Barbara's Tax Service
Call Me at (940) 964-2693 or (940) 393-3590


Home
New Customers
About Us
My Privacy Policy
Organizing Your Records
Tax Info Needed
Location
Contact Us
FAQ
Business Information
Links and Forms
Frequently Asked Questions

We try to anticipate questions you might have about my tax services and provide the answers here. If you need additional information send email to Barbara@BarbarasTaxService.com.

 

I am one or more years behind in filing my taxes.  Where do I start?

First, give me a call.  It is important to get started on your past due returns as soon as possible in order to minimize possible penalties.  If you have already received a notice, we must contact them to work out a reasonable time line for complying with their requests.  If you have not been contacted, call me first!  It is much better to get your information ready to file before contacting the IRS.

Just remember:  this is a problem that is more common than you might think.  You can get things caught up and get square with the IRS.  Just take the first step and call me.


 

I am missing some information needed to complete my return.  How can I get copies?

The simple answer is, it depends.  If you are missing a W-2, contact the company and ask them to fax you a copy.  If you prefer, you can have them fax the copy to me toll free at 855-333-4830.  Some employers can send it via email.  The same thing applies to 1099's, K-1's, and any other formal document.

I am able to access W-2's from some larger companies through a service I use.  I will need detailed information from you, including information from your last paystub of the year.

If you are missing information from operating your own business, try logging onto your bank's website for copies of bank statements.  It will not give you specific information but will give you a place to start for total income to report.  Contact me for more information on how to reconstruct business records.


 

I misplaced my tax return.  What can I do?

If I prepared your return, call me.  I can mail, fax or email a copy to you for a minor fee.  If you had your return prepared by another preparation service, call them.  If you prepared your own return, you can request a copy from the IRS.  Call me about how to go about doing that.


 

How much will it cost to have my return prepared?

This is probably the most frequently asked question by new clients, and probably one of the most difficult to answer with any true accuracy.  Time spent will vary greatly from one return to the next. Other factors including costs for particular forms, delays in obtaining information, and organization of individual tax records also influence the cost of preparing your return.

My tax preparation fees range from $75 and up.  I charge $90 per hour for time spent organizing, sorting, and totalling your receipts. (so you might wish to save money by utilizing my Tax Prep Readiness Service or by doing this part yourself).  Most returns with no small business or farm, no rental properties, and no unusual tax issues or extensive data to enter (extensive stock sales or numerous W-2's for example) will likely range from $125for single taxpayers with no dependents to $250.  Most returns fall within this range.  Adding a business or farm will usually add another $100 to $300.

These are very general estimates.  Your tax situation could vary greatly from these amounts.  Please call me for more information.

 


What are my options for paying my tax preparation fee?

All fees are due and payable before Electronically filing your return or releasing it to you.

There are several ways to pay for your tax preparation.  I accept cash, checks, and credit cards.  The credit cards I can accept include Mastercard, VISA, and Discover. 

Returning customers can elect to have my fee taken out of any refund.  This service is offered through a banking service (I am unable to legally do it any other way) and charges a small fee.  This option is not available to first time customers.  It is also not available to customers who have unpaid federal taxes, child support or student loan debt.  Please contact me for further information. 


 

I need an extension.  How long do I have?  How much does it cost?  What are the consequences of extensions?

There is only one extension available, which gives you until October 15th to file your return.  I charge $50 to file an extension.  That fee is credited back to you when I prepare your tax return.

An extension is only an extension of time to file, NOT to pay your taxes.  If you do end up owing money, penalties and interest will be assessed by the IRS for the time elapsed between filing the extension and actually paying your taxes.  If you think you will owe money, you should always submit that payment with your extension.


 

I know I will owe money this year.  What are my options?

The most important thing is to have your return prepared as early on as you can manage.  This will provide you the information needed to organize your finances.  Even if you file your return in February, you have until April 15 to make payment.

If you cannot manage to pay your tax bill by April 15, you can apply for a payment plan with the IRS.  I have the forms available to make that application.


 

I need my refund now!  How quickly can I get it?

Electronic Filing is the fastest refund option that I currently offer.  According to the IRS, most refunds will be received within ten to 21 days from date of electronic filing.

You can check on the status of your refund at www.irs.gov.  The IRS also offers a publication providing guidelines for checking on your refund.  Click here for a link to that publication.


