Tax Preparation Concord CA Frequently Asked Questions

Tax Preparation Frequently Asked Questions (FAQs)

This page provides a list of frequently asked questions by our clients in the East Bay and Washington, DC area.  These questions may not address your unique income tax problem. As such, we encourage you to contact us for a tax consultation to help you with preparing your individual or business tax returns.

With over 15 years of experience in preparing taxes, we have come across a myriad of tax questions, from simple to complicated, and we value the fact that some questions require alternative actions as the tax law has layers of gray and not one true answer exist.  If you need assistance, feel free to email us at gamarra@willgamarracpa.com.

Question:  We have not filed for prior years and are worried about not being able to afford our tax debt?

Answer: If you are late in filing your taxes, our experts can help you file your late tax returns to mitigate the risk of having the IRS levy your bank account, assets, or garnish your wages.  If needed, we can aid you in establishing a monthly payment plan to get back on track with paying of your tax debt. In other cases, you may be able to qualify to have your debt reduced if you experienced severe financial hardship.

Question: We are working as contractors and received a 1099-Misc and do not know what is deductible in our line of business?

Answer: If you are working as a subcontractor, independent consultant, or registered a LLC and have questions on whether a specific expense is deductible as a business expense, then call us for a free consultation. 

Question:  We have real estate investment properties and do not know (a) how to track our expenses; (b) what expenses are deductible; or (c) how this activity impacts our tax return? If you have investment properties and need support in tracking your rental income, mortgage and real estate taxes, and other rental property expense that result in tax deductions, then we can help. Whatever your questions, we can aid you to resolve your needs in managing your investment properties.

Question:  We have investment interest in stocks, bonds, interest, dividends, percentage of ownership in a small business, and a trust for our kids and do not know the implications on our tax return? 

Answer: If you have these type of transactions, then we can aid you in analyzing the impact it will have on your personal tax return.

Question:  We use an online tax software and that works for our simple tax return but we have a question on a specific deduction?

Answer: If you have a specific question, then call us as we recognize that preparing your own tax return online may be more complicated than what you had expected. For the same fee as you would pay to do it yourself, you may want to reconsider your decision and have a professional prepare your tax return - and keep in mind that you can deduct the tax preparation fee.

Question: We have made a major improvement to our home - is this tax deductible?

Answer: Generally, major improvements made to a personal residence is not deductible. However, the expense will be factored into the cost basis of the home and will generate tax savings at the point in time where the sale of the home will occur. As such, you want to track all major improvements. If you home is used for your home office, then there may be an opportunity to deduct the portion dedicated to the business.

Question: We transferred a property with no debt to a Roth IRA - will we be required to pay taxes on the rental income?

Answer: In most cases, the property transferred debt free to a Roth IRA will have to comply with various regulations and the rental income will be treated as investment income which will be tax-free and subject to the Roth IRA rules and regulations (ie., distributions, etc). Given the complexity of this transaction, coordination with the custodian and CPA is central to such a tax strategy.

Question:  We inherited a property and cash and do we owe taxes?

Answer: Generally, the inheritance will not result in a tax liability. However, if the property is later sold and generates a capital gain, then you may be subject to taxes. If cash is inherited, no tax liability will result.

Question:  We have LLC and mix our business account with personal funds, vice versa - how will this impact us?

Answer: In most cases, if business transactions are intertwined with personal, then chances are the LLC liability protection will be pierced. This type of question reguires that you speak to your lawyer as this is beyond the scope of our services. 

Question: I have a church and it functions an activity available to the public - does it need to file a tax return?

Answer: If a 501(c) (3) Church is operating a cafeteria that is avaiable to the public then filing the Form 990-T is required. The Form 990-T is aimed at reporting the exempt organization's unrelated business income. 

Question: I hired a person and should I classify them as an employee or an independent contractor?

Answer: In general, classifying a worker is highly reviewed by the IRS and State authorities.  As such, consider speaking to lawyer or your CPA to validate if your classification for the person you hired is in compliance with the IRS.

In all cases, your classification should factor in three main categories:

 1. Behavioral Control: Where is the work conducted? Are tools provided? Who provides supplies? Is training provided? Is there an expectation to work on a specific set of hours and on specific days?

