Frequently Asked Questions

  • Deciding whether to classify someone as an employee or a contractor is crucial for both tax and legal reasons. Employees must be paid through payroll, with taxes withheld and reported to the IRS. Contractors, on the other hand, are paid directly, and they handle their own tax obligations. Misclassifying employees can result in penalties, so it’s essential to understand the guidelines. We can help you navigate these classifications to ensure compliance.

  • The IRS recommends keeping tax-related documents for at least three years from the date you file your return. However, if you underreported income by more than 25%, keep records for six years. If you file a fraudulent return or don’t file at all, the IRS suggests keeping records indefinitely. It’s always best to hold onto documentation longer than required, especially for major purchases, business expenses, and real estate transactions.

  • If you expect to owe $1,000 or more in taxes when filing, you should start making quarterly estimated payments to the IRS. These payments are due in April, June, September, and January. Self-employed individuals, business owners, and those with significant non-wage income (like investments or rental income) typically need to pay estimated taxes. We can help you calculate and plan these payments to avoid penalties.

  • Parents with children in college may qualify for several tax deductions and credits, including the American Opportunity Tax Credit (AOTC), Lifetime Learning Credit, and deductions for tuition and fees. Each has specific eligibility requirements, so we can help you determine which benefits apply to your situation and how to maximize your savings.

  • If you sold your primary residence, you may be able to exclude up to $250,000 of the gain ($500,000 for married couples filing jointly) from your taxable income, provided you meet certain ownership and residency requirements. However, if the home wasn’t your primary residence or if you sold it at a significant profit, you may need to report the sale. We can help you determine what needs to be reported.

  • Filing jointly often provides more tax benefits, such as higher income thresholds for deductions and credits. However, there are situations where filing separately could be advantageous, such as when one spouse has significant medical expenses or if you prefer to keep tax liabilities separate. Idaho state taxes also follow many of the same rules as federal taxes, but we can review your specific situation to recommend the best filing status for you.

  • To ensure your tax appointment goes smoothly, bring the following:

    • Last year’s tax return

    • W-2s, 1099s, or other income statements

    • Receipts for deductible expenses (business, medical, educational, etc.)

    • Mortgage interest statements and property tax bills

    • Investment income and retirement account distributions

    • Documents for charitable donations

    • Identification for you and your dependents We’ll guide you on any additional documentation needed based on your unique situation.

  • If your identity has been stolen or compromised, immediately report it to the IRS by completing Form 14039, Identity Theft Affidavit. You should also contact the IRS Identity Protection Specialized Unit. Once the IRS is notified, they will place additional protections on your account. It’s important to monitor your credit and file your taxes early to avoid potential fraud.

  • Common business expenses you can write off include office supplies, equipment, marketing costs, travel expenses, and home office deductions (if applicable). Additionally, you can deduct business-related meals, employee wages, and professional services such as legal or accounting fees. We can help you identify all eligible deductions to maximize your tax savings.

  • Withdrawing from your 401(k) before retirement should be considered carefully. Early withdrawals (before age 59 ½) are generally subject to a 10% penalty in addition to income tax. There are exceptions for specific situations, such as certain medical expenses or buying a first home. However, tapping into your retirement savings early can significantly impact your long-term financial health. We can help you explore alternatives and assess the tax implications.