 

I started a small business.  What records do I need to keep?

I have a page dedicated to small business recordkeeping which you can access by clicking here

The brief answer is everything.  Receipts, bank statements, invoices, bills, and any other paperwork related to your business.  If you use your car in your business you must keep up with mileage driven related to your business.  Remember, driving from your home to your office and back is NOT business mileage; the IRS considers this commuting mileage and it is not deductible.  However, visiting temporary job sites, customer locations, and vendor locations is deductible.  Keeping a mileage log can be tedious but a valuable tool for optimizing vehicle deductions.

If you maintain an inventory of goods to sell you must have an inventory count as of December 31 of each year.  The inventory should be taken at your cost, not at the sale value.

Please refer to the small business page for more detailed information.


 

Can you recommend a bookkeeping software package?

First you need to decide how dedicated you are to keeping your records updated on your computer.  It requires the most effort during the year but yields results with the least effort at tax preparation time.

Quicken™ by Intuit™ is a good basic program, offering different versions for different needs.  It is user-friendly for non-accountant types and has some impressive download capabilities for automatically downloading your banking and credit card information.

Quickbooks™ by Intuit™ is another good option for small businesses.  It does require a bit more accounting accumen but has good tutors and help available.  There are industry specific choices which will gear the books towards your particular business.  It is more costly than Quicken but allows more options and features.

I also offer a bookkeeping service.  We can keep your books up to date and even have an online version available so you can access the information any time you wish.


 

What if I don't want to keep my books on my computer?

Keeping your books on a computer using Quickbooks is ideal.  If you aren't math-inclined but your spouse is, this is a perfect opportunity to employ your spouse and take advantage of several tax savings opportunities.  Or perhaps you have a college-aged child who you could employ?  There's also the option of hiring a bookkeeper or taking advantage of my bookkeeping services.

But if you would rather keep your books yourself only not on a computer, you don't have to!  Any record keeping system that you will consistently use will work.  You can use your regular check register and highlight tax related income and expenses.  At the end of the year you simply go back through your check registers and write down the highlighted items.

You can keep your receipts in files or a paperbag if you choose.  At the end of the year you sort them and run totals on them, then write the information down for use in tax preparation.  Please remember that cancelled checks are a poor substitute for actual receipts and are oftentimes disallowed by the IRS in the event of an audit.

The most important thing to remember when organizing your records is to choose a method that you understand and will keep current with.  Lost or missing records usually equals lost deductions and overpaying your taxes.


 

I advertise my business on my car (with a magnetic sign or window applique'); can I write off all of my vehicle expenses?

The short answer is no.  The IRS wants proof that the business usage of your vehicle is actual business usage and using your car to advertise is not considered business usage.  You can only write off car expenses proportionate to the actual mileage spent conducting business.


 

What car expenses can I deduct?

Anything related to the upkeep and maintenance of your car is deductible, but only in direct proportion of the actual business use of that car.  You have a choice of using actual costs or a mileage allowance set by the IRS.  Standard mileage rates change from year to year.  Contact my office for that information.  

Whichever method works better for you remember that they both require you to keep track of your miles driven for business as well as total miles driven for the year.  I will need both those numbers (total miles driven, total business miles driven).  Remember, driving to and from your business location (office, shop, etc) are considered commuting miles and are not deductible.

Check out your smart phone for help keeping up with your auto records.  There are several apps available that not only track your mileage, either via your odometer or GPS, but will also prepare those records for a nominal monthly fee.

If you office out of your home, it's important that you take the office in home deduction.  Otherwise, the first trip from your "home office" to anywhere, regardless of business purpose, is not deductible.

In addition to either method, you can deduct business related parking, tolls, and interest expense you paid.


 

What records do I need to bring to have my taxes prepared?

A full list of documents and information needed to prepare your return can be found by clicking HERE.

Remember, when in doubt, include it.  Even if the expense turns out to not be deductible, you don't know until you ask.

I'm excited to offer a new service:  Tax Prep Readiness Service.  My bookkeeper will help you gather, organize, and add your receipts and records and even deliver them to me for tax preparation.  The cost for this service starts at $60 and can even include her working at your home or place of business.  Call me!   


 

I just left my job.  What should I do with my 401K?

