Accounting News and Notes

How to Avoid an Audit from the IRS

What You Don’t Know & Report Can Hurt You: Avoid Unnecessary Fines & Penalties

Much confusion exists over which records and documentation should be saved and for how long to support a tax return you prepare and file. Generally speaking you should save records so that if ever asked, you will be able to:

Show Income Sources

This may include your W-2, business income, copies of checks received, invoices, interest and dividend statements, social security, alimony, and K-1’s received from business interest. Documentation should be maintained such that all income and its source and type are readily available by reviewing the source document. If not readily ascertainable it would be advantageous to also save substantive collaborating information.

Keeping  Copies of Receipts, Expenses & Itemizations

You will want to be able to prove all items taken on your return if ever asked. For most taxpayers this would include items such as mortgage interest, real estate and personal property taxes paid, medical and dental expenses, casualty losses, moving expenses, state and other taxes, charitable contributions, alimony, employee business expenses, IRA’s, dependent care expenses, tuition, closing statements, invoices, bank statements, student interest, etc.

This is a partial list and only a sampling of the types of items you would want to save. The totality of what you would need to save would be best served by a review of the prepared return, then ensuring that you have copies of all of the deductions claimed and proof of all dependents. Proof of payment should include the payee, amount, transaction date, check, bank statement, etc. Care should be taken to maintain documentation as prescribed by IRS statues for that year’s taxes in all of the above categories and indeed all deductions on your return. A detailed understanding of what substantiates a valid tax deduction is a critical part of this process as documentation standards, based upon type, vary substantially. 

By critiquing a client’s prior tax return a CPA can gain much guidance and information about a particular taxpayer. However there is no substitute for a CPA being keenly aware of all information that they receive from a client. The below is a sample letter that we might send to a client to ensure that all of the information is received to ensure that a timely and correct return is prepared thereby ensuring that only the lowest legal possible tax is paid:

For your 2010 Personal Return I do not yet have: 

Property taxes paid on your personal vehicles. 

Mortgage Interest & the Real Estate Taxes on Your Home. 

Last year you had $4,000 of charitable contributions, so far this year you have forwarded $200. Please review and advise. 

This will confirm your advice that: 

-You have not paid any federal or state estimated payments for 2010. 

-You have not yet retained a payroll service for your company and that I suggest you do so ASAP. 

-That you are a C Corporation for all tax years prior to 12/31/10 and that you are an S Corporation effective 1-1-11.                                                      

This is to confirm that you are handling all payroll and 1099 issues, your county property tax report, sales tax reports, your annual corporate registration, and your business license. 

Please be reminded that you are required to keep a by day log to support business miles and that I suggest you get to me fixed assets by year, item, and amount purchased so that we can prepare a detailed fixed asset list. 

We encourage you to look at adding a retirement plan so that you can both attract & retain employees and to start planning for your retirement. 

Please forward the data ASAP and the signed power of attorney being forwarded so that I can respond to the IRS 3-1-11 request for documentation. I will mail copy as a reminder ASAP. 

“Dare to Attempt Something so Great for the Kingdom of God, that it is Doomed to Failure Lest God be in it!”

 John Dillard, CPA of His CPA, PC (An Atlanta Christian CPA firm) 1940 Woods River Lane, Duluth, GA 30097  Phone 770-814-9304   http://www.hiscpa.com/    (All Rights Reserved) To retain John Dillard CPA (An Atlanta Christian Speaker/Author) for your business group or church congregation, you can contact him today at 770.814.9304. To discover John Dillard’s Published Books and their vision visit  http://www.john-dillard.com/

We advise clients on: IRS representation, Offer in Compromise, Tax Problems, Incorporation in Georgia, Corporate and Personal Income Tax Returns, Part-time CFO, Virtual Controller, Business Planning, Offer in Compromise, Back Taxes, Business Acquisitions/Sales, Forensic Accounting, Business Valuations and Bookkeeping.

