-ventures, choosing a tax-preparer, and ways to further your education!
First off, you know what kind of business you want, right? Whether it is underwater-basket-weaving or teaching kittens how to sniff out explosives, establishing the proper business entity will determine which income tax return paperwork you will file. According to the IRS, the most common forms are: sole proprietorship, partnership, corporation, and S corporation. To understand more about the different business structures, please read on here.
Secondly, what about joint-ventures? Do you feel that you and your significant other could be significant business partners? In the case of Husband and Wife businesses, some tax breaks are allowed. If you’re interested more on this, as well as the issues that come up, how to earn social security, please read this.
Before I post useful links on furthering education, here are 9 tips that will be useful in choosing a tax preparer! It is important to remember, the taxpayer is always responsible for their taxes, no matter who it is prepared by.
1. Make sure your preparer has a PTIN, or a “Personal Tax Identification Number” and continues to seek further education.The IRS is also phasing in a new test for those tax-preppers that are not CPA, attorneys, or an enrolled agent and will be given the title of Registered Tax Return Preparer once completed.
2. Check your tax preparers’ history, especially with the Better Business Bureau. For CPA, check for any disciplinary actions and license statuses through the state boards of accountancy for certified public accountants; check the state bar associations for attorneys; and the IRS Office of Enrollment for enrolled agents.
3. Determine the service fees. Some of the companies that promise bigger refunds will take a hefty percentage of your tax return. Also, always make sure your refund will be directly sent to your specified address and only deposited in your personal account.
4. Ask about electronic filing. “Any paid preparer who prepares and files more than 10 returns for clients must file the returns electronically, unless the client opts to file a paper return. More than 1 billion individual tax returns have been safely and securely processed since the debut of electronic filing in 1990. Make sure your preparer offers IRS e-file”
5. Never sign a blank return. Ever. Just don’t do it.
6. Make sure that you will be able to remain in contact with your tax-prepper. Even after April, if questions or issues arise, it is important to have their phone and email.
7. Provide all your receipts and records. Reputable preparers will ask a lot of questions and require a lot of documentation before they can determine your refund. “Do not use a preparer who is willing to electronically file your return before you receive your Form W-2 using your last pay stub. This is against IRS e-file rules.”
8. Read through and understand your tax return before signing it.Ask questions and make sure you fell 100% comfortable before you turn it into the IRS. Remember, no matter who prepares it, it’s the tax payers responsibility that everything is accurate.
9. Make sure the tax preparer signs the income tax file and uses his PTIN number. S/He is also required to receive a copy from him or her after everything is said and done.
Lastly, there are many online workshops available for furthering education. Here you will find nine interactive lessons designed to help new small business owners learn their tax rights and responsibilities. Before paying someone to file your taxes, you might also want to check out the FREE resources that the IRS has on the website, here.