This is your reminder countdown to Tax Day! Your personal tax return is due in about one month or less. It’s NOT too late to have a CPA file your personal taxes. In cases where one or both can’t be filed in time, you can get an extension and file later.
As you are considering what to do, if you have not filed already, don’t rush through doing your own taxes. You will likely save money by having a professional like a Certified Public Accountant prepare your paperwork and filing electronically or sending it by mail BUT DO NOT DELAY!
There is a difference between having all your receipts collected in a shoe box and filing the most advantageous tax return. Your maximized return will include all allowable deductions. That way you can get the heftiest refund or pay the lowest taxes. Using a professional for taxes is a wise decision. You can use your time more productively because even with software, you may miss significant deductions you can take or mistakenly record those you are not entitled to take. In either case, it can lead to pricey errors which may cost you time and money later. Call Rink & Robinson, PLLC for all of your tax questions. 828-322-5813
Handling a Sales and Use Tax Audit
You didn’t ask for it, but you have been selected for and notified of a sales tax audit! What should I do?Most companies are not regularly audited by the state for sales and use tax purposes, so it is unlikely you have previously handled an audit. While the requested lists of records and documents that will be reviewed appear straightforward, there is much more to handling a sales tax audit. Warning, there are a lot of potential pitfalls during the interaction with auditors that may occur as you address the questions they typically ask.
What You Don’t Know May Hurt You
Importance of getting the facts correct. Addressing the facts seems like a pretty easy task to handle. However, some auditors are good at asking leading questions which support their position. Some state auditors look only for underpayments. Their directive is to get in and out of the field as quickly as possible, and their priority is looking for under-reported sales and use taxes. Therefore, few auditors will inform taxpayers about potential over-payments since they assume you determined internally that tax was due on a transaction. For example, for issues like IT services, some vendors may be conservative and charge sales tax because they are unsure of the proper taxation.
Benefits of Hiring a Tax Professional
Experience with auditor or industry issues. External representatives or sales tax experts are typically involved in many sales tax audits and might have already worked with your assigned auditor. In addition, from an industry perspective, ‘gray’ issues with respect to certain areas or unpublished rulings by the state may exist. An experienced external representative or sales tax expert will be aware of these.
Understanding the transactions in question.
Sometimes auditors will ask taxpayers to gather unnecessary exemption certificates or other documentation. This may cause the company to invest internal resources to secure the information, which might have been avoided based on an external representatives experience and knowledge. Other times, the state might have already audited the other party to the transaction (the customer on the sales side or the vendor on the purchases side). A company may not know internally what should be pursued and how to secure correct documentation.
A company may not be aware of internal policies establishing the amount of tax that can be conceded by the auditor or the supervisor to secure a fully agreed case.
Handling Proposed Adjustments
- If the actual audit results in significant proposed liabilities, you may be compelled to now engage an external professional representative.
- The auditor believes the audit is complete and may be reluctant to invest more time to address the issues.
- The auditor might have made concessions during the discussions about the questioned transactions that may not be documented in the report detail. The external representative may not be aware of those discussions.
- The external representative may identify new or additional facts that were not presented to the auditor or were not entirely accurate explanations.
- The auditor may not want or be allowed to include offsets at this stage in the audit.
- The auditor may want to refer those refunds to an office auditor for review. This can take more time, and there may be an interest rate differential between assessment interest and refund issues in some states.
Tips to Manage Your Sales and Use Tax Audit
Following are some best practices to consider:
1. Communicate with your CPA, a sales tax expert, or other external representative when you are identified for audit. They can discuss the audit process with you, provide some background on various sampling methods, and provide insights on specific industry issues targeted by the state.
2. Even if you are handling the initial audit preparation internally, communicate with the external representative as schedules are shared so he or she is aware of the initial schedules vs. revised schedules.
3. Evaluate whether it is appropriate to perform a refund study/ reverse audit at the same time to identify potential opportunities for refunds.
4. If you opt to use a third party for the preparation and actual audit, make sure you understand the scope of their work and how they will be compensated.
5. Do not engage in contingent fee arrangements on questioned items by the auditor unless you have already made the first pass. Otherwise, you may be paying them on reductions for errors made by the auditor or obvious exempt transactions.
6. If they are doing a refund study/reverse audit, their fee should not be based on savings in periods outside the audit period.
7. Their fee should always be based on offsets actually granted by the state. Payment should be made at the end of the audit, or a provision should be included to reverse any offsets not allowed.