 2: Financial Control: Is there a reimbursement policy? What is the method of payment? Are services made available to other customers?

 3: Relationship and Parties Involved:  Is there a written contract? Are fringe benefits provided?

Your decision for classifying a person you hired as either an employee or contractor should factor in answering the above questions. Due to the severe penalties involved, you should consider contacting your tax advisor.

Question: Can a person I hire be both an employee and independent contractor?

Answer: Yes, given the facts and cirumstances. A dual service worker is not common but there are instances in where the same person can play the role of an employee and contractor. An example would be having an employee function as an officer of the corporation.  If you need additional information, visit the small business administration webpage http://www.sba.gov/content/hire-contractor-or-employee to read more on the topic.

Question: Do I need to provide independent contractors with a 1099-Misc at year end?

Answer: Yes, all independent contractors that you paid over $600.00 through out the year will need to be issued a 1099-Misc. In addition, a W-9 should filled out by the independent contractor.

Question: I registered and LLC and what would be inappropriate assets to contribute?

Answer: Stock in an S Corporation should not be contributed to an LLC as a partnership cannot be an owner of an S Corporation. However, the S-Corporation can own LLC interest. If you are funding an LLC with Individual Retirement Account (IRA), then this results in a distribution which will be subject to tax.

Question: Can I lease property to an LLC I own?

Answer: Yes, you can lease property to an LLC you own and such an event would be treated as if it were between unrelated parties. If leasing a property to an LLC, the lease should be in writing and fair rental value should be determined.

Question: I was offered free tax return preparation as I qualify for the volunteer income tax program (VITA) - should I have them prepare my tax return?

Answer: The VITA sites prepare free tax returns for individuals who qualify. This is a great method if your tax returns are simple and straight forward. In general, tax payers who have only a W-2 will seek assistance from VITA sites. However, if you own stocks, bonds, real estate, or are self employed then you should consider having a licensed professional prepare your taxes. Bear in mind that the VITA sites are staffed by "volunteers" who are temporary preparers aiding in preparing your taxes. As such, the level of quality and expertise that you may expect may not meet your expectations. To find a VITA site near visit the IRS website http://irs.treasury.gov/freetaxprep/

Question: We have a small congregation and function as a 501(c) (3) Church. We funded and operate a caferia that is open to the public. Are we subject to taxes?

Answer: Generally, Churches are not required to file the 990 tax return UNLESS they are operating an unrelated business. A cafeteria open to the public and not exclusively for members would, in most cases, subject itself to being a taxable event. As such, the 990-T would need to be filed reporting the unrelated business income tax.

Question: I inherited stocks and what would be my basis?

Answer: If you inherited stocks, then generally your basis is long-term and the date of inheritance establishes your new basis.

Question: I lost my tax records and am not able to obtain copies?

Answer: Contact us and we can request a transcript from the IRS. The account transcript provides many of the line items that appear on the actual tax return. However, it does not provide all the details that were reported. If you lost your W-2s and 1099s, then we can request a wage and income transcript. If needed, we can request a copy of the filed copy of the tax return.

Question: I am a foreigner with income in the US, do I need to file?

Answer: In most cases, a foreigner will need to apply for the Individual Taxpayer Identification Number (ITIN). ITINs are issued regardless of immigration status because both resident and nonresident aliens may have a U.S. filing or reporting requirement under the Internal Revenue Code. You must have a filing requirement and file a valid federal income tax return to receive an ITIN, unless they meet an exception.

ITINs are for federal tax reporting only, and are not intended to serve as work permits or any other uses. The IRS issues ITINs to help individuals comply with the U.S. tax laws, and to provide a means to process tax returns for those not eligible for Social Security Numbers (SSNs).

Question: I have dependents in Mexico or Canada and what must I do to claim them on my tax returns?

Answer: You will need to obtain an Individual Taxpayer Identification Number (ITIN) for each person you can legally claim on your tax returns. If you support your dependents and meet the other tests for claiming your dependent, then consider calling us to aid you with fling for an ITIN. Bear in mind that an ITIN can be used for bank purposes as well. If you have any questions regarding the ITIN process, feel free to call us at 415-738-8331.