You should always seek the advice of a Certified Financial Planner.  If you need a referral, I am happy to provide you with the number of a professional in Denton, Texas, that I consider to be reliable.

Whatever you do, please call me before cashing it out.  Even though taxes are usually withheld from a pension distribution it is almost always not enough.  If you do not want to owe money on April 15, CALL ME!  Tax planning is essential to avoid a nasty surprise next April. 


 

I need cash now.  Should I borrow from my retirement?  Cash out my IRA?

You should always seek the advice of a Certified Financial Planner.  If you need a referral, I am happy to provide you with the number of a professional in Denton, Texas, that I consider to be reliable.

Be advised that taking cash from your 401-K or traditional IRA before aged 59-1/2 results in a penalty of 10% of the amount taken.  The withdrawal is also taxable to you at ordinary tax rates.  Which means you will pay the government a minimum of 20% on any withdrawal, up to and beyond 35%.

Should you borrow against your 401-K and then leave that job before you repay that loan will usually result in that loan being converted into a taxable distribution, subject to the 10% penalty plus ordinary tax rates.

If you decide to do any of these things, please contact me to aid you in tax planning.


 

Should I go long form or short form?

The true language for this question is whether you should itemize your deductions or take the standard deduction.  It works basically like this:  Certain expenditures are deductible on your income taxes, including but not limited to medical expenses, real estate taxes, sales taxes, mortgage interest, charitible contributions, investment and job related expenses, and casualty losses.  If the total of those expenditures exceeds the standard deduction allowed by the IRS, (for 2013 standard deduction is $12,400 for marrieds and $6,200 for singles) you should itemize, or go "long form".  If not, you should take the standard deduction or go "short form".

When in doubt, pull together the expenses and we will try both ways to see which saves you the most taxes.


 

Can I deduct child support?

No.  You can deduct any medical expenses you pay for a child for which you are not the custodial parent but that is pretty much it.


 

I will be retiring soon.  Should I cash out any or all of my 401K?

You should always seek the advice of a Certified Financial Planner.  If you need a referral, I am happy to provide you with the number of a professional in Denton, Texas, that I consider to be reliable.

If you should decide to withdraw a large portion of your retirement, please contact me for tax planning.


 

Which IRA is better?  Roth or Traditional?

You should always seek the advice of a Certified Financial Planner.  If you need a referral, I am happy to provide you with the number of a professional in Denton, Texas, that I consider to be reliable.

Having said that, here are the basic differences between the two.

A Roth IRA gives you no immediate tax benefit.  You get no deduction for contributions to a Roth IRA.  However, upon retirement, all withdrawals made from this IRA are nontaxable income.  All earnings in this account are nontaxable.  If you are young, this can be a very good option, giving this retirement investment years to accumulate retirement income tax free.

A traditional IRA gives you an immediate tax benefit.  Contributions made to a traditional IRA are deductible in the year you make them.  You get an added bonus of having until April 15 of the following year to make the contribution.  Upon retirement, all earnings will be taxable.

Both IRA's have certain limitations; i.e. if you are covered by a qualifying pension plan at your work you may or may not be able to make contributions to an IRA.  If your contribution is in excess of the allowable contribution, you will be penalized on that amount.  Call me for advice on whether you qualify.


 

I pay cash for childcare to a relative or friend.  Can I still take the childcare tax credit?

Yes you can.  But it is taxable income to that person and you must report it on your return.  In many cases you may also be required to provide that person with either a 1099 or a W-2.

Just remember, in order to report childcare costs you must report information about the childcare provider, including that person or business name, address, tax number (social security or employer ID), and the amount paid to that person.  This information is reported to the IRS on your tax return.

Also, if that person works in your home, you may be required to withhold taxes and file a payroll tax return for household employees.


 

I just received an inheritance.  Will I have to pay tax on it?

It depends.  Cash benefits paid to you via an inheritance are not taxable.  Other assets received including but not limited to land, stock, bonds, etc. are also not taxable. 

However, any income derived from the liquidation of those assets may be taxable.  When you inherit something other than cash, you will need to know the stated value of that asset as of the time you received it.  Selling it for more than that amount will result in your needing to pay taxes. 

If you inherit stock, you may have some tax consequences even if you hold onto the stock.  If that stock pays dividends or capital gains, you will pay tax on what the stock earned during your term of ownership. 