How to Find a Good Christian CPA

Christian CPA: How to Find the Right One

We advise clients on: IRS representation, Offer in Compromise, Tax Problems, Incorporation in Georgia, Corporate and Personal Income Tax Returns, Part-time CFO, Virtual Controller, Business Planning, Offer in Compromise, Back Taxes, Business Acquisitions/Sales, Forensic Accounting, Business Valuations and Bookkeeping

With thousands of CPA’s in to choose from, it’s difficult for business owners to find the one who is best suited for their needs.  Having been a CPA for almost three decades, you soon discover that CPA’s like doctors and lawyers are not all alike and that each one has their own particular set of nuances, training, experience and specialties.  Just as finding the right doctor when you are having chest pains, it is equally as critical to your business success to find a CPA to fill in the financial gaps that many business owners lack. 

Our world has become one of intense specialization as you have had to hone and perfect your craft and you will want to find a business CPA whose dedication and ambition matches that of your own.  To that end, recapped below you will find several issues to contemplate as you make one of the most important decisions that will impact your business success and your family’s financial future:

• Find a CPA who has at least ten years of varied experience.  CPA’s, like doctors, have extensive training requirements that are important and a prerequisite to even obtaining one’s CPA license.  Just as you would not necessarily prefer to be an oncologist’s first patient, so will you want to find a well skilled and trained CPA.  One of the first places to look would be to ask to see a potential accountant’s resume.
• Someone has to graduate at the head of their class.  Accordingly when you are going to soon have a major surgery would you prefer to have a physician from a top school whose honors are most likely the best indicator of future success or would you prefer to find someone who failed to excel and graduated at the tail end of their class?
• Elect to work with a CPA whose goal is more than just tax returns.  As a business owner, you will want to find someone who has a heavy emphasis on tax planning, a wise and judicious planning style, retirement planning, as well as a broad based understanding of all types of medical, liability, property and other specialty lines of insurance.  Often a well-placed word of advice is all a good listener and seeker needs to hear.
• Find a CPA who cares more about the world than his business.  Although attentiveness to your needs and responsiveness to you are critical to your success, our work lives are not how we are all going to be remembered.  Is your CPA regularly involved in giving back to the community, do they have an active local or overseas ministry that they actually participate in and support?  Do they help the elderly or oppressed in the community, are they involved in the local PTA are they centrally involved in striving to make this world a better place for us all?

As you make a decision for your business’s CPA, you make one not only for yourself but those who are depending on you as well.  These people include not only your family but also the family of your employees as your business and your own financial success depend on it.

Contact HIS CPA PC (A Christian CPA Firm) today. 

Serving as an Award Winning CPA for Decades
http://www.hiscpa.com/article3.html Gwinnett/Duluth CPA Teaches Personnel Keys to Managing Business Growth
http://www.hiscpa.com/article6.html Alpharetta/Roswell CPA Teaches the Tax Effects of Entity Choice
http://www.hiscpa.com/marketing-efforts.html Norcross/Sandy Springs CPA on Tracking Marketing Statistics for Your Georgia Business

And this is only some of the information available on our web site. You also have at our blog a host of other varied and timely tax and business management issues you can use.

John Dillard, CPA of His CPA, PC (An Atlanta Christian CPA firm) 1940 Woods River Lane, Duluth, GA 30097 Phone 770-814-9304 http://www.hiscpa.com/ http://www.john-dillard.com/ To retain John Dillard CPA (An Atlanta Christian Speaker/Author) for your business group or church congregation, you can contact him today at 770.814.9304

Dare to Attempt Something so Great for the Kingdom of God that it is doomed to failure, lest Christ be in it!

Serving Alabama, Alaska, Arizona, Arkansas, California, Colorado, Connecticut, Delaware, Florida, Georgia, Hawaii, Idaho, Illinois, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maine, Maryland, Massachusetts, Michigan, Minnesota, Mississippi, Missouri, Nebraska, Nevada, New Hampshire, New Jersey, New Mexico, New York, North Carolina, North Dakota, Ohio, Oklahoma, Oregon, Pennsylvania, Rhode Island, South Carolina, South Dakota, Tennessee, Texas, Utah, Vermont, Virginia, Washington, West Virginia, Wisconsin and Wyoming, Los Angeles, Chicago, Houston, Philadelphia, Phoenix, San Antonio, San Diego, Dallas, San Jose, Detroit, Indianapolis, Jacksonville, San Francisco, Columbus, Austin, Memphis, Baltimore, Fort Worth, Charlotte, El Paso, Milwaukee, Seattle, Boston, Denver, Louisville, Washington D.C., Nashville, Las Vegas, Portland, Oklahoma, Tucson, Albuquerque, Long Beach, Atlanta, Fresno, Sacramento, New Orleans, Cleveland, Kansas City, Mesa, Virginia, Omaha, Oakland, Miami, Tulsa, Honolulu, Minneapolis, Colorado Springs, Arlington, and Beyond.

