Frequently Asked Questions
- Q?How long does the IRS have to collect my tax debt?
From the day that a tax liability is finalized, the IRS has ten years to collect the full amount, plus any penalties and interest. If the IRS doesn’t collect the full amount in the 10-year period, then the remaining balance on the account disappears forever because the statute of limitations on collecting the tax has expired.
- Q?How long do I have to get audited?
The IRS has three years to audit your tax return or to assess any additional tax liabilities.
This is measured from the day you actually filed your tax return. If you filed your taxes before the deadline, the time is measured from its date, April 15th. Most state tax agencies follow the federal three-year period for auditing tax returns, however, some states have a longer statute of limitations.
Exceptions to the 3-year statute of limitations on assessments and audits:
The IRS has six years from the date a return is filed to audit a tax return and to assess additional tax if the taxpayer omits income that amounts to more than 25% of income that was reported on the tax return.
The IRS also has six years to audit a tax return and assess additional tax on income related to undisclosed foreign financial assets if the omitted income is more than $5,000.
The statute of limitations on audits and assessing additional tax remains open indefinitely if the taxpayer files a false or fraudulent tax return.
- Q?How long do I have to file my tax returns?
The IRS has three years to give you a refund.
Taxpayers have until the later of three years from the date of the original deadline of the tax return or two years from the date the tax was actually paid to claim a refund of overpaid taxes from the IRS.
For example, your 2013 tax return is due on April 15th, 2014. Add three years to this filing deadline, and you have until April 15th, 2017, to file your 2013 tax return and still get a tax refund. If you file your 2013 return after April 15th, 2017, then your refund expires. It goes away forever because the statute of limitations for claiming a refund has closed.
If you already filed a tax return, you can claim any additional refunds by sending in corrections with an amended return. Amended returns claiming additional refunds must be filed with the IRS before the statute of the limitations expires three years from the original April 15th due date.
Filing an extension extends the period for claiming refunds. The IRS can issue refunds for a particular year if you requested an extension and subsequently file a tax return within three years from the extended deadline.
Exceptions to the 3-year statute of limitations on refunds:
- Taxpayers have up to seven years to claim a refund resulting from deductions for bad debt or worthless securities.
- The three-year statute of limitations does not apply in the situation where taxpayers are unable to manage their financial affairs due to physical or mental impairments.
- Q?What recordkeeping system should I have?
Unless you own or operate your own business, partnership, or S corporation, recordkeeping does not have to be fancy.
Your recordkeeping system can be as casual as storing receipts in a box until the end of the year, then transferring the records, along with a copy of the tax return you file, to an envelope or file folder for longer storage.
To make it easy on yourself, you might want to separate your records and receipts into categories, and file them in labeled envelopes or folders. It’s also helpful to keep each year’s records separate and clearly labeled.
If you have your own business, or if you’re a partner in a partnership or an S corporation shareholder, you might find it valuable to hire a bookkeeper or accountant.
Do you contribute to charity?
If you donate to a charity, you must have receipts to prove your donation.
Contributions in cash, check or other monetary form in 2007 and after aren’t deductible-at all-unless substantiated by one of the following:
- A bank record that shows the name of the qualified organization, the date of the contribution, and the amount of the contribution. Bank records may include: a canceled check, a bank or credit union statement or a credit card statement.
- A receipt (or letter or other written communication) from the qualified organization showing the name of the organization, the date of the contribution, and the amount of the contribution.
- Payroll deduction records. The payroll records must include a pay stub, Form W-2 or other document furnished by the employer that shows the date and the amount of the contribution, and a pledge card or other document prepared by or for the qualified organization that shows the name of the organization.
Besides deducting your cash and non-cash charitable donations, you can also deduct your mileage to and from charity work. If you deduct mileage for your charitable efforts, keep detailed records of how you figured your deduction.
Are you employed by someone else?
If you work for someone else and spend your own money on company business, keep good records of your business expense receipts. You will need these records to either get a reimbursement from your employer or to prove business-related deductions that you take on your taxes.
Do you have income from tips?
If you make tips from your job, the hand of the IRS reaches here too, and if you are ever audited, the IRS will be interested in records of how much you made in tips.
Do you own property?
If you own property, be particularly careful to keep receipts or some other proof of all your expenses, especially for repairs and improvements.
Do you hire domestic workers?
It’s important to keep accurate information about who works for you, including nannies and housekeepers, when and where they worked for you, and how much you paid them for the work.
Do you have a business?
If you have a business, you must keep very careful records of all your business expenses, including vehicle mileage, entertainment expenses, and travel expenses.
If you have a business, just because you have cash in your pocket doesn’t mean you’re in the black on the books. Keeping up-to-date records of all transactions and costs will not only help you tax wise, it will tell you if your business is actually profitable.
Do you travel for your business?
If you travel for business, keep good receipts and logs of all your travel expenses, including those for meals and entertainment. You will need this information whether you work for yourself or for someone else.
- Q?What other types of tax records should I keep?
You need to keep some other types of tax records and receipts, because they tell you how much you paid for something that you may later sell.
Keep the following types of records:
- Records of capital assets, such as coin and antique collections, jewelry, stocks, and bonds.
- Records regarding the purchase and improvements to your home.
- Records regarding the purchase, maintenance, and improvements to your rental or investment property.