Life insurance proceeds are not taxable.  Therefore, if you are the beneficiary of a life insurance payout of $500,000, you will not pay taxes on that money.  However, if you invest that money and it earns money (via interest or dividends, etc), you will pay tax on that income, just as you would if you had invested money from any source.

If you are the beneficiary of a pension benefit, that may be taxable.  Sometimes these monies are death benefits, sometimes they are a continuation of a pension that the decedent received.  In either case, it can be taxable to you.

If you have any questions about inheritance proceeds, please call me.


 

I just turned 62.  Should I apply for Social Security benefits now or wait until I turn 65?

You should always seek the advice of a Certified Financial Planner.  If you need a referral, I am happy to provide you with the number of a professional in Denton, Texas, that I consider to be reliable.

One thing to keep in mind before deciding is your current income, which will affect you in two different ways.  Social Security benefits can be taxable, depending on your income.  Also, benefits received before full retirement age can be limited by how much you earn from working. 

You can contact the Social Security Administration at SSA.gov for further information.  They have recently updated their website, making available great tools for gaining information about your account, including expected benefits and copies of benefit statements.


 

Are my Social Security benefits taxable?

Yes, sometimes they are.  This is a completely different issue from the amount the Social Security Administration allows you to earn before you must repay a portion of your benefits.  I am only addressing the taxability of you benefits by the IRS. 

Depending on your marital status and your total income, a portion of your Social Security benefits become taxable.  If you live only on Social Security, most likely you will not be required to file a tax return.  Call me if you have any questions.


 

I take care of my parent.  Can I deduct anything for that?

It depends.  If you can show that you provide more than half of your parent's support then you can take them as a deduction.  You must consider any income they receive to offset the cost of their care. 

Even if you do not qualify to take them as a dependent, you might have other expenses you can deduct, including medical expenses paid by you.


 

My child started college this year.  Can I still take him/her as a dependent?

As long as you can demonstrate more than 50% support then, yes, you can continue to take them as a dependent. 

Just make sure you inform your child that you are claiming them on your return.  They should still file their own tax return if they had income but cannot claim a deduction for themselves if you plan to do so.

Should you wish for me to prepare both returns, and your child is age 18 or older at the end of 2013, you need to submit a signed release to me for me to legally discuss their tax matters with you.  Also, if you need to sign documents for your child, I must also have a signed power of attorney.  I have forms for this which you can download by clicking here.

Tax credits available for tuition and now books can only be taken by the taxpayer claiming the student's dependency deduction.  Traditionally a student's tax situation is such that he/she cannot take full advantage of this tax credit.  Therefore, the net tax savings is of far greater benefit to the parent.


 

What college costs are deductible?

New tax law allows either a tax credit or deduction for both tuition and books.  Income limitations do apply, so not everyone is eligible for this credit/deduction.  The credit or deduction can only be taken on the return of the taxpayer claiming the student's dependency deduction.


 

I just started a job.  How do I fill out my form W-4?

It depends on your tax situation.  Generally speaking, a single person with little or no other reportable income can claim "Single" with one (1) exemption and have plenty of taxes withheld to assure no tax due at year end.

If you are married, much depends on your combined, joint income.  If you and your spouse's income are close, you may be better off claiming "Married, but withhold at the higher single rate" and zero dependents.  Remember, your joint tax return is viewed as a single entity.  This means that, while each of you may be earning individually in the 15% bracket, that combined income may launch you into the 25% bracket. 

Filing separately is often not the answer.  First of all, federal laws follow the laws of the state.  Since Texas is a community property state, separate returns filed correctly will split each spouse's income between one another, thereby rendering the separation of income moot.  Additionally, the tables are higher and you stand to lose some deductions not available to taxpayers who are married but filing separately.

You can try to follow the worksheet accompanying the form W-4.  However, it has been my experience that it is complicated and not always accurate.  Your best bet, if you are married and both employed, or single and holding multiple jobs, is to estimate your annual income, determine what your estimated total tax bill is, then claim exemptions that will facilitate that total tax bill.

When in doubt, give me a call and we can do some tax planning.


 

I own my own business.  How do I pay my taxes?

Legally you should be making quarterly estimated payments.  You need an estimate of your annual tax liability, divide that by four, and mail those payments to the IRS using form 1040ES.  The due dates for quarterly estimates are April 15, June 15, September 15, and January 15.

