Nevada CPA Talks Taxes

What Are the Different Kinds of Reno Tax Preparers, and What Do They Specialize In?

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Every year in April, everyone begins scrambling to complete and file his or her taxes. Although many people prepare their own taxes, a business owner or someone with significant assets and investments needs to use a professional’s services. There are many kinds of Reno tax preparation services and Reno tax planning professionals. Some of these are Enrolled Agents, CPA’s, and attorneys. What is the difference between a tax preparation service and an Enrolled Agent?

Tax Preparations Services

Most people are familiar with Reno tax preparation services, such as H&R Block and Jackson Hewitt. These services will prepare and file your yearly return for a fee, and often offer refund advance loans. Many smaller such services exist all over the country. Usually they are staffed with certified professionals such as accountants, although some may hire experienced nonprofessionals or accounting students. Be careful using an uncertified tax preparer, because they may not know the tax code well and miss deductions.

CPA’s

Individuals can be certified as tax preparers in many ways, but the CPA is the most common. A Certified Public Accountant has to attend secondary school and receive a degree in accounting. They are licensed by their state, and take yearly continuing education classes for re-certification. Accountants do not just prepare taxes; they also give financial, business and tax planning advice. Some CPAs work for tax preparation services full- or part-time. It is recommended that large businesses keep a CPA on retainer. Any Reno CPA should display their most recent credentials or offer them openly.

Tax Attorneys

Attorneys can choose to specialize in a certain area of the law, just like doctors. Some choose tax law, which can be a very lucrative specialty. Tax attorneys are there to assist their clients in tax disputes, to set up tax shelters, draw up paperwork for corporate tax measures, and more. They are not specialists in filing actual returns. A tax attorney is good to have on retainer for a larger corporation, as they know the tax code well and can advise how to invest and what deductions might be best for the business. Check with the local Bar Association to find out if the attorney you are considering is well qualified.

Enrolled Agents

A Reno Enrolled Agent (EA) is different from a CPA in the scope and training of their job. EA’s are certified by the IRS to represent taxpayers. They do not have a set training course, but do have to pass a certification exam and get continuing education. An EA is a tax specialist who advises taxpayers in audits, investigations, and can prepare taxes. They have client privacy obligations, unlike other most tax preparers. An authorized agent is also the only taxpayer representative designated by the federal government. There are only about 49,000 EA’s in the US, and they should display their credentials prominently.

Different Areas of Expertise

CPA’s are financial jacks-of-all-trade. Their certification exam has 1000 questions, only about a quarter of which deal directly with taxes. Most Reno accountants focus more on actual accounting practices and only actively work on taxes during tax season. Their advice and guidance is very important for running a business efficiently. An Enrolled Agent, however, specializes only in taxes. Their exam covers every part of the tax code and does not include accounting and business principles. They have passed a very strict exam to become an EA in the first place, plus yearly Continuing Education classes and tests.

Practical Application

A company should have a CPA on retainer all year, to give advice on business matters as well as taxation. Their services are invaluable for running a business efficiently and profitably. While an Enrolled Agent will charge slightly less than a CPA, their services are more limited. If you or your business have specific tax problems, it might be best to call an enrolled agent instead of a CPA. They are bound by EA-Client privacy privileges, and are extremely experienced in tax matters, especially audits. A tax attorney should be retained by corporations or people with a high net worth to take proactive measures to shelter their income.

Reno tax preparation services can and do employ all types of tax professionals. When it is time to choose your tax-planning professional, determine the extent of your needs first. If you are an individual with a straightforward return, a tax service or CPA will work fine. If you fear an audit or need special representation to the IRS, employ and enrolled agent. For legal tax matters, hire a tax attorney. Each of these financial advisors can do their job within the scope of their specialization, but are not necessarily interchangeable.

Reno’s Best CPA,

Tim Nelson

What Are the Different Kinds of Reno Tax Preparers, and What Do They Specialize In?encpaswp2016-09-22T17:54:41-07:00

A CPA In Reno Explains How Getting Married Changes Your Tax Situation

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So your big day has come and gone, now what? You have made it through the chaos of the wedding and I am sure taxes are not on your mind, but it is important to understand how getting married can change your tax situation. A married couple should take some time to sit down with their CPA in Reno to discuss how their tax situation will change now that they are married.

