Frequently Asked Questions
Q? WHAT SERVICES AND GUARANTEES DOES JOHN A WAREKOIS, CPA, LLC OFFER?
I will provide you with questionnaires and/or worksheets to guide you in gathering the necessary information. Your use of such forms will assist in keeping pertinent information from being overlooked. This information will be the basis for preparing tax returns. I will not audit or otherwise verify the data you submit, although it may be necessary to request clarification of some of the information.
It is your responsibility to provide all the information required for the preparation of complete and accurate returns. You should retain all the documents, canceled checks, and other data that form the basis of income and deductions. These may be necessary to prove the accuracy and completeness of the returns to a taxing authority. You have the final responsibility for the income tax returns and, therefore, you should carefully review them before you sign and file them.
My work in connection with the preparation of your income tax returns does not include any procedures designed to discover defalcations or other irregularities, should any exist. However, should I find any irregularities or unusual items I will bring them to your attention and will render such accounting and bookkeeping assistance as determined to be necessary for preparation of the income tax returns. If I discover any errors or omissions on a prior year return I will bring them to your attention.
I will use professional judgment in resolving questions where the tax law is unclear, or where there may be conflicts between the taxing authorities’ interpretations of the law and other supportable positions. Unless otherwise instructed by you, I will resolve such questions in your favor whenever possible.
The filing deadline for the tax returns is on or about April 15. In order to meet this filing deadline, the information needed to complete the returns should be received in this office no later than April 1.
If an extension of the time is required, any tax due with these returns must be paid with that extension. Any amounts not paid by the filing deadline may be subject to interest and late payment penalties.
The law provides various penalties that may be imposed when taxpayers understate their tax liability. If you would like information on the amount or the circumstances of these penalties, please contact me.
Your returns may be selected for review by the taxing authorities. Any proposed adjustments by the examining agent are subject to certain rights of appeal. In the event of such governmental tax examination, I will be available, upon request, to represent you under a separate engagement letter for that representation.
Sometimes the best things in life are free! Free tax advice may prove invaluable, and it’s available just by calling or stopping by our office. Did you, or someone else, prepare your tax return last year? We’ll check it free.
Q? DOES JOHN A WAREKOIS, CPA, LLC OFFER E-FILE?
Yes, we do, we offer e-file and free direct deposit for refunds directly sent to the customer’s bank account.
Q? WHAT ARE THE OPERATING HOURS OF JOHN A WAREKOIS, CPA, LLC?
During tax season, our office is open seven days a week. Monday through Friday, 9 a.m. – 5 p.m. Saturday and Sunday 12 p.m. – 5 p.m. For your convenience, we are open all year-round to offer any tax advice you need long after tax season is over.
Q? WHAT DOCUMENTS DO I NEED IF I HAVE A MORTGAGE?
Your mortgage company should send you Form 1098 which reports the mortgage interest you paid.
Q? WHAT DOCUMENTS SHOULD I RECEIVE FROM MY EMPLOYER?
The forms to prove employment may vary depending on individual situations. For most, an employer will provide a W-2 form. The self-employed (i.e. independent contractors, product sales representatives such as Mary Kay, etc.) should receive a 1099-MISC from the company.
Q? WHAT DOCUMENTS DO I NEED IF I AM UNEMPLOYED?
If you received unemployment benefits from your state over the past year, you must claim that as income and, therefore, pay taxes on those benefits. The unemployment agency should provide you with a 1099-G form, which explains the amount of benefits you drew during the past year. The Internal Revenue Service (IRS) receives a copy as well and will tax you at the appropriate rate in your tax bracket. Not everyone owes. If you worked a portion of the past year, chances are you paid payroll taxes and may earn a refund if those deductions were overpaid.
Q? WHAT DOCUMENTS DO I NEED IF I AM SELF-EMPLOYED?
You will need to file a Schedule C using IRS Form 1040. Depending on your type of business and where you conduct business, there may be other forms you will need. You may also need to make quarterly estimated payments by filing Form 1040-ES, Estimated Tax for Individuals.
Q? WHAT DOCUMENTS DO I NEED IF I AM DIVORCED?
Taking necessary steps before tax time will make things easier once you file your taxes for the first time after a divorce. Change your W-4 through your employer so taxes will be withheld at the correct rates. Also, if you (or a family member) changed your name, file Form SS-5 with the Social Security Administration to ensure there aren’t any complications with the IRS.
Q? WHEN IS THE DEADLINE TO FILE MY TAXES?