Any time you have a balance due, unless it is an obvious one time occurance, I will prepare estimated tax payment vouchers for you and include them with your return.  If you have any questions, please call.


 

I have been offered a job but they do not take taxes out of my check.  How does that work?

It is the same as if you are self-employed.  You are now responsible for paying your own income taxes as well as your own Social Security and Medicare taxes.  When an employer withholds Social Security and Medicare taxes, they must match that amount when they pay it into the IRS.  However, when you are self-employed, you must pay both "halves" of that.  The end result is that you will pay a total of 15.3% of your income as Social Security and Medicare tax (also referred to as Self Employment taxes), in addition to income taxes.

It is common for taxpayers in this situation to feel cheated at year end when they encounter an unexpectedly high tax bill.  However, other than the additional 7.65% in social security and medicare taxes they are paying, they are taxed no differently than their wage earning counterparts.  Only their method of payment, a lump sum once a year (or quarterly) rather than smaller amounts held out of a paycheck.

While you enjoy the benefit of more money per check being paid in this manner, in the end it can cost you more money, minimally in taxes but also in recordkeeping requirements and tax preparation fees.  Also, many taxpayers do not make quarterly estimates nor even save back enough to pay those taxes on April 15.  This results in a nasty surprise at tax time.

Some employers pay "contract labor" type wages illegally.  It saves them time, effort and money to do so.  Most go on doing so with no consequences.  You can file a complaint with the IRS if you are in that situation; however, you run the illegal but real risk of retaliation by your employer.  You must consider carefully should you wish to pursue this option.


 

I am married.  Should I file a joint or separate return?

Federal tax laws follow state property laws.  Since Texas is a community property state, all income and deductions must be split equally between spouses filing separately.  The end result is there is no difference between filing joint or separate as far as how much income and deductions you are reporting.  Since the tax tables are adjusted for filing separately, you will not change your tax liability.

However, there are some limitations on some deductions if you file separately.  Some deductions are disallowed altogether which means you could end up paying more.  Therefore, the short answer is, you should always file a joint return.  It can save you tax dollars and will save you tax preparation fees.


 

I separated from my spouse last year, and our relationship is strained.  Do I still have to file a joint return?

Not always; you do have options.  If you were separated for more than six months and did not comingle funds (share a bank account) for more than six months, you can file as a single person.  That is a better option than filing separately.


 

I got married last year.  Can I still file single since we didn't marry until December?

No.  If you married last year you must file married.  While this contradicts what was stated about separated individuals, the IRS is concerned about your marital status as of December 31.


 

I found a mistake on a tax return that I already filed.  What do I do?

It depends.  If the return is more than three years past its original due date, then you can do nothing, unless the mistake benefits the IRS.  In that case, you are legally required to amend the return, pay the deficiency, along with penalties and interest.  Any returns filed more than three years late forfeit any claim to any refund that might be due, which also includes amended returns.

Good news for this tax season:  Now I can electronically file your amended return.  Often your current year return is dependent upon amending a prior year return.  Waiting for a paper-filed return to be processed took weeks, sometimes months.  Now that situation is streamlined.

However, if you fall within the three year window, you can choose to amend your return.  Depending on the actual dollar difference it makes on your return, you may choose to not amend.  Hitting the IRS for an additional $50 refund from a previous year might not financially viable if the amendment is going to cost you a $100 tax preparation fee.  However, if that correction is due to a mistake that I made in preparing your return, I will amend the return at no charge to you.


 

My employer does not reimburse me for job-related expenses.  Can I deduct them?

Possibly.  If you itemize then yes, you can deduct job-related costs such as union dues, safety gear, vehicle expenses, etc. as a miscellaneous deduction.  The deduction will be reduced by an amount equal to two percent (2%) of your gross income, however.

Even if your employer does reimburse you, you might still want to report these expenses to offset the income reported for that reimbursement.


 

Can I deduct legal fees?

Only under certain circumstances.  Legal fees incurred relating to your estate or investments can be deductible.  Most legal fees are non deductible, including cases of divorce, criminal activity, and most civil litigation.


 

Can I deduct funeral expenses?

No.


 

I am being audited by the IRS.  Will you represent me?

