Jeffrey L. Jackson, CPA LLC
Certified Public Accountant
Frequently Asked Questions
Q. I'm looking for someone to prepare my taxes. Should I use a CPA or go to a company such as Liberty or H&R Block?
A. The best way to answer this question is to point out the differences between a CPA and many of the tax preparers at a franchised tax service or other tax preparation business.
In order to become a CPA, an individual has to have earned a 4 or 5 year college education in accounting & tax, have taken a comprehensive exam covering accounting, finance, tax, law, and business management, and have worked for another CPA or in the accounting profession for multiple years...all before becoming a CPA. In addition, CPAs are required to take 40 hours of continuing education each year, abide by a professional code of ethics, and be accountable to their state board of accountancy.
In respect to the franchised tax services or other tax services, there are no requirements that the preparer have any knowledge or education in tax. Basically, anyone can call themselves a "tax preparer" and charge for their services. It is likely that the tax preparer at franchised tax service has little to no experience in preparing taxes and may have recently completed a short tax preparation class.
That said, you should consider the complexity of your tax return and what level of service you expect from your tax provider. My recommendation is that you seek out the service of a CPA, or if not a CPA, an enrolled agent (EA). If the tax preparer is neither a CPA or EA, it would be wise to determine how qualified he or she is.
Q. I use my personal vehicle for business. Is a mileage log required?
A. Yes. To claim a deduction for mileage expenses, the IRS requires that you have records to support the business use of your vehicle (estimates are not allowed. It is highly recommended that you use a mileage log, calender or phone app to document your business miles. The log should include the date, destination, purpose and miles driven.
Q. My company reimburses me less than the federal mileage allowance. Can I claim the difference on my taxes?
A. No. In 2017, the Congress passed and the President signed the Tax Cuts and Jobs Act. This law went into effect for 2018 and eliminated the tax deduction for Miscellaneous Itemized Deduction including employee business expenses such as unreimbursed mileage.
Q. I am an employee and work from home. Can I claim an Office-in-Home deduction on my taxes?
A. Yes, if you are self-employed and qualify. The IRS allows Schedule C self-employed individuals to claim a deduction for their home office. There are certain eligibility requirements such as the home office must be used "regularly & exclusively" for business. With the passage of the Tax Cuts and Jobs Act in 2017, the office in home deduction for employees is no longer allowed.
Q. Can I claim home office expenses for my S-Corporation?
A. Yes, by using one of three methods. First, as an employee of the S-Corporation, you can claim an office in home deduction meeting the eligibility requirements (exclusive-use, employer-benefit, Schedule A subject to 2% of Adjusted Gross Income). Second, the S-Corporation could pay rent to the owner-employee for the office space. Third, the S-Corporation could reimburse the employee for his/her out-of-pocket expenses relating to the home office. There are pros & cons to each of the three methods as well as documentation requirements.
Q. I am the owner of an S-Corporation. Can the S-Corp pay for my health insurance?
A. Yes, if done correctly. An S-Corp can provide health insurance to its >2% shareholders by including the shareholder on the company plan, paying the premiums of a personal policy, or reimbursing the shareholder for the amount he/she paid for a personal policy. When paying a personal policy directly or via reimbursement, the company should receive a copy of the policy invoice. The company must also include the cost of the insurance in box 1 of the shareholder's W-2.
Q. I own an S-Corporation. Does the company have to pay me a salary?
A. Yes, if you are also an employee or officer of the S-Corp. The company should pay you "Reasonable Compensation" for the duties you perform.
Q. What is "Reasonable Compensation" and why is it important?
A. Reasonable compensation is the amount of compensation that a company should pay its owner-employee for the services he or she provides the business. It is not a specific amount or calculation, but is based upon the facts and circumstances of the business. It's important because some business owners will pay themselves unusually high or unusually low salaries to avoid taxes. If the IRS deems the owner-employee compensation to be unreasonable, the IRS can re-characterize payments received by the owner and assess additional taxes, penalties and interest.
Q. How do I determine "Reasonable Compensation?
A. There is no a specific calculation for reasonable compensation. In general, the business should review the services and functions provided by the owner-employee and determine a compensation level based upon similar work by individuals at other companies, within the industry, etc. The company maintains supporting documentation for the reasonable compensation calculation.
Q. How should I document my Meals & Entertainment Expenses?
A. Entertainment expenses are no longer deductible (beginning 2018). In respect to Meals, you can document the deductible expenses by writing the names of the people, the business relationship, and the business purpose on the receipt. The receipt should also include the date and amount.
Q. I extended my individual tax return. What is the new filing deadline?
A. When you extend your individual income tax return, you receive a 6-month extension. As such, the new filing deadline will be October 15th. If the 15th fall on a weekend or holiday, the return is due the next business day.
Q. If I extend my tax return, does that also extend the payment due date?
A. No. Whether you file timely or extend your filing return, payments are due on April 15th (individual or C-Corp return) or March 15th (calendar year S-Corp or Partnership return).
Jeffrey L Jackson CPA LLC
515 Autumn Walk
Canton, GA 30114
Voice: (678) 919-1250
Fax: (678) 919-1062
Regular Hours: Mon-Fri 9am-6pm
Tax Season Hours: Mon-Sat 9am-8pm
By Appointment Only
www.jjacksoncpa.com