Alpharetta/Duluth/Suwanee CPA on Understanding the “Ins & Outs” of  Business Tax Returns

Discover what type of returns your corporation is required to file and its corresponding due dates ensuring that you do not miss an important deadline resulting in unnecessary penalties and interest. Many service businesses opt to file their tax returns on a cash basis, which results in a client not paying taxes on their accounts receivable or deducting their accounts payable until paid. This is especially advantageous for profitable businesses that qualify, since they will not bear the additional tax burden of paying taxes on billed but yet still uncollected accounts receivable. Often cash needs of a rapidly growing business put an inordinate strain on the availability of funds, and the selection of this method will greatly help as it is very difficult to pay taxes on monies one has not yet collected. Below is sample letter that might be used to help Atlanta Business Owners and Entrepreneurs file their corporate income tax returns.

In reviewing the data for your corporate returns I need: 

-To know the amount of medical insurance premiums covering your family. 

-I need a copy of your yearend balance sheet but before you send it please make the below corrections/notations: 

- Debit due to Shareholder and Credit Common Stock for $500.

- Be sure that your retained earnings equals a negative $10,500. 

-Forward me a copy of your W-3 or a payroll report showing total wages for all employees. 

ASAP after I get the above I will complete the corporate return. 

Below are articles that you will find useful in addressing issues on your personal income tax returns, as well.

Determining Your Adjusted Gross Income (AGI)
The first page of Form 1040 is used to calculate the taxpayer’s adjusted gross income. While many people think of their income as what is reported on form W-2, there are some other additions (and possibly some deductions) that have to be made as well. See http://www.hiscpa.com/agi.html

Claiming Itemized Deductions on Your Tax Return
Itemizing deductions on your personal return can result in paying a smaller tax. However the rules on what can be deducted and what can’t are fairly strict. Use this guide to determine what’s deductible. See http://www.hiscpa.com/itemized-deductions.html

How Long Should I Save Tax Records?
Lift up the veil and discover how long and what types of records you should retain and for how long are often the point of consternation for many taxpayers. Learn what you need to keep so that you are never unduly surprised if ever asked to reproduce documents. Visit http://www.hiscpa.com/tax-records.html

Matthew 7:24  ”Therefore everyone who hears these words of mine and puts them into practice is like a wise man who built his house on the rock. 

John Dillard, CPA of His CPA, PC (An Atlanta Christian CPA firm) 1940 Woods River Lane, Duluth, GA 30097  Phone 770-814-9304   http://www.hiscpa.com/    http://www.john-dillard.com/ To retain John Dillard CPA (An Atlanta Christian Speaker/Author) for your business group or church congregation, you can contact him today at 770.814.9304 

His CPA PC…A Christian Atlanta CPA Firm: Never Underestimate the Long-Term Benefits 

Dare to Attempt Something so Great for the Kingdom of God that it is doomed to failure, lest Christ be in it! 

We advise clients on: IRS representation, Offer in Compromise, Tax Problems, Incorporation in Georgia, Corporate and Personal Income Tax Returns, Part-time CFO, Virtual Controller, Business Planning, Offer in Compromise, Back Taxes, Business Acquisitions/Sales, Forensic Accounting, Business Valuations and Bookkeeping

Duluth Georgia CPA Addresses Setting up an Installment Plan with the IRS and Recording of 2009 Internal Data and Bookkeeping Issues  

Attached is a recent note we received from a potential client  However, extreme caution should be exercised by taxpayers to ensure that they retain the services of a CPA who is experienced with tax representation issues and matters.  

