Q1: What if I haven’t filed my taxes in a number of years?
A1: It is important to file tax returns for every year that you have a filing requirement to avoid paying late filing penalties and interest. Some mistakenly believe that the IRS can only require you to file up to three years of delinquent returns. However, there is no expiration period for unfiled returns.
There is a 3-year statute of limitations during which the IRS can make changes on a return which starts on the due date of the return or whenever it is filed, whichever is later. Tulsa CPA Terry Mosley can file returns for all prior years for you as well as arrange for an installment agreement or an offer in compromise if your tax liability is more than you can afford to pay.
Q2: Should I always file a joint return if I’m married; or, should my spouse and I file separate returns?
A2: In most cases, your tax liability will be lower if you file a joint tax return especially if only one spouse works. However, if you normally itemize deductions, some of these are currently limited to the amount that exceeds your adjusted gross income. Therefore, if one spouse has a lower income than the other, it may benefit you to file separately to maximize these deductions.
One other consideration is that some tax credits are limited, or not allowed at all, if you file separately such as the earned income credit. Tulsa CPA Terry Mosley will review your all of your deductions and advise you on which filing status is the most advantageous.
Q3: What form of organization should I choose when I set up my business?
A3: The simplest form of organization is called a sole proprietorship. The IRS automatically classifies you as a sole proprietor if you are the only owner of your business and haven’t elected another type. If there are more than two owners of your business, you are generally considered to be a partnership. However, businesses with either one or more owners may also elect to become a limited liability company (LLC), a C corporation, or an S corporation. Tulsa CPA Terry Mosley can advise you on the advantages and disadvantages of each of these forms of organization.
Q4: What does it mean to itemize deductions and why should I consider doing this on my tax return?
A4: All taxpayers are allowed to reduce their gross income for tax purposes by either a standard deduction based on their filing status or they may elect to itemize specific deductions allowed under the tax code. The four most common itemized deductions are state income taxes, property taxes, mortgage interest, and charitable contributions. Unless the total of all itemized deductions exceed the standard deduction it doesn’t benefit a taxpayer to itemize. Tulsa CPA Terry Mosley can advise you on whether itemizing will benefit you.