Frequently Asked Questions

What are some tips on collecting and organizing my tax documents?

The easiest way to ensure you don’t lose important documents is to designate a folder to current year tax documents. As you collect information that may be relevant to your tax return preparation through the year, just put them in the folder. Then when you’re ready to hand them over to your preparer, everything will be in one place. If you’d like to organize the documents even further, group them together by type. For example, clip all documents reporting income together; clip documents related to child care together; etc. (Tip: Target often sells plastic pocket binders in their dollar section that work great and last a long time!)

I’m self-employed. How do I know if an expense is deductible by my business?

The IRS advises that expenses are deductible by a business if they are “ordinary and necessary” for that business. “Ordinary” means that it is reasonable and expected that other businesses similar to yours would deduct the same expense. “Necessary” means that the expense is required to operate, sustain or grow your business. With small businesses, there are often expenses that have both personal and business elements. In those cases, only the portion of the expense that is attributable to your business is deductible. There can be a lot of gray area when it comes to the deductions of expenses for small businesses. Consult your accountant about specific items if you’re unsure.

How can I be sure that I’m not missing out on tax deductions?

This is a little tricky because your tax preparer may not know about an activity or transaction you have that has tax implications and you may not know that the activity/transaction has tax implications. The best place to start is by reviewing my tax checklists. If you think you may have a situation that has tax implications that is not listed in these checklists, please discuss it with your preparer. There’s never any harm in asking!

What medical expenses are deductible?

Only the amount of your medical expenses that exceed 7.5% of your Adjusted Gross Income are deductible. Most taxpayers don’t incur enough medical expenses to pass that threshold. Some possible exceptions: You suffer from a chronic illness/condition that incurs higher medical expenses than the average person, you require ongoing medical care (i.e., a home nurse, assisted living, nursing home, etc), you experience a significant illness, injury or surgery during the year, or you purchase expensive medical equipment during the year (i.e., wheelchair, hearing aids, etc.) For more information on what types of medical expenses are deductible, see this IRS Tax Topic.

Does my child need to file a tax return? If they do, can I still claim them as a dependent?

If your child earned less than the Single filer standard deduction ($14,600 in 2024), they most likely do not need to file a tax return. The exceptions are if they had more than $1,300 in unearned income (interest, dividends, etc) and/or received a Form 1099-NEC for $400 or more.* If they received a W2 that shows amounts in Boxes 2 and/or 17, they may choose to file to have excess income taxes that were withheld from their earnings refunded.

You can still claim your child as a dependent if they file a tax return as long as you still qualify to claim them. (Click here if you’re not sure whether you qualify.) However, your child MUST indicate on their return that they are being claimed as a dependent on another taxpayer’s return. I offer FREE return preparation for my clients’ dependents to avoid any issues.

*If your child receives a Form 1099-NEC reporting $400 or more in nonemployee compensation, they must file a return even if their total earnings are less than the standard deduction. They will be required to pay “self-employment” taxes on their earnings. Self-employment taxes are another name for Social Security and Medicare taxes. Since they were paid as a contractor rather than an employee, those taxes were not withheld and paid by the payer. The recipient is liable for those taxes in this arrangement.

What do I do if I can’t pay my tax bill?

Even if you’re unable to pay the tax you owe when you file, you should still file on time. Filing and paying are two different transactions with the taxing authorities. They can charge penalties for both. The IRS and most states offer installment payment plans. Your tax professional can provide more information on those and may offer additional options depending on the situation.

Why is the IRS (or state) charging me penalties and interest?

The taxing authorities want to be paid through the year. If you owe more than 10% of your total tax liability when you file, you may be charged a penalty and/or late fee, as well as interest, on the balance due. Also, remember that filing an extension only extends the time you have to file your return. It does not extend the time to pay. You are expected to pay your entire tax liability no later than April 15th. So if you expect to owe on your tax return when you file an extension, you should make a payment with the extension. If you do not, you may be charged penalties and interest for the amount remaining after April 15th, even if that amount is less than 10% of your total liability.

What do I do if I get a letter from the IRS or state?

First, don’t panic. Second, don’t procrastinate. Read the letter and determine why they’re contacting you. If you’re unsure, contact your tax preparer as soon as possible. They will be able to determine the issue and advise. The sooner you address the issue, the easier it will be to resolve it.