8. Understand whether their services are included only at the audit level or whether services related to appeals or tax court are included.
9. Understand their specific experience with your specific state and your industry.
Ask for references.
A sales tax audit is not an ordinary occurrence. Therefore, you need to invest the proper efforts internally or with external assistance. While you most likely work with an accounting firm that handles your financial audit or tax compliance, they may not have dedicated professionals who specialize in state and local tax matters. Inquire about their experience with sales tax and audit defense issues for your industry in your state being audited. If they do not have the experience, then actively seek out experts through your business contacts at other companies, trade associations, and/or Internet research.
1. Your Income Is Cash Based
Do you usually deal with cash? Are you in a service industry or perhaps the restaurant business where you often get tips? You might find yourself in an audit of your tax return. The tax office will make sure you calculated all your tips and other cash funds correctly. This will lead to your NC state refund status undergoing a delay.
2. You Claimed Business Deductions
Your state tax office will be more likely to check your return for an audit if you claim business deductions. Every year businesses around the country try to squeeze in various deductions that don’t make sense. The tax office will most likely want to check your return. This can delay your NC state refund status funds.
3. Your Business Deductions Aren’t Reasonable
Like stated above, if you try and put in business deductions that are unreasonable, you’re going to run into problems. It could lead to an audit and a delay on your NC state refund status funds. If you review your calculations and they seem awfully high, you’re probably going to get noticed.
4. You Missed Receipts
Speaking of deductions, make sure you have all the paperwork that goes with them in case of a double check from your state’s tax office. States are cracking down on deductions and such, now more than ever. If you don’t recheck your receipts, you may find yourself in the middle of an audit and a delay in your NC state refund status money.
5. You Miscalculated
Did you check all your calculations on the tax return? Any errors can lead to a big audit from your tax office. This can lead to a huge delay with your NC state refund status funds. Make sure everything is up to speed on your tax return. Check it at least once, preferably twice.
6. Your Refund is Delayed
If you keep looking for the money from your NC state refund status and it never arrives, then you might have been hit with an audit. This isn’t always the case, as North Carolina has had budget problems the past few years. This may be the cause of your delay. However, this could be a warning sign your return is getting a look over.
7. You Owe Back Taxes
Owing taxes to your tax office can flag you for an audit as well. Anything that makes you stand out as a taxpayer can be a problem. This includes owing the office money. They may check all your tax return information and lead to a delay in your NC state refund status.
Congratulations to our Team!
HICKORY, NORTH CAROLINA, RINK & ROBINSON, PLLC ” a quality CPA firm”announced today its successful completion and passing scores of its independent quality review of the firms’ accounting practices by the American Institute of Certified Public Accountants (AICPA), a national professional organization of CPAs. Over 27 years ago, Rink & Robinson, PLLC was selected by the AICPA to participate in an elite national pilot program to audit the firm’s practices, policies and accounting procedures to ensure quality control in the industry. Since the inception of the program in 1990, Rink & Robinson, PLLC has successfully completed all of its peer reviews, occurring every three years. The firm’s current peer review rating of PASS concluded that the firm complies with the stringent quality control standards set forth by the AICPA Quality Review Requirement Program Based off of this review, it shows Rink & Robinson, PLLC to be a top Quality CPA firm in the USA.
The quality review was conducted by an independent accounting firm approved by the North Carolina Association of Certified Public Accountants Quality Review Executive Committee under guidelines established by the AICPA. The review team made an independent assessment of the firm’s quality control policies and procedures and inspected the reports on a representative sample of accounting engagements. The reviewers’ report has been accepted by the North Carolina Quality Review Executive Committee.
Rink & Robinson, PLLC was founded in 1956. The practice serves a wide variety of corporate, non-profit, partnership and individual clients throughout the United States, maintaining a position of dignity, integrity and responsibility to our community.
Rink & Robinson, PLLC provides professional services in a variety of areas, including: Tax Service for Individuals, Corporations and Estates, Personal Financial Planning, Estate & Retirement Planning, Accounting & Auditing Services, Computer & Software Selection and Support Assistance, New Business Start-Up, Management Advisory Services, Medical Practice Consultants, Buy/Sell Agreements, Pension/Profit Sharing Plans, and Monthly & Quarterly Profit and Loss Statements.
Additionally, within the accounting area, the quality CPA Firm provides specialized services in unique situations, which include: Insurance cases – loss of earnings, accounts receivable, inventory theft, arson, embezzlement, casualty, Lease/purchase studies, Financial projections and forecasts, Valuation of Businesses, Bank negotiations, Surety company letters, Expert testimony – Bankruptcy, Divorce, etc.
