1040 PERSONAL TAXES

Added Value. When preparing your personal income tax on Form 1040, the U.S. Individual Income Tax Return, Katy Income Tax Svc. (KITS) provides a lot of added value:

  • Free Consultation. We discuss your tax situation free of charge, whether it be by email, phone, or in-person. I often give tax advice that gives a potential client enough information to do the return themselves. Consultations frequently result in 1040X Amended returns.
  • Free Audit Assistance. If you have received a letter from the IRS and need help answering it, we can generally develop a response during the Free Consultation. If you are an existing customer and there is an IRS issue with a return that prepared on your behalf, then take advantage of my Free Audit Assistance policy. I qualify under the IRS Annual Filing System Program (AFSP) to interface for you with IRS employees. I work out of my home and I am available year-round.
  • Free Adobe pdf Copies. Free for three years. Send an email or call me when you can’t find your copy. I get a lot of calls from clients when they are buying a new home.
  • Free e-filing. Of course it’s free. The IRS doesn’t charge for e-filing. It’s part of the software tax preparers use to prepare your return. It’s nothing more than pressing a button and is a requirement for preparers with 10 or more returns.
  • Free Tax Tips. I subscribe to the TaxBook tax tip services. Give me a topic and I will generate a TaxBook printout for you.
  • Free Simulations. Once you have agreed to pay for a tax return, or an estimate, I will do simulations without additional charges.
  • Free identity Theft Reporting. If your return is rejected by the IRS, we will complete Form 14039 on your behalf. See https://www.irs.gov/pub/irs-pdf/f14039.pdf.
  • Free Speaking Engagements. If you are a member of an organization that would to present a speaker regarding taxation, give me a call.

Estimates Take Time. I can’t do a good estimate unless I have practically all your data. My fee for doing an estimate is $100 and you do not get a printout. However, if you decide to continue, the cost of the estimate is credited to the cost of the return. I take this as a practical solution to discourage shoppers and to save time and frustration. If you go to the tab “Pricing,” you can get a good estimate of what a return will cost, especially if you have your prior year return and there are no significant changes in your tax situation.

Finalizing a Tax Return. A tax return is not finalized until it has been accepted by Intuit, the IRS, and the Social Security Administration. During the Annual Filing Season, an acceptance or rejection can take place within two hours or the next business day. The most common cause for a rejection is the spelling of a name or a social security number problem. Another common cause is two taxpayers claiming the same dependent. If a return is rejected, we will call or email you to get a resolution. If there is an issue with identity theft, we will work with you to complete (https://www.irs.gov/pub/irs-pdf/f14039.pdf) IRS Form 14039.

KITS Discount Program. This is explained further under the Pricing tab. We reward you with a discount, that is incorporated into our rates-per-form calculations, when your data is well-organized and we know there are no problems with your prior return. We ask you to complete Form 4506-T, option 6c, and have it sent to Katy Income Tax Svc. as soon as possible. If you do not qualify for the well-organized taxpayer status, there is a potential surcharge of $120 per hour. Excel is great for working from a shoebox of receipts!

Schedule C for Self-Employed Individuals. By the time a sole proprietor has decided to go into business for himself or herself, they have discovered the benefits of the Limited Liability Corporation, or LLC. I recommend filing LLCs under Schedule C unless there is a good reason for not doing so; i.e. to keep business records separate from personal records when reporting to banks, creditors, of governmental agencies.

Employee Business Expenses, Form 2106. These are reported on Schedule A. If you have these unreimbursed expenses, please contact me for a flyer from The TaxBook. Also note the 2% penalty for miscellaneous deductions (including tax preparation fees).

Home Office Expense. The home office deduction is calculated based on the percentage of the work area to the total area of the home. There are direct and indirect expenses to categorize. Eligibility to deduct home office expenses differs depending on whether the taxpayer is a self-employed person (Schedule C) or an employee (Schedule A). Daycare facilities may also take this deduction. Please contact me for a flyer from The TaxBook.

1040NR. The non-resident will file this form. It disallows a standard deduction and may also affect dependency status if married in the current year.

1040X. The X indicates an amended return. Taxpayers who prepare their own returns make a lot of mistakes simply by not knowing tax laws that may be utilized to their advantage. I often uncover these mistakes when accepting new clients and recover thousands of dollars.

Penalties for Withdrawals or Early Distributions of IRAs. I cannot run the gamut of 1040 tax issues on a few webpages but there is one more area that concerns me and that is lines 15a and 59 of Form 1040 that penalize the taxpayer, often heavily. There are exceptions to the penalties, please consider them before an IRA withdrawal. Unfortunately, there is no exception for being unemployed for a long time but there should be.

Semper Fi