PILLERI ROMANO, P.C.
Certified Public Accountants
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Frequently Asked Questions


GENERAL QUESTIONS

TAX QUESTIONS

NEW BUSINESS STARTUPS

PAYROLL QUESTIONS


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GENERAL QUESTIONS

How much does it cost to have an individual tax returned prepared?

It depends on the complexity of the return. Most small returns with only W-2 and interest income can cost as low as $125. The average return, however, will run you anywhere from $250 to $450.

What's the difference between an accountant and a CPA?

CPAs are distinguished from other accountants by stringent state licensing requirements. In addition to having a college degree, CPAs are required to pass a rigorous uniform national examination and must have extensive experience before being licensed. Also, CPAs must acquire an average of 40 hours of continuing professional education each year. Some CPAs must also undergo what is known as "Peer Review" from time to time to assure that the highest quality services are being performed for the public.

How do I find a reliable CPA?

Normally, through a trusted referral. Make sure your CPA is actually licensed in your state and check to see what professional associations your CPA belongs to. Also see if your CPA is available throughout the year, not just tax season. A good CPA will not only prepare your taxes or financial statements, but will also send you useful newsletters and advise you on new tax developments as they apply to you. Maintaining a personal relationship with your CPA is key to financial success.

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TAX QUESTIONS

Can I file an extension?

If you need additional time to file your return you may request an automatic extension for up to six months until October 15th, using IRS Form 4868. On this form, the IRS requests you to estimate your tax liability and send in any amount owed with the extension request. You will receive the automatic extension whether you pay or not, but be aware that the extension is for filing the return, NOT for paying the tax. Late payments are subject to interest and penalty assessments and IRS collection actions.

What if I can't pay my taxes?

It is VERY IMPORTANT that you file your tax return on time, regardless of whether you can pay right away or not. Late filing penalties are HUGE! Late payment penalties are much smaller. If you don't file on time, you could be assessed Late filing AND late paying penalties AND interest. If you can't pay the amount owing, attach a payment for as much as you can and send it in with your tax return. The IRS will send you a statement of the balance owing including interest. You can make payments without waiting for a statement from the IRS. Just make sure that you put your Social Security #, Tax Period, and Form # on your check (i.e.SS#123-45-6789, 2007-Form 1040). If you will not be able to pay the entire amount due within a few months, you may consider applying for an Installment Agreement. On the form, you are asked to enter a monthly payment amount and a day of the month to make your payment. You are well advised to make the largest monthly payment possible to limit interest and penalties, which still accrue until the tax is paid in full. If the monthly payment is adequate and made on time, most liabilities under $10,000 can be handled this way without further collection action. By entering into an installment agreement with the IRS, you are agreeing to make your monthly payments on time and pay all future liabilities on time (including adequate withholding or estimated tax payments). Sometimes it makes sense to borrow the funds from another source to pay off the IRS. In many cases, the interest charged by a bank will be less than the interest and penalties that the IRS will charge.

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NEW BUSINESS STARTUPS

Should I incorporate?

The question really is, what type of entity is correct for your situation?  I can advise you in making the proper entity choice for you and your business. Choosing the correct type of entity could save you thousands of dollars in taxes every year.

Do I need a separate business bank account?

Yes, I usually recommend a separate business account in almost all circumstances.

Does my business need an Employer Identification Number (EIN)?

If you are operating as a corporation, partnership, or if your sole proprietorship has employees, an EIN will be needed.  I can assist you in filing for an EIN. It is a relatively simple process but must be done correctly and timely.

How will I pay taxes on the money my business makes?

This will depend on your choice of entity. I would explain this to you as you decide what entity is correct for you.

I'm planning to start a new business. When should I meet with you to handle these and other start-up matters?

During the planning process is the best time to meet with me. If you've already begun business operations, please call now for an appointment.

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PAYROLL QUESTIONS

What is the difference between an employee and an independent contractor and how are they treated differently for payroll purposes?

An employee performs services under the direction and control of an employer as to what is to be done and how it is done. Federal, state and local income taxes must be withheld as well as the employer paying the matching share of FICA. An independent contractor decides the means of how to get to the final result. He is not required to work unless he feels he has an opportunity to make a profit. Federal, state and local taxes are not withheld. If an independent contractor makes $600 or more a year, a Form 1099 must be filed. If in doubt it is safest to classify the worker as an employee, but it may be more costly to you the employer.

I have an employee who only worked 1 day. Do I still have to pay him through payroll?

Yes, payroll taxes need to be withheld and a W-2 prepared at the end of the year, regardless of how long they worked or how much they earned.

What are FICA taxes?

FICA taxes are made up of two parts. The first part is Social Security which finances old-age, survivors, and disability insurance. Medicare, the second part, finances hospital insurance.

What is the Form 941 deposit I make each month (for larger companies it may be more frequent) made up of?

The 941 deposit is made up of the FICA taxes (both the employee portion and the employer match) and the federal taxes withheld from employee income.

If a filing deadline falls on a Saturday, Sunday or a holiday is it still due that day?

No, it is due the next business day.

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