The standing deadline for personal taxes is April 15. However, sometimes that date falls on a weekend or after Emancipation Day (a holiday in DC) and pushes the deadline to as late as April 17.
Q? WHEN IS THE EARLIEST THAT I CAN FILE MY TAXES?
When you get your W-2, you can have your taxes prepared right away, but the IRS will not accept them before a pre-defined date.
Q? IS THERE A PENALTY FOR FILING MY TAXES AFTER THE DEADLINE?
Yes, you can opt to pay your tax liability through an installment plan. In addition to paying taxes through an installment payment plan, there may be other options such as the Offer in Compromise (OIC). Under an OIC agreement, the IRS may agree to settle the taxpayer’s liability for less than the full amount of taxes owed. The IRS is not likely to approve an OIC if there’s evidence that the taxpayer could pay the full amount through an installment payment plan or another method. A taxpayer can request consideration for an OIC by filling out Form 656, Offer in Compromise, or Form 656L, Offer in Compromise (Doubt as to Liability), and mail the application package to the IRS.
Q? WHAT PAPERWORK SHOULD I BRING TO MY TAX INTERVIEW?
Below is a list of documents to bring with you to your tax interview. A copy of this list, along with what to expect during your interview, can be downloaded in the Resource Center.
PERSONAL INFORMATION FOR EACH FAMILY MEMBER:
Name/Date of Birth
Social Security Card /ITIN/ATIN
Last three (3) Year’s Tax Return
Valid Driver’s License
INCOME AND TAX INFORMATION:
Interest (1099-INT or substitute)
Dividend Slips (1099-DIV or substitute)
Stock Sales (1099-B or Broker Statement)
Self-Employment Income and Expenses
Sale of a Personal Residence
Rental Income and Expenses
Sale of any Business Assets
Gambling or Lottery Winnings (W-2G for some winnings)
State Income Tax Refund (1099-G)
Pension Income (1099-R)
Estimated Taxes Paid
Social Security or Railroad Retirement (SSA-1099 or RRB-1099)
IRA or 401(k) Distribution (1099-R)
Unemployment Compensation (1099-G)
Miscellaneous Income (1099-MISC)
Real Estate or Personal Property Taxes
Charitable Contributions (cash and non-cash)
Employee Business Expenses
Traditional IRA Contributions
Higher Education Expenses
Student Loan Interest
Child Care Provider/Address and Employer Identification Number (EIN) or Social Security Number (SSN)
Retirement Savings Contributions Credit
Q? CAN I CLAIM CHARITABLE DONATIONS WITHOUT A RECEIPT?
Yes, you can as long as you keep good records in case you are ever audited by the IRS. Be sure to record the name of the organization, the date and location, as well as a detailed description of what you donated. Keep notes on the amount you claimed as a deduction and how you figured the fair market value on the items you donated. In the case of a monetary donation, as long as it’s less than $250, a canceled check or even a payroll deduction can suffice for proof of the donation.
Q? CAN I DEDUCT EXPENSES PAID FOR REPAIRING MY HOME?
Typically, general home repairs cannot be deducted from your taxes. Home repairs are meant to keep your home in good condition, but do not increase the value of your home. However, if you live in a “federally declared disaster area” and your home is affected, then you can claim the cost to repair the damages. If you use part of your home as a principal place of business, some repairs can be deducted, but you must itemize your deductions on Schedule A.
Q? WHAT ARE MY NEXT STEPS IF I HAVE BEEN IMPACTED BY A NATURAL DISASTER?
The first step is to check the IRS Tax Relief Site to see if your area has been determined as a “disaster area” by the President because the IRS provides specific relief to these victims. (If you do not have access to the internet, call FEMA for disaster assistance at 1-800-621-3362). If you are in a disaster area and you were impacted by the disaster, meet with a tax preparer to determine which year you should claim casualty loss. Doing so will help you figure out the best possible tax break.
Q? WHAT TAX CONSEQUENCES WILL I FACE IF I LOST MY HOME IN A FORECLOSURE?
For federal taxes, a foreclosure is viewed as the sale of property. Two separate matters will impact your tax liability: any gain from the sale of your property and credited income you receive from any debt forgiveness. There are ways to calculate your Gains and Cancellation of Debt. To learn the specifics on how your particular situation is impacted, visit the Home Foreclosure and Debt Cancellation section on the IRS website or contact our office for guidance.
Q? HOW ARE MY TAXES IMPACTED IF I HAVE FILED BANKRUPTCY?