Thanks John.  I enjoyed hearing what you had to say.  I am definitely looking forward to getting some order in my business and life.  I know I am in for a tough road in the beginning because of my disobedience but I believe I can get through it by God’s grace and your help.    

I will work on getting together those things you asked me such as my latest return, my first few months of 2009 bank statements and checkbooks, and my QuickBooks downloaded to my laptop.  I will plan on giving you a call the week of November 30.   

Also, I wanted to ask you another question.  I told you I had filed my 2008 tax return but I hadn’t paid anything yet.  I filed it before the October 15th deadline this year after an extension but didn’t pay anything unfortunately.  I was going to set up a payment plan like I did the last time I owed.  They sent me a letter saying it was due Dec. 1st.  I didn’t set up a payment plan when I filed because I knew I wanted to talk to you first.  Can you guide me in this when I see you or do I need to call them and set something up before I meet with you?  Thanks,

Below is our response:

I will be happy to help. 

I suggest you call the IRS and tell them you are going to retain me and the date and request they extend your time to respond to 12-31-09 and that we work to ASAP address this return as well as your 2009 tax issues. Time is the enemy in dealing with IRS Representation issues so if you can get with me ASAP we can plan the best course of action tailored to your particular circumstance.

To learn more about IRS Representation issues see:

How Audits are Selected
Learning about how audits are selected is the first step to discovering how to overcome the emotional and financial distress that normally occurs as part of the audit process. Lifting this veil will help keep you on an even keel in learning how to deal with the IRS audit. Visit http://www.hiscpa.com/irs-selection.html

When the IRS Notice Arrives
Rather than beginning the process in fear, discover how you can better prepare yourself so that you are not surprised at the audit process and its ultimate results. By seeing through to the other side you can best ready yourself to close your audit with no adjustments and no additional monies due. See http://www.hiscpa.com/irs-audit.html

Solving Atlanta IRS Tax Issues
Don’t fight the IRS but work with them to resolve your tax problems. Discover a myriad of legal ways the IRS is eager and willing to work with you to resolve any unpaid debts, penalties, and interest. To learn more http://www.hiscpa.com/working-with-the-irs.html

Paying Your Taxes – Withholding & Extensions for Metro Atlanta Taxpayers
Paying your taxes made easy. This section will enable you to quickly grasp the general guidelines of tax law requiring that you pay taxes as you earn money. As well, extensions and their uses and limitations are disclosed and discovered. Visit http://www.hiscpa.com/paying-taxes.html

How to Avoid an IRS Audit for Atlanta Taxpayers
Discover simple steps that you can do to help prevent an IRS audit. Though the tax code is at times very difficult to understand and comply, these basic simple steps will help you avoid an IRS audit. See http://www.hiscpa.com/avoiding-audits.html

Solving IRS Tax Problems: Submitting an Georgia Offer in Compromise
When all else fails and if you qualify, the IRS and Georgia both have a program which will enable you to work to solve the severest tax problems. Visit http://www.hiscpa.com/offer-in-compromise.html

Utilizing IRS Installment Plans for Metro Atlanta Taxpayers to Pay Your Past Due Taxes
The IRS has long been in the business of helping taxpayers get back into the system to ensure that taxpayers are able to pay their taxes over time. For those who do not qualify for an Offer in Compromise or to pay the taxes and interest in full, while seeking penalty abatement, an Installment Plan is a prudent and wise choice and alternative to get your past taxes due paid and current. See http://www.hiscpa.com/installment-plans.html

 John Dillard is an Christian Speaker/Author and Certified Public Accountant in Duluth, GA. To See how he takes Christ along with him to work visit http://www.hiscpa.com/ and for his latest book Overcoming Life’s 9/11’s: Job’s Journey and a Voice of One: Nehemiah’s Prayer visit http://www.john-dillard.com/ or call John Dillard CPA today at 770.814.9304 (All Rights Reserved) Dare to Attempt Something so Great for the Kingdom of God that it is doomed to failure, lest Christ be in it!  

Contact HIS CPA PC (A Christian CPA Firm) today.

We advise clients on: IRS representation, Offer in Compromise, Tax Problems, Incorporation in Georgia, Corporate and Personal Income Tax Returns, Part-time CFO, Virtual Controller, Business Planning, Offer in Compromise, Back Taxes, Bookkeeping.

