Ask a CPA
The most frequently asked tax questions, answered by our network of licensed accountants.
Can't find the answer to your question? Ask a tax question.
there is an over accrual that is still sitting in the liability for three years now.. if i want to reverse should I use relevant expense account?
Asked Monday, January 27, 2025 by SashaCPA Answer:
Do you mean the statement balance is higher than the book balance? If that is case, I would assume payments were applied in full to the liability and not allocated to interest expense. You would need to debit interest expense and credit the liability to fix.
If the liability balance is higher than the statement balance that would require more information. If the liability was used to purchase an asset, the asset value on the balance sheet could be incorrect. Another possibility is if the owner (assuming this is a small business passthrough entity) paid part of the original purchase out of personal funds and the contribution was never recorded.
Stephanie Adams
Rental income tax for foreign property buyer
Asked Saturday, September 14, 2024 by LauraHi, we are non US residents and considering buying an investment property in Florida. Would like to get some advice on the tax implications if we rent it out and annual tax preparation matters. Thank you.
CPA Answer:
Hi Laura-
This is not a simple question but I will give you the basics. However, I recommend that you get further advice beyond here. In general, if you have a rental property in the US, you will need to file as a non-resident. Florida does not have a state income tax but you would need to research whether they have any Franchise Taxes or Lodging Taxes that your property would be subject to. Hope this is helpful. Jackie
Jackie Compton
W4 Assistance
Asked Thursday, September 05, 2024 by ChristopherHello, my wife and I intend to file jointly next year. We have a 1yr old son. She is self-employed and I’m a W2. She is the higher earner and makes quarterly payments. To ensure I’m withholding enough on my W4, should I declare our son as a dependent? Or, should I not and let my wife do so in her quarterly tax payments?
CPA Answer:
Hi Christopher-
I recommend claiming married filing jointly with two jobs only and no dependent. Then you need to do a tax projection to see if you are having enough withheld and to see if your wife is making adequate quarterly estimated payments.
Jackie Compton
Sole Prop vs LLC
Asked Friday, August 16, 2024 by KevinI'm starting a social media marketing business and want to start out with as little expense as possible. I would like to start as a sole proprietorship until I get off the ground and then convert to an LLC. I see little risk in having sole prop in this industry, but would like to add the protections an LLC provides as I grow and potentially add employees. Is the process of converting difficult? Should it coincide with a certain date, like the start of the next year? For reference I will be operating in Illinois. Thanks!
CPA Answer:
HI Kevin!
I always recommend starting off as an LLC because the default tax status for a single member LLC is a sole proprietorship. An LLC is a legal entity, then tax status is secondary. The reason to start off as an LLC is ease of transition to partnership or S Corp should your needs change.
Jackie Compton
Tax obligations for an Online Travel Agency in the United States
Asked Wednesday, July 17, 2024 by SirishHi, we are starting a new travel agency. The home state of the Business is in the state of Nevada. We have also registered as out of state corporations in the state of California, Florida, Hawaii, Washington and IOWA as these states would need us to have a seller of travel license in order to enable customers from these places to book hotel accommodations on our website. However, we do not have any physical office in any state other than Nevada. I would like help to comply with the tax requirements that my company may have in the United States or will i have tax liability only in the state of Nevada.
CPA Answer:
Hi Sirish-
Generally states do not tax non-resident business revenues unless your sales values exceed a certain amount or your transaction value exceeds a certain amount. Each state will vary in their filing requirements. If you would like to do some consulting with me on this, let me know and I can advise you on next steps! Thanks, Jackie
Jackie Compton
Capital gains 1041
Asked Friday, May 31, 2024 by RichardAre capital gains due for a house sold during administration of an estate. If so how are they calculated based on date of death appraisal, selling price, abd expenses
CPA Answer:
If the decedent owned 200% of the house before the date of death, then the basis of the house will be stepped up to fair market value on the date of death. If the house was sold within a couple of months of the death, then that value can generally be used as the step up value even without the alternative valuation date. In other words, the basis is the selling price of the house. If the house was used for personal purposes, then there will be a capital loss due to the expenses of the sale, but it will be disallowed under 26 U.S. Code § 165 (c).
Hans Nelson
First LLC: No Income, No Expense Filing
Asked Thursday, March 21, 2024 by MarcusCurious to know if an LLC would be subject to taxation if it were to incur zero income and expense? And how to file them.
CPA Answer:
Hi Marcus,
Choosing the appropriate legal entity depends on many factors including the type of business, types of services, future operational expectations, etc. Most people that are starting a business will either choose to be a Sole Proprietor or and LLC; however, in some circumstances, starting as an S-Corp or C-Corp make the most sense. If your business has some risk that you would like to separate from your personal finances, you may want to start out as an LLC.
To answer the question based on your current situation, since your business has zero income and expenses, there will be no tax impact since there will be nothing being passed on to you to be taxed.
Christopher Kent
My ex spouse is requesting my 2023 1095-A form. She gets to claim both children on tax return each year. We separated Nov 2022.
Asked Tuesday, February 06, 2024 by PaulI provide health ins coverage for both children, my current spouse and myself for 2023. My ex never asked for my 2022 1095-A which she was on it, along with both my children so I found it odd she is demanding my 2023 1095-A. I asked her why and she said for proof the children had insurance. I'd like some wisdom on why she needs my 2023 1095-A. I don't trust her as the 1095-A forms has sensitive information like our social.
CPA Answer:
Paul,
I understand your concerns. Since you were married I am sure she has all of your sensitive information from tax returns you filed in the past.
I don't see the need to provide her with the 1095A if your divorce decree indicates you are covering the insurance for both of your children. I don't understand why she would be requesting this information from you as she would be filing her tax returns.
I hope this helps,
Jeanne Adams, CPA
Firestone, CO
Jeanne Adams
Question about Filing Taxes with resell hobby
Asked Monday, February 05, 2024 by AmyHello! My husband and I both work full time regular jobs and receive w2s. On the side, we both have a resell hobby. He resells shoes on Stockx and I resell clothing on Poshmark. This past year we both sold more than we normally do. However, neither of us qualified for a 1099-k on each of the sites, meaning we did not exceed 20k in sales and/or over 200 transactions. That being said, how do we report the income we did make on our taxes? Since we did not meet the threshold and consider it a hobby, do we have to report the income? Thank you!
CPA Answer:
Amy, You will need to take a look at the Hobby Law Rules 1st. If you reported losses for 3 out of the last 5 years for your businesses, the IRS will consider this a hobby and disallow any deductions. They may send you correspondence regarding this as well.
Given the above information, you could report both of your incomes on a Schedule C and show a profit with each of your Schedule C's.
I hope this helps,
Jeanne Adams CPA
Firestone, CO 80504
Jeanne Adams
Taxes on gambling winnings
Asked Friday, February 02, 2024 by MichaelI am getting some confusing information on gambling winnings that I hope you can clarify. I have approximately $28,000 in W2G events in a casino app. But, in the app my year end win/loss shows a win of only approximately $3,000. Do I report the whole $28,000 in income? And if so, can I also deduct the $25,000 loss if I itemize?
CPA Answer:
How you heard about me?
