Weird Tax Preparation Day

[Scanner]

Well, for the first time I used HR Block for my tax preparation for my sole proprietorship and our normal employment vs. using a CPA.

Overall, it cost me $535 whereas a CPA ran me $1100 last year after talking him down from $1800.

In a poetic justice, I got $442 back from the Federal but owed $442 to the State of NJ. So, it's a wash. I had a perfect year with tax estimation (well, a more "perfect" scenario would be to owe the maximum amount so I could interest on it without penalties).

Speaking of penalties, I had to pay $14 because I sent my second quarter estimated in late.

However, last year (and the year before) I asked my accountant to declare part of my home for business. I store some equipment here and I have a little nook down the basement where I work on reports and interface with my billing company and whatnot. It's not much. . .maybe 250 square feet on a 2500 square foot house but I think it was legitimate.

So in the end, it won't be a wash and maybe I can owe the state nothign and get something back from the Federal gov't.

I think it's legitimate because I share space at my practice so I really don't have a "dedicated office" there to store files and stuff. Just a desk to sit at with my laptop and consult.

(I am going to irs.gov to research)

So, I have to gather my mortgage, utilities, repairs, and maintenance and submit it in to him in a week and I guess I will ask him if we can make an amendment to last years (since the gov't seems to be in a giving mood lately).

I wonder how far back I could go for amendments? Of course, getting documentation more than 2 years back may prove difficult.

Anyway, what were the odds of getting back from the Fed. and oweing the State the same amount? I must be Even Steven.

EDIT:

Well, I researched it - I definitely qualify. According to IRS Publicatin 587. . .

Administrative or management activities. There are many activities that are administrative or managerial in nature. The following are a few examples.

Billing customers, clients, or patients.

Keeping books and records.

Ordering supplies.

Setting up appointments.

Forwarding orders or writing reports

I use this space exclusively (except when my son gets into the stapler) for interfacing with my billing co., ordering supplies, and writing reports and keeping books/records. Plus, I store business information here (managed care contracts, etc.). The only thing I don't do is set up appointments; that's done directly at my office.

Geez. . .why didn't my CPA ever write this stuff off? Maybe next year I'll just grab Turbo TAx and do it myself if I want it done right. Even the tax preparer sat there just saying, "Can ya think of anything else?"

Well lordy. . .I can input stuff in a software program.

I guess he was helpful, more than my CPA, in that he at least gave me some advice. He told me for my wife to take the work deduction for childcare vs. seeking the credit.

[scfr]

Originally Posted by Scanner

Geez. . .why didn't my CPA ever write this stuff off? Maybe next year I'll just grab Turbo TAx and do it myself if I want it done right. Even the tax preparer sat there just saying, "Can ya think of anything else?"

Well lordy. . .I can input stuff in a software program.

Are you a Vanguard customer? We paid $48.70 for Turbo Tax Home & Business, and that included e-filing. I am not sure if there is an additional charge for a state return (live in a no income tax state). Just something to keep in mind for next year.

https://personal.vanguard.com/us/pla...WebContent.jsp

[moneybags]

A home office is a red flag for the IRS. I would be hesitant to amend a return just for a home office, but check with your accountant. If it is legit, you meet all the qualifying test, and you have all supporting info than it shouldn't be a problem.

[MonkeyMama]

A home office is no longer a red flag actually. It was in the past but they considerably loosened the rules since.

However, because of this we did avoid home office deductions for a long time. They really usually don't amount to much and aren't worth the work. I usually steer my clients away from it. (I mean, usually they want to write off 50 square feet or something or they can't really claim they exclusively use the space).

You will owe taxes when you sell the home as well - recapturing the depreciation you take. Probably won't be much - but just one more thing.

In general a CPA should be saving you more than you are paying them, to do your taxes. The tax code is so complex I think it is hard to know when you have a good tax preparer or not. A good one is worth paying the money for. As with anything, you do tend to get what you pay for.