Depending on which Chapter you filed for, taxes may not be exempt. With Chapter 7 bankruptcy, federal taxes are exempt from discharge. When filing Chapter 13 bankruptcy, it is very important to file and pay your taxes during the bankruptcy proceedings because the court can dismiss your claim if you fail to meet this requirement. Dismissing the claim leaves you responsible for all of your debts. For further tax information on bankruptcy, read the IRS Publication 908 (10/2012), Bankruptcy Tax Guide.
Q? CAN MY SPOUSE AND I FILE OUR TAX RETURN TOGETHER IF WE ARE LEGALLY SEPARATED AND NOT DIVORCED?
If your divorce is not final, you may choose to file married filing jointly. Just note, that you and your spouse are responsible for the tax bill and any future audits.
Q? IF I FORGOT TO REPORT A SECOND INCOME ON MY TAXES, HOW CAN I REPORT IT NOW?
Since it is not a small change (missing form or math miscalculation), missed income probably requires that you file an amendment. You’ll need to file Form 1040X, Amended U.S. Individual Income Tax Return, on paper; no e-filing here. Additionally, if any changes you are making need forms or schedules attached, make sure you do so.
Don’t panic, you have three years since the date of filing or two years from paying (whichever is later) to correct the issue. But note, if your amended return claims more refund money, go ahead and cash your original refund check – no need to wait the average 12 weeks it takes to process your amended return. However, if your amended return shows you owe, you’ll want to lower fees and interest by paying those taxes as fast as you can.
You can then track the status of your amended tax return(s) with the IRS’s ‘Where’s My Amended Return’ tool. Check the IRS’s site about three weeks after you’ve mailed your amended return or call 866-464-2050.
If you are uncertain about needing to amend a tax return, don’t hesitate to contact our office.
Q? DO I HAVE TO PAY TAXES ON MONEY THAT WAS GIFTED TO ME?
No. The federal tax laws do not consider gifted money to be earned income therefore it is not taxable to you. No state has a tax law on gifted money either.
Q? AM I TAXED ON MONEY THAT I INHERIT FROM A LOVED ONE?
Generally, property received as an inheritance is not included in your income. However, if property you receive this way later produces income such as interest, dividends, or rents, the income is taxable to you.
Q? DO I NEED TO REPORT WORK-STUDY INCOME IF I AM A FULL-TIME STUDENT?
Yes, any money which you received as a result of work is taxable income and must be reported on your tax return. Attach your W-2 showing your earnings and your taxes withheld to your tax return.
Q? WHY SHOULD I FILE MY TAXES ELECTRONICALLY?
The main reason for filing taxes electronically (e-filing) is to get your refund faster. Twenty-four hours after sending your tax return, the IRS will send you a confirmation of receipt or a rejection notice. Generally, e-filing is safer and faster than filing on paper.
Q? HOW CAN I CHECK THE STATUS OF MY REFUND?
The ‘Where’s My Refund’ tool on the IRS website provides the most up-to-date information regarding the status of your refund. This tool is updated every 24 hours.
Q? WHY IS MY REFUND LESS THAN I EXPECTED?
Many factors can contribute to why your refund is less than you expected. You have to consider the three elements that define a refund: your taxable income, the amount withheld from your paycheck for federal and state taxes, and your tax rate. If you aren’t getting as much money back try to look on the bright side – you didn’t give the IRS a zero-interest loan.
Q? TAX GLOSSARY
Amend – re-filing a tax return due to a change in filing status or dependents, error in reported income, or missed deductions or credits.
Audit – an in-depth investigation conducted by the Internal Revenue Service (IRS) where additional information needs to be obtained concerning an individual’s or business’s financial records or systems.
Bankruptcy – legal status of an individual or business that is unable to pay debts that are owed to creditors.
Debt Forgiveness – relief from the total debt owed.
Decedent – a person who has died.
Deduction (or tax deduction) – reduction in taxable income, based on various criteria, that may lessen an individual’s tax liability.
Dependent – for income tax purposes, a person that relies on a taxpayer for more than half of their financial support and whom a taxpayer can claim on their taxes.
e-file – safe, quick, and easy way to submit a tax return online.
Escrow – functions as an account to pay taxes and insurance. The homeowner pays into the account that is held by the lender.
Estimated Taxes Paid – taxes paid on amounts reported on the taxpayer’s tax return that are not subject to withholding, such as self-employment, interest, and alimony. The estimated tax may also have to be paid if the amount of income tax withheld from the taxpayer’s salary, pension, or other income is insufficient.
