Confused about tax and accounting?

We’ve compiled a list of questions regarding our firm, the services we provide and other topics relevant to tax and accounting.

When do I need the services of a Certified Public Accountant?

The answer is not cut and dry. Facts and circumstances will dictate if you need a CPA. Usually the services of a CPA is beneficial when your tax return has become complicated, or for issues that requires a higher degree of expertise, or when a service that only a licensed CPA can provide is needed.

What if I have not provided the necessary information for my tax return to be prepared and I cannot file it by the due date?

For an individual, you receive an automatic 6 month extension by filing a Form 4868. The August 15th extension is no longer applicable for individual extensions. For corporations and partnerships, you can get an automatic extension by filing a Form 7004. The extension for a corporation is good for 6 months from the due date of the return. Effective with 2008 tax returns, partnership will only receive a 5 month extension. If you need an extension, or have any questions about when an extended return is due please contact us.

How long should I retain my tax records?

As a minimum, tax records should be retained until the statue of limitations runs out for the return. The statue of limitations is usually 3 years from the date the return is filed, or 2 years from the date the tax was paid, whichever is later. There are certain records that should be retained for longer periods for time, such as records that are valid for the life of a corporation or partnership. These should be retained for the life of the entity plus the statue of limitations of the final return. Records that substantiate the purchase price of an asset (bill of sale or HUD Settlement Statement) should be retained until the asset is sold plus the statue of limitations. As a note – there is no statute of limitations for fraud or no return being filed.

What is the difference between bookkeeping and a compilation? I have heard both of these terms used and not sure what they mean.

A compilation is usually when the CPA takes the financial information of the client and prepares the financial statements from such information. Compilations are either prepared with or without the disclosures required by generally accepted accounting principles. Usually there are no adjustments made by the CPA when preparing the financial statements. Bookkeeping is the entering of the client’s check stub information into a general ledger and making certain adjustments.

Wouldn’t I be better off hiring an in-house bookkeeper?

In most cases, no. To hire an in-house bookkeeper, first you must find that person, check their credentials, negotiate a salary, hire and train them, and manage them. That can be very expensive both in time and money for a business owner. You must also provide office space, a desk, a computer, and software for them to use. You incur payroll tax expenses, vacation and sick time, and the cost of other benefits for that employee. If the person you hire is part-time, you must manage their hours and will only have access to them when they are at work. If they go on vacation, get sick, or leave your employ, you may have a large gap in your accounting and payroll. Furthermore, in some cases, there can be security concerns when only one person has access to all your business financial information, data, bank accounts, statements, and checks. Or you could hire us!