Don’t Forget The Little Things

After the marriage, there is usually a move. Whether it is one part of the couple moving in with the other or the couple moving into a new place, a new home means a new address. It is important to remember to update your employer, the post office and even the IRS of your address change. You want to make sure that all of your tax information will arrive at the proper address.

Another thing that commonly happens after marriage is the changing of a last name. Whether a spouse changes their last name to the other’s or adds a hyphen between the names, it is important to remember to notify your employer, the post office, the IRS and, well, everybody. The last thing you want come tax season is confusion over who you are.

Filing Jointly

After getting married, the couple usually files their taxes jointly. By filing a joint tax return, the couple doubles the limitations and deductions that you otherwise would get if you filed two single returns. However, there are certain differences in the tax code where the “marriage penalty” comes into play.

This is a situation where filing jointly causes higher tax than you would pay if you filed two single returns, even though the taxable income is the same. This has largely been eliminated for the lower income tax brackets through 2010, but would apply once you reach a taxable income of $137,300 (in 2010) or higher. For example, assume that a married couple earned $120,000 for one spouse and $100,000 for the other, then the tax as a married couple would be $44,607.50. If they each filed single, the total tax would be $43,782.50, or $825 less than joint filing. The “penalty” increases with the amount of taxable income earned as the couple.

When In Doubt Ask For Advice

After getting married, you do not need the added stress of taxes on your plate. If you are concerned that you may have missed something or just want clarification on how you should file as a couple, you should contact a CPA in Reno. Depending on your tax situation, the CPA will be able to tell you the best way to file. The CPA in Reno will also be able to talk you through the name change and address change process. They may not be able to help you with the actual steps, but they will able to remind you of anything you may have missed.

Reno’s Best CPA,

Tim Nelson

A CPA In Reno Explains How Getting Married Changes Your Tax Situationencpaswp2016-09-22T17:32:13-07:00

A Reno Certified Public Accountant Discusses Divorce and Taxes

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Going through a divorce is a very stressful time. You need to figure out child custody, child support, division of property, etc… However, there is one thing that may have not made it on your list of things to remember-taxes.

Marital Status on The Last Day Of The Year Determines Tax Filing Status

Many things come into play as far as taxes are concerned when going through a divorce. The first thing to know is that you are supposed to file based on your status on the last day of the tax year. That means if you get divorced on December 28, you file single for the entire year! Similarly, if you get divorced on January 2, you will need to file jointly (or married filing separately) for the prior year.

Don’t Forget About Alimony

Alimony may be a factor, and is governed by the divorce decree or separation agreement. Note that if you get into a situation where Spouse A owes Spouse B for alimony, and Spouse B owes child support back to Spouse A, do not NET them! The IRS only allows you to take the NET amount as alimony. If you pay the entire amount, and get a separate check back, you can take the FULL amount.

Refund Checks Can Be Tricky

Refund checks (or direct deposits) are always an exciting factor. If you are due a refund with your former spouse, make sure it goes to a neutral party who will give you ONLY the refund you are entitled to. If your former spouse gets you to sign on the back of the check and cashes it into their account, you may never see the refund! Similarly, do not direct deposit it into an account you do not have control of! My recommendation is to have a check sent to the Certified Public Accountant’s office. Then have both spouses come in to sign it. The CPA can then cash the check and remit the appropriate amounts to each spouse.

Get Help!

Even before you get divorced, it is important to get advice to determine the tax issues at hand. For example, what if he gets the primary residence and you get the rental house to live in? The tax bases are likely very different, and you will end up owing tax on a gain of a former rental that he can exclude from his residence since it qualified as a primary residence. There are many other factors to consider in divorce taxation. The IRS publication number 504, Divorced or Separated Individuals, deals with many of these issues, but it is important that you discuss all of these with your Reno Certified Public Accountant before they bite you!

Reno’s Best CPA,

Tim Nelson

A Reno Certified Public Accountant Discusses Divorce and Taxesencpaswp2016-09-22T17:23:20-07:00

IRS Wants Money, a Reno CPA Can Help

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Whether it’s back taxes, money owed following an audit, or taxes due from the current year, owing money to the IRS can have devastating repercussions if left unpaid. The IRS has the right to place levies and liens against your property to insure tax repayment. This could lead to seizure of your home, automobile, or bank account with serious effects on your credit. When the IRS wants money, there are several options available. There are many ways a Reno CPA can help.

