FAQ

(Use this when meeting with your professional advisor. Not Intended as Legal Advice.)  

1. What is the difference between  1099 and W2?

a: 1099 is sent to vendors and W2's are for employees at year end showing amount paid. Be sure you are sending our receiving the right form.

2. What is adjusted gross income?

a: Your income minus certain allowed deductions.

3. When should I start investing in  college planning? Retirement?

a: The earlier the better so it is less noticeable every week/ month.  This will also allow your investment time to grow. 

4. What is the difference between  LLC, S CORP, C CORP, 501(C)3?

a: LLC - Allows your business to be separate from you for liability purposes.

S Corp- Max 100 shareholders.  Useful if you are a US business. No corporate income tax.   

C Corp- Board of Directors manage the Corp. And useful if you expect to be publicly traded. Pays corporate income tax. 

501(c)3- non-profit corporation 

5. What is an audit? 

a:An audit can be done internally by your own auditor or by an employee of another governing organization (insurance company, IRS, State). Its purpose is to verify and confirm accuracy of submitted information. 

6. What do I need to open/close business  in NJ?

a: You should always have this done by a professional.  Here are the steps in NJ

https://www.njportal.com/dor/businessformation/home/welcome

7. What are capital gains?

a: A capital gain is calculated as the total sale price minus the original cost of an asset. Different tax rates apply based on whatever the asset is in question.

8. What can I do to lower my tax bill?

a: Tax planning starts before you do your taxes.  Setting up retirement accounts and saving receipts for business expenses incurred all year are helpful. 

9. What is a tax bracket and how does  it change?

a: Your income determines your tax bracket and what percentage of tax you pay.  Inflation and tax code changes can change your bracket. 

10. What is the difference between  standard deduction and itemizing deductions?

a:A standard deduction lowers your income by one amount.  Your tax advisor may find that you have individual deductions that can reduce your income further. 

11. Do I qualify for Homestead Rebate?

a: According to NJ: You may qualify if your income is $150,000 or less for homeowners age 65 or over or blind or disabled; or $75,000 or less for homeowners under age 65 and not blind or disabled.

12. For which tax credits do I qualify?

a: There are a variety of tax credits available every year.  Check with your tax preparer or IRS/State 

13. Do I need a Bookkeeper?

a:Of course this is a personal decision,  but, you may find that having someone keep your records organized will save you money and time in the long run. 

14. Why do I need to keep receipts  if I enter purchases in Quickbooks?

a:Quickbooks only records numbers. Your receipts "back up" or prove your actual purchase 

15. Can I write off dinner if we talk  about work?

a: There should be some discussion notes from before,  during and after your meal.  

16. Is student loan interest tax deductible?

a: Yes, up to $2500.

17. Can I take a tax deduction on  new appliances?

a: Did you donate the old one? Is the new one labeled to qualify for an energy efficiency tax credit?

As, always, these are meant to be general answers.  Your situation may differ.  Always consult a tax professional.