Tax Tips by Scarfo and Company, CPA’s / Stephen Scarfo


Stephen Scarfo of Scarfo and Company, CPA’s, want to spread word of his favorite tax tips for businesses. This is to show to you what kind of quality accounting you can expect from Stephen Scarfo and his associates. You are always welcome to contact us if you have any questions or concerns.

 

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The collection of information for your tax return is very important. Many times errors in calculation or errors due to omission are cause by inadequate information. The more accurate the information and the more complete, the greater the chances are for the best result on the tax return.

Some people do not always think that it is important to be so careful in this aspect of collecting information for their tax returns. The more time the tax preparer spends in organizing the information, the more difficult it is for the preparer to stay focus on all the issues involved with a tax return. A well prepared tax return involves more than just keying in numbers into a computer.

Because of the mandatory deadlines, many times the accountant only has so much time to complete the tax returns since there could be hundreds of tax returns to be file in a short amount of time. Sometimes, the tax preparer will have to place the return on extension in order to have the additional time in which to complete the tax return properly.

Some CPA firms will probably get back with their clients requesting the missing information. Providing the requested information is vital to the best outcome. We provide a data organizer to our clients which acts as a guide for the gathering of tax information.

For example, if a person purchases a business asset, the date of purchase and amount paid should be provided to the accountant. If you do sell an asset please let the accountant know when you sold it and for how much. Automobile mileage needs to be disclosed. Both total miles and business miles need to be shown. A client should make every effort to let the tax preparer know the details of important transactions and provide a concise description whenever possible.

As part of our services we show multiple years comparisons. This is helpful in showing the trend of taxable income. A quick trend analysis helps to determine the amount of tax savings and finding the best strategy to minimize your taxes. Also, a two year comparison shows differences between tax years and sometimes the differences may be due to omissions or errors. By reviewing the differences with the client, if these discrepancies are due to errors or omissions, the client will be allowed additional time to locate the missing information.

If you should have questions in regard to this article, please contact your local CPA or tax preparer. For my clients or future clients, our telephone number is 727-733-1026.

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Filing Form 2553 is to make an election to be treated as a sub S corporation for tax filing purposes. This form can be downloaded from the IRS site on the internet at IRS.gov. You can download the form in PDF style. The site allows you also fill it in and print out this form. After printing out the form, you must have both an officer sign and all the shareholders in the appropriate places. This form I recommend that you mail certified return receipt to that Internal Revenue Service. Make sure you fill out all the pages as complete as possible. There are three pages the Internal Revenue Service required to be filled out. Incomplete forms may delay the acceptance of the form or its rejection. I suggest that you have a CPA or tax professional assist you in this effort for several reasons. One, they should know how the form should be fill out. Two, if you hire a professional and the form is rejected; the Internal Revenue Service will usually give you additional leeway in getting the election accepted. In other words, the fact that you hire a professional to assist in filling in the form lends creditability that due care was taken in the effort file properly. In most cases this assures you that the Sub-S election will be accepted.

Since this election is vital to small business owners, the Internal Revenue Service does allow some exceptions. This election should be made within 75 days from the start of the business or the start of operations as a sub S corporation. If you miss making the elections and this is a new corporation, the IRS will give you a second chance to make the election if you attach the 2553 to a timely file corporate tax return. There is also another way by writing to get a 2553 accepted late, but usually because the procedure is complex for most novices, please have a professional assist you if this happens.

I hope this tip helps. If you have further questions, please contact your local CPA or accountant. If you are a client or future client, please give me a call at 727-733-1026

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For a business or a person, auto business mileage and depreciation are two of the most important deductions. For the tax year 2015, the auto business mileage rate is 57.5 cents per business mile. Obviously, keeping track of your business miles can be a big deduction. The Internal Revenue Service requires that a mileage log be kept. Mileage should be tracked as it is incurred. Most auto logs keep track of the personal and business miles driven during the year. With some of the newer vehicles with trip odometers, keeping track of business miles can be made easier. Keep the mileage log with a pen in the vehicle and the chore is not so bad.

Depreciation is also a major deduction and should be a priority. Whenever a new asset is purchased, you should list the purchase date and amount spent for item. Place the invoice for the asset in an envelope and make sure you provide that information to your accountant or CPA. The accountant should ask you some questions in regard to the asset and help to choose the most appropriate depreciation method for the item. The Internal Revenue Service rules allow a great amount of flexibility in the choice of how fast an asset can be written off. Many newly acquired assets can be written off in their entirety under code section 179. Other depreciation choices under MACRS in include aggressive methods to write off and even bonus depreciation. The accountant’s knowledge of the client and the client’s business goals may help to determine the best choice for depreciation.

I hope this tax tip helps and please contact your local accountant or CPA for additional advice on this topic. If you are a client or future client, please give us a call at 727-733-1026.

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Always save your information for at least three years from your filing date. Should you ever be audited you will need this information. If the information was somewhat incomplete when you gave it to the CPA, go back and find the missing information and place all the information into an envelope for safe keeping. Label the outside of the envelope about the topics and tax year. Some individuals also scan the information into PDF files for safe keeping. The more organize the information is by topic, the easier it will be to use the information if you need to. Most tax audits occurred about 1 to 2 years from the time you filed the tax return. Most people may not remember much about the information at that late time and it is always helpful to make it easy to recall what happened.

If you have any questions, please contact your local CPA or accountant. If you are a client or future client, please contact our office at 727-733-1026.