Notice of Tax Due

When an individual doesn’t pay the total tax amount due to the IRS by the annual filing date, they will receive a “Notice of Tax Due” letter. Within a few months, the debt will be in collections status and penalty fees will continue to add up. It is important to act quickly when you owe taxes to the IRS. A person who doesn’t agree with the amount stated has the right to ask for an assessment by an IRS manager. Copies of bank statements, receipts, and other finance related records will be needed for the hearing. Many taxpayers choose to hire a CPA to represent them at this point.

Finding a Qualified CPA

Retaining the services of a Certified Public Accountant can be very beneficial when you owe tax money to the IRS. Not all CPAs are qualified to represent taxpayers during the IRS collection process so it’s important to choose the right one. Beware of tax debt relief scams that may end up costing you even more money in the long run. Look for a CPA that specializes in working with the IRS on the taxpayer’s behalf. Read client reviews and look into their previous case history if possible before deciding to hire a professional. The right Reno CPA can offer sound advice and get the best IRS payment deal possible.

What to Expect from a Reno CPA

The first thing a CPA will do is discuss the available options. An “offer in compromise” is usually the best strategy. This allows the taxpayer to make a settlement with the IRS and pay less than the total tax amount. The CPA will help you decide on the best plan of action and will make sure it is executed correctly. He or she may file necessary paperwork with the IRS and will represent you in meetings with IRS agents. The CPA will also assist with appeals, hearings, or audits that may be required to help lower the tax amount you must pay.

The IRS can be brutal when it comes to collecting taxes that are owed. Doing nothing when you owe money to the IRS can lead to wage garnishments, frozen bank accounts, and the loss of your home. There are several options available to pay back the tax money owed to the IRS. A qualified Reno CPA can help you make the best decision and can even reduce the amount you owe. Hiring a Reno CPA also brings peace of mind. It’s easier to be confident when there’s a knowledgeable, experienced professional working for you.

IRS Wants Money, a Reno CPA Can Helpencpaswp2016-09-22T16:53:01-07:00

Is a Roth IRA Good or Bad?

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Like a knife, a Roth IRA is neither inherently good nor inherently bad. In the hands of a thug, a knife can be a deadly weapon. In the hands of a skilled surgeon, a knife is a life-saving device!

Roth IRAs are a special type of individual retirement account (IRA). When “traditional” IRAs were originally made available, it was on a tax-deductible basis. You could contribute up to $3,000 and if you were not participating in another retirement plan or did not make too much money, you could deduct the $3,000 on your tax return.

For 2010 and 2011, the amounts are $5,000 for people under 50 years old and $6,000 if you are 50 or older. If you are a participant in another retirement plan, you cannot contribute to a normal IRA if you make more than $109,000 in AGI (married filing jointly), or $66,000 (single). In a Roth IRA, you cannot contribute if you make more than $177,000 in AGI (MFJ) or $120,000 (single).

Under a Roth IRA, the difference is that these contributions are NOT tax deductible. The tradeoff is that if you meet certain conditions, such as holding the account for at least five years, then the increase in value of the account (interest, dividends, and capital gains) are ALSO not taxable!

Generally, the younger you are, the better it is to start putting into a Roth. The number of years of tax-free earnings will far outweigh the benefit of a traditional IRA. Conversely, the older you are, the less advantageous the few years of tax-free earnings will be. Your income tax bracket also comes into play here. If you are going from a high income tax bracket in your earning years and into a low one in your retirement years, perhaps the deferral is not as attractive.

In 2010, there was a big frenzy to convert traditional IRAs to Roth IRAs. The government was putting this forth as a taxing measure to offset some spending. If you converted to a Roth IRA, be sure to speak with a tax advisor to get the best tax treatment on the conversion.

My biggest concern over Roth IRAs is what I like to call the “Social Security dilemma.” They TOLD us that Social Security would never be taxed, until they needed the revenue from it! I fear that the same thing will happen to Roth IRAs. That they will not allow the tax deduction up front, but will later decide that Roths were a “bad investment” and decide to tax the earnings down the road!

For all of your investment, retirement and financial questions make sure to contact a trusted and experienced financial advisor.

Reno’s Best CPA,

Tim Nelson

Is a Roth IRA Good or Bad?encpaswp2016-09-22T16:39:47-07:00

A CPA Helps Business Owners Understand Payroll Taxes

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Payroll taxes can be a headache for business owners. Employers are required to withhold some types of payroll taxes from an employee’s paycheck. Some payroll taxes must be paid by both the business owner and the employee, while some are the responsibility of the business owner alone. Along with understanding the different types of payroll taxes, employers must stay up-to-date on the amount of each tax, as well as the most current legislation regarding taxes. Many business owners consult a Reno CPA to make it easier.