How long should I keep these records? You need to keep these records as long as you own the item so you can prove the cost you use to figure your gain or loss when you sell the item.
- Q?How long should I keep old tax returns?
If you are audited, it is very likely that the auditor will ask to see the last few tax returns. It is recommended to keep these tax returns forever.
An added benefit of keeping your tax returns is that you can see what you claimed last year, allowing you to adjust for the current year.
- Q?How long should I keep these records?
Keep the records of your current year’s income and expenses for as long as you may be called upon to prove the income or deduction if you’re audited.
For federal tax purposes, this is generally three years from the date you file your return (or the date it’s due, if that’s later), or two years from the date you actually pay the tax that’s due, if the date you pay the tax is later than the due date. IRS requirements for record keeping are as follows:
- You owe additional tax and situations (2), (3), and (4), below, do not apply to you; keep records for 3 years.
- You do not report income that you should report, and it is more than 25% of the gross income shown on your return; keep records for 6 years.
- You file a fraudulent return; keep records indefinitely.
- You do not file a return; keep records indefinitely.
- You file a claim for credit or refund* after you file your return; keep records for 3 years from the date you filed your original return or 2 years from the date you paid the tax, whichever is later.
- You file a claim for a loss from worthless securities or bad debt deduction; keep records for 7 years.
- Keep all employment tax records for at least 4 years after the date that the tax becomes due or is paid, whichever is later.
- Q?How should I separate and organize these?
It is advantageous to categorize your expenses:
- Medical Expenses
- Business Expenses
- Q?What do I need to keep for tax reasons?
It is a good idea to keep all of your receipts and any other records that you may have of your income and expenses. These will come in very handy if you are audited. It is best to hold on to these records for at least 7 years.
- Q?Being self employed, what sort of deductions can I take?
To be deductible, a business expense must be both ordinary and necessary. An ordinary expense is one that is common and accepted in your trade or business. A necessary expense is one that is helpful and appropriate for your trade or business. An expense does not have to be indispensable to be considered necessary.
- Q?Is a W-2 required to file my tax return, or can I use my final paystub?
You must have a valid Form W-2 in order to complete and file your income tax return. Your employer(s) must issue your W-2s by January 31, 2013. If you do not receive your W-2 mid-February, then contact your employer for more information.
Experto Tax Service may be able to download your W-2, and complete and file your income tax return before it arrives by mail. Contact your nearest Experto Tax Service office. (Office Locator)
- Q?What should I bring to my appointment?
- Wage statements (Form W-2)
- Pension, or retirement income (Forms 1099-R)
- Social Security card(s)
- Driver’s license(s)
- Dependents’ Social Security numbers and dates of birth
- Last year’s tax return
- Information on education expenses (Form 1098-T)
- Commissions received and/or paid
- Information on the sales of stocks and/or bonds (Form 1099-B)
- Self-employed business income and expenses
- Lottery and/or gambling winnings and losses (Form W-2G)
- State refund amount (Form 1099-G)
- Social Security and/or unemployment income (Forms SSA1099/1099-G)
- Income and expenses from rentals
- Alimony paid or received
- Record of purchase or sale of real estate
- Medical and dental expenses
- Real estate and personal property taxes
- Estimated taxes or foreign taxes paid
- Cash and non-cash charitable donations
- Mortgage or home equity loan interest paid (Form 1098)
- Unreimbursed employment-related expenses
- Job-related educational expenses
- Childcare expenses and provider information (Form W-10)
- Q?What should a small business owner bring to the tax appointment?
- Gross receipts from sales or services
- Sales records (for accrual based taxpayers)
- Beginning inventory (if applicable)
- Ending Inventory (if applicable)
- Items removed for personal purposes (if applicable)
- Returns and allowances
- Business checking and savings account interest (1099-INT or statement)
Transportation and Travel Expenses
- Business trip (mileage) log
- Contemporaneous log or receipts for public transportation, parking and tolls.
Travel away from home
- Airfare or mileage (actual expense if drove)
- Meals and tips
- Taxes and tips
- Internet connection (hotel, Internet café, etc.)
Commissions paid to subcontractors
- File Form 1099-MISC and 1096 as necessary
- Cost and first date of business use of assets
- Sales price and disposition date of any assets sold
- Employer-paid pension/profit sharing contributions
- Employer-paid HSA contributions
- Employer-paid health insurance premiums
- Cost of other fringe benefits
- Casualty loss insurance
- Errors and omissions
- Mortgage interest on building owned by business
- Business loan interest
- Legal fees
- Pens, paper, staples, etc.
- Other consumables
- Office space rent
- Business-use vehicle lease expense
- Square footage of office space (hours of use for daycare business)
- Total square footage of home (not applicable for daycare business)
- Mortgage interest or rent paid
Wages paid to employees
- Form W-2 and W-3 Federal and state payroll returns (Form 940, etc.)
- Repairs and maintenance of office facility, etc.
- Q?How fast can I get my refund at Experto Tax Service?
- Q?What is the Bring-a-Buddy Program?
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- Q?How much does it cost to have my taxes prepared at Experto Tax Service?
The cost of tax preparation is based upon the complexity of your tax return. At Experto Tax Service our prices are reasonable. We are definitely lower than the big tax service franchises.
- Q?Flexible Payment Options?
- No Upfront Fees
- Accept Credits Cards
- Accept debit Cards
- Checks or Money Order