Certified Public Accountants | 1819 S. Dobson, Suite 101 | Mesa, AZ 85202 | Phone (480) 820-5077

FAQ

What do I do if I receive a notice from the IRS about my taxes?

Don’t panic! the first thing to do is carefully read the notice—to determine why it was sent, what the IRS is requesting, and what they want you to do. It may be nothing of importance; it may even be a notice in your favor. After reading it you should bring it to our attention.


How do I find out about my refund?

The best way is to use the Check Your Refund link from the Useful Links page of our website! To look up the status of your federal or state refund, you will need your social security number, filing status, and exact amount you’re expecting back.


What are the consequences of early withdrawals from my retirement plans?

If you withdraw money from a 401(k) or an IRA before age 59 ½, the distribution is taxable and there is a 10% penalty on the taxable amount. The main exceptions that let you withdraw money early without penalty are as follows:

  • Qualified retirement plan distributions if you separated from service in or after the year you reach age 55 (does not apply to IRAs).
  • Distributions made as a part of a series of substantially equal periodic payments (made at least annually) for your life or the joint lives of you and your designated beneficiary.
  • Distributions due to total and permanent disability.
  • Distributions due to death (does not apply to modified endowment contracts)
  • Qualified retirement plan distributions up to (1) the amount you paid for unreimbursed medical expenses during the year minus (2) 7.5% of your adjusted gross income for the year.
  • IRA distributions made to unemployed individuals for health insurance premiums.
  • IRA distributions made for higher education expenses.
  • IRA distributions made for the purchase of a first home (up to $10,000).
  • Distributions due to an IRS levy on the qualified retirement plan.
  • Qualified distributions to reservists while serving on active duty for at least 180 days.


What is a 529 plan?

A Qualified Tuition Program (QTP), also called a "529 plan," is established and maintained to let you either prepay or contribute to an account established for paying a student's qualified higher education expenses at an eligible institution. States and eligible educational institutions can establish and maintain a QTP. You do not get any federal deductions for the account, but any income earned in it is tax-free. One of the big advantages of a 529 plan is that many states allow you to deduct some contributions to the plan from your state tax return.

What are the differences between a Roth and a conventional IRA?

A traditional IRA lets you deduct contributions in the year you make them, and the distributions are included as income on your return when you withdraw from the IRA after reaching age 59½. A Roth IRA does not let you deduct the contributions, but you also do not report the distributions as income, no matter how much the Roth account has appreciated. With a Roth, you can exclude the income earned in the account from being taxed.


Do I have to file a joint return with my spouse?

No, you can file either as married filing joint or married filing separate. If you file separately your taxes will most likely be higher. Many credits—such as earned income, education (Hope and lifetime learning), and child care—are not allowed when you file separately.

There are special circumstances where people who are married but either do not want to or cannot file with their spouse can file as Head of Household, which therefore entitles them to these credits and a lower tax bracket. In order to qualify as a Head of Household you must meet the following conditions

  • §  You lived apart from your spouse for the last six months of the tax year. Temporary absences for special circumstances, such as for business, medical care, school, or military service, count as time lived in the home.
  • §  You filed a separate return from your spouse.
  • §  You paid over half the cost of keeping up your home for 2009.
  • §  Your home was the main home of your child for over half of the year.
  • §  You can claim this child as your dependent.

If you do not meet all these conditions but are legally separated as of the last day of the year, you may also qualify to file as single.

How should I keep records for my business driving?

Keep a log in your vehicle and record the purpose and mileage of each trip. You also need to record the odometer readings at the beginning and end of each year, as the IRS will ask you for total miles driven during the year. Keep your repair bills as these normally record odometer readings when the car is serviced.