Fair Market Value (FMV) – normal selling price of a home in the open market that is agreed upon by the buyer and seller. A realtor can prepare a comparative market analysis of similar properties that are currently on the market or have sold recently in the area to determine fair market value.
Foreclosure – a process in which property is seized from a homeowner who is unable to make mortgage payments.
Form 656 – form completed and submitted to the IRS by a taxpayer that wishes to apply for an offer in compromise.
Form 1040NR – a document that may need be filed and submitted to the IRS if the taxpayer is a nonresident alien engaged in trade or business in U.S., representing a deceased person who would have needed to file this form, or representing an estate or trust that had to file this form.
Form 1040X – a form that must be completed by a taxpayer and submitted to the IRS in order to make changes to a submitted tax return.
Form 1098 – document received by a taxpayer from a lending bank that is reporting mortgage interest of $600 or more that the taxpayer paid during the year.
Form 1099-B – document received by a taxpayer that is issued from a broker, mutual fund company or other financial institution that reports the sale of stocks, mutual funds, bonds, and other securities.
Form 1099-DIV – a document that contains important taxpayer information concerning dividends paid from stocks owned, or capital gains distributions from mutual funds invested in during the year.
Form 1099-G – document sent to a taxpayer by federal, state, or local governments stating the amount of total taxable unemployment compensation for which the taxpayer is responsible. It may also be used to report state and local income tax refunds and other payments.
Form 1099-INT – document received by a taxpayer that reports interest paid and is sent by the person or entity to which the interest was paid.
Form 1099-MISC – document that must be filed and submitted to the IRS for each person to whom a taxpayer has paid at least $10 in royalties or broker payments in lieu of dividends or tax-exempt interest; at least $600 in rents, services (including parts and materials), prizes and awards, other income payments, medical and health care payments, and crop insurance proceeds.
Form 1099-R – a document outlining distributions of $10 or more from a taxpayer’s retirement account(s), such as Individual Retirement Accounts (IRAs), insurance contracts, pensions, and 401(k) plans.
Form HUD-1 Settlement Statement – the official statement of the U. S. Department of Housing and Urban Development that details all closing costs paid by the buyer and seller. This is completed by the settlement agent and both the buyer and seller must sign it at closing.
Form SS-5 – a form that is completed and submitted to the Social Security Administration to apply for a new or replacement Social Security card, or to change or correct information on the Social Security number record.
Form SSA-1099 (or RRB-1099) – a document that reports any Social Security benefits that a taxpayer has received during the year or RRB RailRoad benefits.
Improvements – home expenditures that prolong the life of your home, such as the cost of total roof replacement.
Married Filing Jointly (MFJ) – filing status that can be used by a couple who are married at the end of a tax year. This means the taxpayers report total income, exemptions, deductions, and credits of both spouses on one return. Married couples using this status must not be legally separated or have a final divorce decree or decree of separate maintenance.
Nontaxable Income – income that is not taxed by the IRS, such as life insurance money and certain veteran’s benefits.
Offer in Compromise – allows a taxpayer to settle a tax debt with the IRS for less than the full amount owed and is usually an option when a tax liability cannot be paid in full or creates financial hardship for the taxpayer.
Points – charges at closing by the lender in increments of 1 percent of the mortgage amount. They may also be listed as loan origination fees or loan discounts and may be deductible on a tax return.
Repairs – expenditures that maintain a home, such as painting the interior.
Retirement Savings Contributions Credit – a non-refundable tax credit available to eligible individuals who contribute to an employer-sponsored retirement plan or to a traditional IRA.
Sale of Business Assets – items of a business are sold to determine a gain or loss.
Schedule C – a document used to report income or loss from a business that an individual operated or a profession that the individual practiced as a sole proprietor.
Self-employment Income and Expenses – money that is made and expenses that are incurred by an individual who works for himself or herself rather than earning wages from an employer.
Short-Sale – alternative to foreclosure; sale of property on which there is debt and can no longer be afforded by the property owner who settles to repay less than the full amount owed on the property.
Substitute Return – a tax return filed by the IRS on a taxpayer’s behalf if the taxpayer does not file a tax return on their own.
Taxable Income – income that is subject to income tax or being taxed by the IRS, such as employee wages, jury duty fees, and rental property income.
W-2 – a document issued to an individual by an employer that states an individual’s income for the year.
W-4 – form completed by an employee to be given to an employer to ensure that correct federal income tax is deducted from the employee’s compensation
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