Rink & Robinson, PLLC’s primary objective is to furnish its clients with the best professional services available provided by a quality CPA firm, by actively striving for excellence of performance and higher levels of service through a practice, which adheres to professional standards.
Rink & Robinson, PLLC can provide specific details in these areas of specialized services. For further information, contact Michael E. Rink, at (828) 322-5813 or 1-800-467-4972.
On the Web www.mrinkcpa.com
Rink & Robinson Celebrates a Milestone
Rink & Robinson, PLLC opened its doors in 1956 and has provided services to the greater Hickory area for 60 years. On behalf of our staff, we want to thank our family, friends and clients for their support over the many decades. We are grateful to our community and are fortunate to welcome new clients. We appreciate your business and the trust you have placed in our hands.
As tax filing season approaches, the Internal Revenue Service has information for taxpayers who wonder how long to keep tax returns and other documents.
Generally, the IRS recommends keeping copies of tax returns and supporting documents at least three years. Some documents should be kept up to seven years in case a taxpayer needs to file an amended return or if questions arise. Keep records relating to real estate up to seven years after disposing of the property.
Health care information statements should be kept with other tax records. Taxpayers do not need to send these forms to IRS as proof of health coverage. The records taxpayers should keep include records of any employer-provided coverage, premiums paid, advance payments of the premium tax credit received and type of coverage. Taxpayers should keep these – as they do other tax records – generally for three years after they file their tax returns.
Whether stored on paper or kept electronically, the IRS urges taxpayers to keep tax records safe and secure, especially any documents bearing Social Security numbers. The IRS also suggests scanning paper tax and financial records into a format that can be encrypted and stored securely on a flash drive, CD or DVD with photos or videos of valuables.
Now is a good time to set up a system to keep tax records safe and easy to find when filing next year, applying for a home loan or financial aid. Tax records must support the income, deductions and credits claimed on returns. Taxpayers need to keep these records if the IRS asks questions about a tax return or to file an amended return.
It is even more important for taxpayers to have a copy of last year’s tax return as the IRS makes changes to authenticate and protect taxpayer identity. Beginning in 2017, some taxpayers who e-file will need to enter either the prior-year Adjusted Gross Income or the prior-year self-select PIN and date of birth. If filing jointly, both taxpayers’ identities must be authenticated with this information. The AGI is clearly labeled on the tax return. Learn more at Validating Your Electronically Filed Tax Return.
Taxpayers who need tax information can request a free transcript for the past three tax years. The ‘Get Transcript’ tool on IRS.gov is the fastest way to get a transcript.
If taxpayers are still keeping old tax returns and receipts stuffed in a shoebox in the back of the closet, they might want to rethink that approach. Keep tax, financial and health records safe and secure whether stored on paper or kept electronically. When records are no longer needed for tax purposes, ensure the data is properly destroyed to prevent the information from being used by identity thieves.
If disposing of an old computer, tablet, mobile phone or back-up hard drive, keep in mind it includes files and personal data. Removing this information may require special disk utility software. More information call our office @ 828-322-5813.
IRS changes W-2 & 1099 Filing deadlines
Effective with the 2016 reporting year, deadlines for filing form W-2 with the Social Security Administration (SSA) and Form 1099-Misc with the IRS are changing to January 31.
In the past, employers were required to provide both the W-2 and 1099-Misc forms to recipients by January 31 with a later submission date for filings with the SSA and the IRS (February 28 for paper filings or March 31 for electronic filings).
Beginning in 2017, the 2016 reporting forms will now have one filing deadline – January 31 – for all federal W-2s. This is true for both employee and agency copies regardless of filing type.
Be aware, many states, including North Carolina, have adopted the Federal change to the January 31 deadline!
The new January 31 deadline also applies if you’re filing Form 1099-MISC and reporting amounts in Box 7: Non-employee Compensation (which is fairly common practice). If you don’t have amounts in Box 7, then the deadline remains February 28 for paper filings or March 31 for electronic filings.
As a reminder, the IRS recently eliminated the automatic 30-day extension of time to file W-2 forms. You may still file for an extension, but the IRS states that it will only grant the extension in extraordinary circumstances or due to a catastrophe.
With the timing of the new deadline, it is important that employers, and their CPAs, are well prepared to complete these year-end tasks.