March 04 2019, 6:00am EST
The Minnesota Society of CPAs has a list of real questions clients have asked MNCPA members. These will not only educate, but also show there’s truly no such thing as a silly tax question.
1. Do I really need to file?
It’s highly advisable to submit timely returns to avoid problems in the future. The IRS has specific guidelines about who must file a tax return. A common misunderstanding some people have is they don’t need to file a return when they reach a certain age. There is no such rule. Everyone needs to file if they meet the income filing requirements. Keep in mind you may even need someone else to file your final tax return after you pass away.
2. Is the new tax code so simple now that CPAs aren’t needed?
The new tax law removed some deductions, created new deductions and changed the format of the tax forms. For some individuals, the increased standard deduction for federal returns does make filing taxes simpler. That being said, there are still thousands of pages of tax law. For those who have a complicated tax situation, such as small-business owners, retirees, executives and investors, a CPA is a great resource to interpret those laws and help take advantage of the tax benefits that are available.
3. I did volunteer work for a charitable organization. Can I deduct my time?
Bless you for committing your time to making the world a better place. You get a hearty pat on the back and a great feeling inside for donating your time. Sadly, that is all that a CPA can provide you. Time spent doing volunteer work is not a valid deduction.
4. I took photos of my dogs for a calendar. Can I deduct the dogs on my return?
Generally no, but, interestingly enough, if you are selling the calendars, you may get some tax benefits from the maintenance of the dogs. That’s why it’s important to ask these types of questions to your CPA and determine what’s allowable in the eyes of the IRS. But, generally speaking, “man's best friend” is not deductible.
5. How much can I deduct without any proof?
Documentation (or lack thereof) has become the easiest way for the IRS and state taxing authorities to disallow deductions. You need to have substantiating records to support the deductions if you’re going to claim them on your return. Remember what your English teacher taught you in Beginning Composition: Who, what, when, why and where are all necessary to support a deduction. So, keep your receipts and log your expenses in a timely manner.
6. What are my chances of being audited?
It’s hard to say exactly what the odds are of being audited, but there are certain red flags that can trigger an audit. Failure to report income will easily generate a notice from the government. Large deductions and losses, as well as high income taxpayers are going to garner an extra look by the government, too.
7. Can a CPA fix what I’ve done wrong on my tax return?
If it’s found that you’ve filed incorrect returns, a CPA can work with you on your options. In most cases, it may be necessary to file an amended return.
8. Why do I owe taxes on gambling winnings?