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Tax Preparation Questions

Individuals who have dealt with tax preparation in any form have often encountered difficulties with that process. Uncertainties on when you can deduct tax preparation fees or how to get copies of past tax preparation fees often lead to questions like the ones answered below by the Experts.

If an individual is using tax preparation for their takes and filing jointly, after reporting their spouses W-2 and removing all the deductions for their refund was approximately $6800. Upon entering any 1099 Misc. incomes of 3,000, their refund went down to $844. Isn’t this well over the self-employment tax?

That amount would be over the percentage taxed for the self-employment tax. However, when adding your income to your spouse’s income more than one thing had occurred. First, you were taxed with the self-employment tax and second your total amount of income combined was also higher. The higher combined income increased the taxes against that income – taxing on his $6800 plus your $3000. You should try to account for all your expenses so that your taxable self-employment income can be reduced. Use a Schedule C for your expenses.

In the past as part of my tax preparation, I filed head of household, as I have full custody of my two younger children. I usually qualify for the earned income credit. What would be the ramifications if I married were married who has been incarcerated for the last 7 years?

Even if an individual gets married that may still qualify for head of household and Earned Income Credit (EIC) if they meet the Head of Household and EIC tests. If you get married you can file a separate return if your spouse had not lived in the home during the last 6 months of the tax year and you gave more than half the cost of the maintenance of the home. This home should be the primary home for the qualifying child for more than half of the tax year. You can also file as married filing jointly. A spouse is an automatic extra exemption as long as you were married as of Dec 31st of that tax year.

I want to start a tax preparation business. How does one do that?

Individuals that want to start their own business would need to first check with their Secretary of State at the State Capital and check if there are any registrations or licensing that may be required because every state is different.

Secondly individuals would need to get update training, if starting a tax preparation business, on the type of returns that you will be preparing. Many choose to work for another similar company for a year or more just to get the experience.

There are different professional tax preparation software’s available. You may want to test drive a few to see what works best for you and your purposes. Additionally you will need to decide on the type of service and the price of service that you will charge.

The location of where you would like to open your business is also very important. You will also need to prepare a business plan, marketing plan, and develop a budget.

I met with a Certified Public Accountant (CPA) that would like to charge me $240.00/hour for consultation. I own ten rentals. In our first meeting, I was told that I cannot deduct tax preparation fees from my taxes unless the preparation exceeds 2% of my income. When can I deduct tax preparation fees?

The amount of time that specifically relates to the rental properties on the Schedule E would be what you can deduct as far as tax preparation goes. Whichever tax professional that you use would need to calculate how much the fee would be for completing the Schedule E and any other forms that relate to the rentals.

How do I get a copy of my 1040 tax preparation for the year 2006?

Individuals that would like to get a copy of past years tax returns can get them from the IRS. If an individual fills out form 4506 and submits a fee of $39, the IRS will send a copy of the tax return. If an individual fills out form 4506-T, the IRS will send a transcript of the tax return free of charge.

Gathering good information and understanding tax preparation can help when faced with tax preparation questions. Experts can help answer when you can deduct tax preparation fees or how to get a copy of your past tax preparation forms. Get the answers fast an affordably by asking an Expert.
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