Christian CPA Teaches How to Submit an Offer in Compromise: Which Tax Forms to Use 

If you have a large tax bill owed to either the IRS or Georgia, there is a tax process called the Offer in Compromise which may be well suited to help you get beyond the mountain of tax debt and to negotiate a fair and just settlement with the IRS. The process requires you to be current on all of your tax filings and payments, thus the Internal Revenue Service or Georgia will first need to be able to verify that all of your respective corporate and personal income taxes, payroll taxes, and sales tax reports have been appropriately filed. If you are a corporate taxpayer or have been a proprietorship and have a payroll, the IRS will need to be able to ascertain and confirm that you are current on these payments and filings as well. If you are doing an Offer in Compromise to the state of Georgia then having your payroll reports, income taxes and payments current as well as any applicable sales tax reports will also be a pre-requisite to submitting an Offer.

Submission of an Offer in Compromise. Filing of the Offer Form (Form 656), the Collection Information Statement for Wage Earners and Self-Employed Individuals (Form 433-A), and the Collection Information Statement for Businesses (Form 433B) are the core paperwork to be initially submitted with the Offer  in Compromise. Attendant with this filing is wide host of required documentation which needs to be submitted with the Offer to validate the deductions claimed.

Form 656: Offer in Compromise. This form is the actual Offer itself. The Offer when submitted to the Internal Revenue Service needs to include a check for $150 along with a check for at least twenty percent of the amount you are  proposing to settle your total outstanding taxes. On the Form you will also indicate how the balance of the monies will be paid after an Offer in Compromise is accepted. Generally the best option is to pay the balance within thirty days of acceptance of the Offer, although by law the IRS can extend a payment schedule for up to two years.

Form 433A: The Collection Information Statement for Wage Earners and Self-Employed Individuals. This form is used by all taxpayers who are filing an Offer in Compromise for tax monies, which they personally owe. Accordingly for all those who receive a paycheck with payroll withholding or have a business proprietorship will utilize this form to file along with Form 656. This form will list all of a taxpayers (and if a joint offer, their spouse as well) assets, liabilities, credit lines, insurance values, retirement plan balances, monthly cash inflow and outgo in accordance with prescribed IRS criteria. Attendant to the forms instructions there is a wide host of documentation which also should be attached including monthly pay stubs, bank statements, billings/statements, and proof of expenditures.

Form 433B: Collection Information Statement for Businesses. If you are submitting an Offer in Compromise for your business for either payroll taxes withheld and not paid or for unpaid income taxes if a C Corporation, then you will use Form 433B for the submission. This schedule will also list all of the assets and liabilities of the business along with a profit and loss showing the year to date profit for the current year. Most of this information can be obtained from the company’s internal books and records (i.e., their balance sheet and profit and loss). Details of where the company banks, account numbers, loans, loan numbers, offsetting balances, monthly payments are examples of the additional information which will also need to be supplied. Copies of items such as the last three monthly bank statements, open accounts receivable and accounts payable detail will also need to be provided.

Generally an Offer in Compromise will take at least a year to process and it is not a task you will want to take on without the skill of a good Atlanta CPA to guide you along the way. 

Contact John Dillard CPA of His CPA at 770 814 9304 and visit www.HisCPA.com

At His CPA we march to the beat of a higher drummer where we put the “Golden Rule” to work each and every day by “Serving Him by Serving You…One Tax Return at a Time.”

We advise clients on: IRS representation, Offer in Compromise, Incorporation in GA, Corporate and Personal Income Taxes, Part-time CFO, Virtual Controller, Business Planning, Payroll Administration, Bookkeeping.

We serve clients that are located in Atlanta GA, Gwinnett County, North Fulton County, DeKalb County, Hall County, Clayton County, Cobb County, Forsyth County, Hart County, Jefferson County, Duluth, Alpharetta, Johns Creek, Lawrenceville, Milton, Norcross, Snellville, Roswell, Buford, Cumming, Grayson, Hartwell, Suwanee, Sugar Hill, Loganville, Lilburn, Dunwoody, Gainesville, Decatur, and Beyond.