What are pass through entities?

The concept of “pass-through entity’s attribution” stems from the fact that this entity’s ownership can be attributed to another entity. The IRS Code prescribes that pass through entities’ income belongs to that other entity. Pass through entity earns the income, but is not responsible to pay the tax related to this income. In effect, the pass-through entity’s income and related tax liability pass through to the entity having ownership. Examples are estates, LLCs, partnerships, S Corporations and trusts.

What are Real Estates, Tangible and Intangible assets?

Real Estate is land and its permanently attached buildings, structures and land improvements Tangible assets are man-made, physical movable objects. The assets value lays in its physical being. Tangible assets are something that you can touch, which was transported to its present location and not permanently attached to the real estate. Intangible assets are man-created, intellectual property. The assets value lays in what it can do. Examples are patents, copyrights and software.

How should i keep my tax records?

All business records, especially sales and payroll must be kept for seven years. The Social Security Administration requires discrepancy to be resolved anytime within this seven-year window. The IRS and the states will audit within the seven-year window. Keep all federal, state and local returns indefinitely and all supporting documents for seven (7) years.

Real Estate and stock market transactions records should be kept. Tax consequences of a transaction can depend on events that happened years earlier. Taxpayers often keep files in a single, easily accessible location. Consider keeping your files in a safe deposit box or another safe place outside your home.

What kind of record keeping system must i have?

Simply stated, the Tax Courts prescribed a standard for determining that a bookkeeping system is appropriate: “Does the bookkeeping provide sufficient data for the taxpayer to make informed business decisions”. An informed business decision is designed to increase profits, reduce losses and to evaluate the overall performance. Here is what the IRS says: You may choose any recordkeeping system suited to your business that clearly shows your income and expenses. Except in a few cases, the law does not require any special kind of records.

However, the business you are in affects the type of records you need to keep for federal tax purposes. Your record keeping system should also include a summary of your business transactions. This summary is ordinarily made in your business books (for example, accounting journals and ledgers). Your books must show your gross income, as well as your deductions and credits. For most small businesses, the business chequebook is the main source for entries in the business books.

Taxpayers had that have no regular books and records, and did not keep separate bank accounts, were considered by the IRS not to have a business.

Are there things i should consider before i talk to you about being my CPA?

Yes. The more you understand about your needs, the better job we can do together of matching our services to those needs. Your first step is to decide what you want from us. Different CPA firms offer different levels of experience and provide different services. Prior to meeting with any CPA, you are considering, you should review your present and future financial goals and needs. Some general questions you should ask yourself might be:

* Will you need help with personal financial issues, individual or corporate tax returns, retirement, estate, or college planning? Are you seeking investment help?

* Do you need financial statements prepared for your business? Must those statements be audited or reviewed? Will you need special financial reports for government agencies?

* How comfortable are you in your own ability (or in the case of a business, your staff’s ability) to handle financial and operational details. Do you want to do as much as possible in-house, or are you considering outsourcing some of your bookkeeping, accounting, or CFO functions?

* Do you need help preparing a business plan or a personal or business loan application?

Will your business need other services such as technology planning, strategic planning, process consulting, or costs analysis?.

How can an accountant help a new business owner?

Can an accountant help a new business owner? Remember, the issue to be addressed is “What level of professional do I need at any particular point in time?”

An accountant has some advantages. Accountants are unlicensed, this translates into lesser fees. This also translates into a lesser level of professional service. Routine accounting work is appropriate for an accountant. The IRS restricts accountants’ ability to represent taxpayers. CPAs and accountants often work in tandem. Accountants will perform the accounting work to the point where a CPA can address the more complex issues. Having accountants do pre-CPA level work saves money.

You need a CPA when: the IRS wants you for any reason, your professional needs are complicated, bankers or whoever needs financial statements and when your accountant does not understand and/or cannot explain the issues. Non-CPA prepared business reports are not considered to be financial statements and have limited third party acceptance. Most importantly you need a CPA BEFORE the circumstances above occur. Establish a relationship with a CPA early in your business formation, or now if you are already a business, so that he can give you guidance and keep you away from the pitfalls.