FAQ
What is the difference between a C and an S
corporation?
A C Corporation and an S Corporation are exactly the same in
respect to liability protection. The difference is in how you
are taxed. A C Corporation has what is referred to as a
double taxation. First the corporation is taxed, and secondly
the dividends are taxed on the shareholders’ tax
returns. An S Corporation is not taxed at the corporate
level, only at the shareholder level. Most small businesses
are eligible to file as S corporations. But the appropriate
election must be made.
How do I find out about my refund?
The best way is to use the Check Your Refund link from the
Resources pages of our website! To look up the status of your
federal or state refund, you will need your social security
number, filing status, and exact amount you’re
expecting back.
What are the consequences of early withdrawals from my
retirement plans?
If you withdraw money from a 401(k) or an IRA before age 59
½, the distribution is taxable and there is a 10%
penalty on the taxable amount. The main exceptions
that let you withdraw money early without penalty are as
follows:
-
Qualified retirement plan distributions if you separated
from service in or after the year you reach age 55 (does
not apply to IRAs).
-
Distributions made as a part of a series of substantially
equal periodic payments (made at least annually) for your
life or the joint lives of you and your designated
beneficiary.
-
Distributions due to total and permanent disability.
-
Distributions due to death (does not apply to modified
endowment contracts)
-
Qualified retirement plan distributions up to (1) the
amount you paid for unreimbursed medical expenses during
the year minus (2) 7.5% of your adjusted gross income for
the year.
-
IRA distributions made to unemployed individuals for health
insurance premiums.
-
IRA distributions made for higher education expenses.
-
IRA distributions made for the purchase of
a first home (up to $10,000).
-
Distributions due to an IRS levy on the qualified
retirement plan.
-
Qualified distributions to reservists while serving on
active duty for at least 180 days.
What do I need to keep for my charitable
contributions?
First,
is your contribution cash or
non-cash?
-
If you make a cash donation, you must have a bank record or
written communication from the charity showing the name of
the charity and the amount of the donation. A bank record
can be the cancelled check or a statement from a bank or
credit union—so long as it lists the charity’s
name, the date, and the amount of the contribution.
Personal records such as bank registers, diaries and notes
are no longer considered acceptable proof of contributions.
-
Any used items (such as clothing, linens, appliances, etc.)
must be in good condition and may only be deducted at the
price you could reasonably ask for the item in used
condition. For contributions worth $250 or more, you must
have a written receipt or letter from the organization. For
contributions worth $500 or more, you must file Form 8283
(Noncash Charitable Contributions) and attach it to your
Form 1040.
All contributions must be made to qualified charitable
organizations.
What are the differences between a Roth and a
conventional IRA?
A traditional IRA lets you deduct contributions in the year you
make them, and the distributions are included as income on
your return when you withdraw from the IRA after reaching age
59½. A Roth IRA does not let you deduct
the contributions, but you also do not report the
distributions as income, no matter how much the Roth account
has appreciated. With a Roth, you can exclude the income
earned in the account from being taxed.
Can I deduct expenses for a business run out of my
home?
If you use a portion of your home for business purposes, you
may be able to take a home office deduction whether you are
self-employed or an employee. Expenses you may be able to
deduct for business use of your home may include the business
portion of real estate taxes, mortgage interest, rent,
utilities, insurance, depreciation, painting, and
repairs.
You can claim this deduction only if you use a part of your
home regularly and exclusively:
-
As your principal place of business for any trade or
business.
-
As a place to meet or deal with your patients, clients or
customers in the normal course of your trade or
business.
Generally, the amount you can deduct depends on the
percentage of your home that you used for business. Your
deduction will be limited if your gross income from your
business is less than your total business
expenses.