It depends.  If I prepared and signed the return in question, I can legally represent you before the IRS.  However, if the return was signed by another person or self-prepared, then no, I cannot legally represent you.  However, I can review the notice and help you accumulate the information you will need.

I do not build the cost of audit representation into my tax preparation fees so I will charge you at my current hourly rate for any work related to an IRS audit.  I can either help you by analyzing the notice and determining their demands or represent you (if I prepared the original return).


 

I just received a notice from the IRS.  What do I do now?

First, call me.  You can mail or fax your notice to me so I can compare it to your return and determine what they are saying.  Then I will take whatever action necessary to comply with their requests.

If I find that you are liable for the additional taxes, I will do what I can to minimize the assessed penalties.  Interest charges, by law, cannot be waived.

If I find that you are not liable for the additional taxes, I will determine what needs to be done to prove the differences to the IRS.  Oftentimes, a simple letter of explanation is all that is necessary.  Sometimes, further documentation or even an amended return are necessary as proof.  I will work with you to resolve the issue.

Most notices resulting in additional tax due are caused by under reporting your income.  Remember, if you made the money, you are liable for paying taxes whether or not you receive a form 1099 or W-2.  A lost, forgotten or overlooked 1099 will come back to haunt you every time.  This is another reason to be viligant about saving all the tax documents you receive in January, as well as thinking carefully about your financial history before submitting your information for tax preparation. 

Services rendered responding to an IRS notice are billed at my normal hourly rate unless it is determined that the error was mine, then there is no charge.


What's New This Year?

The Affordable Care Act (ACA or Obamacare) brings some changes to individuals this year. Basically, most taxpayers are required by law to maintain health insurance that meets certain minimum requirements.  I can help you determine your requirements and if you qualify for a subsidy.

Standard deduction amounts went up:

  • Single $6,300
  • Married Filing Joint $12,600
  • Married Filing Separately $6,200
  • Head of Household $9,250

Personal exemptions increased to $4,000

High incomers can expect to pay the 3.8% Medicare surtax in some instances.


 

If I file late, will I be penalized?

It depends on your situation.  If you are late but have no tax due or a refund, you will not be penalized.  However, if you do have a tax due, the penalty will be a percentage based upon the amount of tax you owe. 

However, if you file more than three years beyond the original due date of the return and have an overpayment, you will forfeit this refund.   

The combination of late payment and late filing penalties can be staggering.  Even if you cannot afford to pay your taxes it is always better to at least file the return.

Bottom line:  Paying late is bad.  Filing late is bad.  Filing late with taxes due is really, really bad!


I bought and/or sold a house this year.  What do I need to bring?

You need to bring the Settlement Statement for both the sale and the purchase.  When you sell or purchase a home, some items that are deductible are listed on the closing statement.  Also, if this is your first home purchase in three years, you may qualify for the new home buyer credit, a refundable credit of up to $8,000. 

If you sell your residence, you will likely be exempt from paying taxes on the profit.  However, there are some instances where this is not the case so be sure to bring in your settlement statement when you bring in your taxes.  Also, you should gather information supporting the cost of the home when you purchased it and the cost of any major additions you made to the home while you owned it (such as fencing, new roof, new A/C or heating unit, carpeting, remodeling, etc.).  Selling expenses such as realtor fees, fixing up costs (painting, cleaning fees, etc) that you incurred reduce the sales price and should be brought in as well.

Don't forget, if you moved more than 35 miles because of a job change, your moving expenses, less any employer reimbursements, may be deductible.

There are some new laws and requirements regarding residency in primary home sales; please call me if you have questions or concerns about this.


What is the new mileage deduction rate?

Mileage rates change from year to year.  For tax year 2015 they are:

  • 57.5 cents for business miles
  • 23 cents for medical miles
  • 14 cents for charitable work mileage

Appointments are recommended

Call today! (940) 964-2693 or (940) 393-3590

You can also mail (copies, not originals!), email, or fax your information:

Mail or Delivery Service: 2953 Jim Harry Loop, Sunset, TX 76270*

*There is a drop box at this location for unscheduled drop offs.

Email: Barbara@BarbarasTaxService.com

Toll-Free Fax: (855) 333-4830

Pickup and Delivery is available for a fee. Please call for details.


Error: Component not initialized. Please retry.

Barbara's Tax Service BBB Business Review