What Are Payroll Taxes?

There are federal and state payroll taxes. A CPA can help business owners understand both types, but state payroll taxes usually create more problems for employers because the requirements are different depending on the location. In Nevada, there are no state income taxes. Individuals and business owners are only required to pay federal income taxes, social security tax, and Medicare. Like most states, Nevada does have an unemployment tax that business owners must pay. Nevada also requires many employers to pay an additional payroll tax, known as the Modified Business Tax.

Federal Payroll Taxes

The amount of federal income tax that a business owner takes out of an employee’s paycheck is determined by an IRS W-4 form. Employers are required to have every employee complete a W-4. Generally, social security and Medicare taxes (FICA) are shared equally by the employer and the employee. But in 2011, the employee tax contribution rate was lowered to 4.2% for social security. Business owners are still required to pay 6.2% on all wages less than $106,800. Medicare tax rates are still 1.45% for both parties. A CPA can keep business owners stay informed about current tax rates.

Unemployment Taxes

Unemployment taxes are collected by the federal government, as well as individual state governments, to fund the unemployment program. Most business owners are required to pay unemployment taxes by filing a Form 940 with the IRS. As of July 1, 2011, the federal unemployment tax rate is 6%, but a credit of 5.4% is available for employers who pay state unemployment taxes. In Nevada, the state unemployment tax is referred to as unemployment insurance tax, or UI tax. Calculating the UI tax rate depends on several factors that are best explained by a Nevada CPA.

UI Tax Rate

Any business owner in Nevada who pays at least $225 in wages within one calendar quarter is subject to UI taxes. The amount of the tax is a percentage of every employee’s wages, up to $26,400 (2012 wage limit). New businesses pay 2.95% for the first 14 to 17 quarters in operation. After this period, the UI tax rate is determined by Nevada’s ‘experience rating.’ Depending on how much a business pays in UI taxes and the unemployment benefits its employees receive, the UI tax rate can range from 0.25% to 5.4% of the total taxable wages the business has paid.

Modified Business Tax

On October 1, 2003, the state of Nevada made it a requirement for business owners to also pay an excise tax on their paid wages. The Modified Business Tax is a quarterly payroll tax based on an employer’s gross wages and paid to the Nevada Department of Taxation. This tax is in addition to the UI tax that is paid to the Employment Security Commission. The current Modified Business Tax rate is 0.63%, and there are no wage limits or caps to benefit the business owner. There are deductions available to reduce the tax. Most of these credits are associated with health care payments.

Many business owners are unsure of the legislation concerning payroll taxes, but failing to comply with state and federal tax laws can be detrimental to a company. An experienced Nevada CPA is the best resource for learning more about federal payroll taxes, as well as current information on the UI and Modified Business taxes.

Reno’s Best CPA,

Tim Nelson

A CPA Helps Business Owners Understand Payroll Taxesencpaswp2016-09-22T16:33:50-07:00

Reno Tax Preparation Requires Cooperation Between CPA And Client

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A Reno CPA or certified public accountant is a huge help to individuals and businesses when it comes time for filing taxes. However, in order for the CPA and client relationship to be successful, communication is imperative. By understanding how communication works best between a CPA and his or her client, you can make sure your relationship with your CPA is solid. In addition, this helps to ensure that filing taxes, keeping records, and all other processes are easier and more accurate.

Don’t Be Afraid to Ask Questions

One of the best methods of communication is asking questions. As a client, if you are unsure of a specific process or you do not know why certain results are the way they are you can ask your CPA to explain it to you. Things like tax preparation, expense records, and loss charts can be very confusing for someone who doesn’t work with those numbers every day. A great accountant will take the time to explain what he or she is doing and why things have to be completed a certain way. Just because you’re not doing the tax preparation or other processes yourself, doesn’t mean you shouldn’t be able to understand what’s happening.

Reports and Information

If there’s something a CPA knows about, it’s keeping records. A great certified public accountant will record everything and provide reports and information to you regarding the processes he or she is going through in order to file your taxes or keep up with your business records. This will allow you to examine the processes yourself, and keep your own records for those processes. It’s also very important for you to keep records and provide your CPA with information as well. Keeping receipts and transaction logs of expenses will allow your CPA to prepare your taxes in the most accurate way. This ensures that your taxes are paid correctly and that you’re on an even ground with the IRS.

