Income Tax Season: Common Q&A

Taxes can be a confusing time for anyone; especially small to medium corporations that have a lot of tax paperwork to deal with but are wearing many different hats. (P.S. That’s why you should outsource!) We are here to help you this tax season. Let’s go over some of the most common questions our clients ask us around this time.

When are my taxes due?

2019: Friday, March 15 for S corporations and partnerships

2019: Monday, April 15 for individuals and corporations

How do I file an extension?

For S corporations and partnerships, you will need to file a Form 7004 with the IRS to obtain an automatic extension. The IRS must receive the 7004 by March 15th. This will give you a six month extension.

If you want to file your taxes after the deadline of April 15th, you will need to file for an extension. There is no penalty for filing for an extension and it is free. You will get a six month extension and all you need to do is fill out the Free File form on the IRS website. Find this form here.

Keep in mind, even with this extension, income taxes due must be paid on or before April 15th.

Can I file my own taxes, or should I use a professional?

This is on a case-by-case basis; when it comes to preparing your own taxes, you have to decide if you like to spend the time crunching the numbers and whether you have a basic understanding of tax rules. Hiring a professional to do your taxes for you takes all of that work off your plate and you can have peace of mind knowing they are done correctly, with less stress and effort on your part. So, essentially, the decision is up to you. We recommend hiring a professional as your professional tax consultant will know all of the changes made to the tax law for 2018—and there are a lot.

How long do I need to keep my tax records?

You should hold on to your tax records for at least three years from the date that you filed your original return, or two years from the date you paid the tax—whichever is later. However, if you file for anything besides a credit or refund, you should keep your records for seven years.

I run my business out of my home, what expenses are deductible?

This is where tax law begins to get a little tricky for those who aren’t familiar with the tax codes; we recommend hiring a tax consultant to help you get the most out of your tax return. Some things that are deductible if you work from home include your home office, office supplies, equipment, software, travel costs, meals and entertainment, training and education, marketing and advertising, professional services, health insurance, and more. However, there are many rules following each of these deductions, so be sure to research carefully or hire a consultant to do them for you.

I am self-employed, can I claim mileage on my vehicle when traveling for work?

Yes. You must keep a log of the miles you drive for your business, regardless of the method you use. If you use your car for business and personal, you must prorate your expenses. If you use the standard mileage rate method, the rate for each mile is $0.545. You may instead opt to use the actual expenses method. Tax rules will determine if you can switch between methods in different tax years. You may also deduct the cost of business-related parking and tolls, however you cannot deduct commuting miles.

Am I withholding enough from my paycheck?

This is hard to give a direct answer to because each individual is different. The best way to know if you are withholding enough from your paycheck each year is to use the IRS Withholding Calculator. By using this calculator, you can find out if you are withholding too much or too little from your paychecks.

How much is the penalty if I did not have health insurance?

If you did not have health insurance in 2018, you will have to pay a penalty fee when you file your taxes due, April 2019. For adults, the fee is $695, and for children it is $347.50—or it is 2.5% of your yearly income, whichever amount is more.

However, due to recent changes made by the Trump Administration, these tax penalties will be eliminated in 2019 which will be reflected on your 2019 taxes when you do them in 2020.

Who can I claim as a dependent?

A qualified dependent is someone you support—you must have supported at least half of this person’s living expenses for the whole year (food, shelter, clothing, etc.). Dependents are usually, but not always, a child of yours or another qualifying relative.

If you are claiming a child, that child must have lived with you for at least six months and must be related (son, daughter, stepchild, foster child, brother, sister, stepsibling, or any descendant of these). They must be 18 or younger at the end of the tax year, or 24 and younger if they are considered a student.

If you are claiming another relative or someone who doesn’t fit the criteria above, that person cannot have a yearly income exceeding $4,150. They cannot be claimed by any other person besides you. They must be related to you or live within your household for one year.

How long will it take to get my refund?

Refunds are typically issued by the IRS within twenty-one business days from the date that you file.

What type of losses can I claim as a business owner?

This question has many avenues of exploring and is always on a case-by-case basis. We recommend hiring a professional consultant to look over these issues with you. If you would still like to complete your taxes on your own, check out this article to get a better understand of the depth of this question: Claiming Business Losses on Your Tax Return.