Why a CPA is the Best Choice

In addition to learning how to prepare taxes to begin with, a CPA will spend hours each year learning new information about laws that have changed, new stipulations for tax preparation and so much more. Most individuals don’t have the time to spend themselves learning these things, and trusting a professional is the best choice. A qualified CPA understands tax laws easily and in-depth, so they can make sure your taxes are filed correctly and accurately. In the same way that you’d hire an expert cake decorator to make sure your wedding cake is perfect, hiring a CPA ensures that your taxes are filed perfectly.

Overall, by having a great relationship with your Reno CPA, you can be sure that your tax preparation is done accurately and that nothing has been missed. It’s important to trust your accountant and communication is the best way to build that trust.

Reno Tax Preparation Requires Cooperation Between CPA And Clientencpaswp2016-09-22T16:29:02-07:00

Elections & Tax Law Changes

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I often hear people say “Tax laws are constantly changing! How can I protect my business? How can I even keep up with how it will impact my bottom line?”

One of the constants in life is change…and you can be sure there will be constant tax law changes as well! How can you keep up with them all? What kind of impact does an election year have on tax laws?

A Reno CPA or certified public accountant is a huge help to individuals and businesses when dealing with tax law changes. After all, it’s our business to know the information that can help you pay the least amount of taxes and use all the tax advantages in the IRS tax code.

We understand how difficult it can be with all the constant IRS tax code and tax law changes, but at Evans Nelson CPAs, we keep up with tax law changes. Certified Public Accountants are required by law to complete a certain number of Continuing Education classes and seminars. At Evans Nelson, every one of our CPAs goes well beyond those minimum requirements, along with other research to stay informed. It’s our business to advise you and you deserve far more than just minimum requirements.

Whether it’s proposed changes investments in capital equipment–can it be all deducted in the first year–to health insurance deductions, to changes in business taxes, or personal write offs, tax law changes can affect when and how you may want to take certain actions. We help guide you with sound advice based on information from the IRS and our experience and understanding of how these tax law changes will affect your individual circumstances.

Simply consulting for an hour or two with your Reno CPA can save you 10, 20 or even more hours of research and frustration trying to determine what is best for your business, and also help you find the best ways to protect it.

So save yourself the struggle and time consuming research by hiring a professional. Evans Nelson stays informed, so you can focus on your passions.

Elections & Tax Law Changesencpaswp2016-09-22T16:02:27-07:00

The Mortgage Debt Forgiveness Act

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Are you “upside down” with your mortgage? Do you know how the tax implications of walking away from your home or having short sale can affect you? How can a Reno CPA help you with these types of mortgage issues? What are the tax implications of a short sale, foreclosure and other options? The Mortgage Debt Forgiveness Act ends this year. Do you understand what the benefits can be for you?

Millions of homeowners around the country are “upside down” with their mortgages. Being “upside down” means you owe more on the mortgage than the house is worth. Real estate values have fallen dramatically, especially in Nevada.

So, many people are asking “What are the tax implications of getting rid of my house? Should I short sell it? Foreclose it? Should I stay or just walk away?”

Here’s an example. A house is worth $200,000 but the mortgage is for $400,000. The Bank will usually send a 1099 or 1099C (cancelation of debt) form for that difference of $200,000.

The IRS will normally require you to pay on the tax owed for that $200,000. But you didn’t “receive” that money, the house is still the same house, and you got rid of it. It isn’t worth $400,000 anymore, you can’t sell it for $400,000 but the mortgage is still for that amount.

The Mortgage Debt Forgiveness Act, which runs through the end of 2012 (December 31, 2012) says you don’t have to pay tax on that $200,000.

Many people are worried about that huge tax liability. They are not sure if it would be better to try to short sell or foreclose on their house before the end of 2012 to be able to use the Mortgage Debt Forgiveness Act before it expires and avoid that tax.

Nevada has had its fair share of foreclosures and other mortgage issues. It is very important to sit down with a Reno CPA to discuss the options and tax implications of walking away from the house, vs. short selling, foreclosing or simply keeping it.

A Reno CPA can help you determine the best course of action, based on the many factors of your personal situation, and can help save you thousands of dollars (along with saving you time and frustration) by helping you determine the best choice for you.

Contact Evans Nelson & Company, CPAs for more information today.

The Mortgage Debt Forgiveness Actencpaswp2016-09-22T15:44:22-07:00

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