On this page, you will find answers to "frequently asked questions" by BGGE's Tax clients.  For additional info about tax forms, tax preparation, calculators, personal finances, refund dates, etc., also check out BGGE DIY Bookkeeping & Taxes for Micro Business Owners & Individuals.  If you still do not find what you are looking for, simply contact me by email or submit a free quote request, and I will call you. 

How much do you charge?

BGGE tax preparation fees are based on the type of form used, the number of forms, the number of entries per form, how the return is transmitted, and if bookkeeping services are needed to make your financial data tax-ready. For example, the base cost for preparing a Federal/State return with electronic filing for students, individual, & business return is $40, $50,& $75, respectively. Last year, the average return cost for students, individuals, & businesses was $52, $63, & $96, respectively. Because of BGGE's discount and referral program, some returns were considerably less.

By comparison, The National Society of Accountants in their fee study reported that their members charged on average $205 for a Federal 1040 with Schedule A and state return and $115 for a Federal 1040 with state return. In another study, the average prices at franchised tax offices revealed that H&R Block charged $187.17 per return (average, 2009 data) and Jackson Hewitt charged $188.96 per return (average, 2008 data).

What are the advantages of electronically filing my tax return?

Electronic filing, known as e-filing, is the quickest, most accurate way to file your tax returns. E-filed returns have an error rate of less than 1%. If you are due a refund, you can expect to receive it within approximately 2 weeks from the date it is accepted by the IRS - less than half the time it takes when a paper return is filed.

Is it safe to save an electronic copy of the tax return on my computer?

There are a few things you can do to protect the sensitve information contained in your return (i.e. SS #, bank info, etc.) from other users or in the event your computer is stolen. This includes but is not limited to: - Keep your firewall on at all times. - Install anti-virus & anti-spyware software, and update it regularly against the latest threats. - Store your return in a location where it cannot be shared with other users. - Password protect your tax files or tax folder for extra security. Keep it easy to remember, but hard for hackers to guess.

How long does it take for the IRS to process my amended tax return?

If it's been more than 8 weeks since you filed your amended return and you haven't received your refund, please contact a customer service representative by calling 800-829-1040.

What is the difference between a Form W-2 and a Form 1099-MISC?

Both of these forms are called information returns.

The Form W-2 is used by employers to:

  • Report wages, tips and other compensation paid to an employee.
  • To report the employee's income tax and Social Security taxes withheld and any advanced earned income credit payments.
  • To report wage information to the employee, the Internal Revenue Service and the Social Security Administration.

A Form 1099-MISC is:

  • Used to report payments made in the course of a trade or business to another person or business who is not an employee.
  • Required among other things, when payments of $10 or more in gross royalties or $600 or more in rents or compensation are paid.
  • Provided by the payer to the IRS and the person or business that received the payment.

Does a small company need a tax ID number?

A sole proprietor who does not have any employees and who does not file any excise or pension plan tax returns is the only business person who does not need an employer identification number. In this instance, the sole proprietor uses his or her social security number as the taxpayer identification number.

Under what circumstances am I required to change my employer identification number (EIN)?

If you already have an EIN, and the organization or ownership of your business changes, you may need to apply for a new number.

Some of the circumstances under which a new number is required are as follows:

  • An existing business is purchased or inherited by an individual who will operate it as a sole proprietorship.
  • A sole proprietorship changes to a corporation or a partnership.
  • A partnership changes to a corporation or a sole proprietorship.
  • A corporation changes to a partnership or a sole proprietorship.
  • An individual owner dies, and the estate takes over the business.

This list is not all inclusive. Please refer to the website under Business, then Employer ID Numbers.

I use my home for business. Can I deduct the expenses?

To deduct expenses related to the business use of part of your home, you must meet specific requirements. Even then, your deduction may be limited.

Your use of the business part of your home must be:

  • Exclusive (see *exceptions below)
  • Regular
  • For your trade or business, and

The business part of your home must be one of the following:

  • Your principal place of business.
  • A place where you meet or deal with patients, clients, or customers in the normal course of your trade or business.
  • A separate structure (not attached to your home) you use in connection with your trade or business.

NOTE:  You do not have to meet the exclusive use test if you satisfy the rules that apply in either of the following circumstances:

  • You use part of your home for the storage of inventory or product samples.
  • You use part of your home as a day-care facility.

Are business gifts deductible?

If you give business gifts in the course of your trade or business:

  • You can deduct the cost subject to special limits and rules.
  • You can deduct no more than $25 for business gifts you give directly or indirectly to any one person during your tax year.
  • You need to have records that prove the business purpose of the gift as well as the details of the amount spent.

NOTE:  There are certain items whose cost does not have to be included in the $25 limit.

For business travel, are there limits on the amounts deductible for meals?

  • Meal expenses are deductible only if your trip is overnight or long enough that you need to stop for sleep or rest to properly perform your duties.
  • The amount of the meal expenses must be substantiated. 
  • However, instead of keeping records of the actual cost of your meal expenses you can generally use a standard meal allowance. The amount allowed varies, depending on where and when you travel.
  • The deduction for unreimbursed business meals is limited to 50% of the cost that would otherwise be deductible.

How do you determine if a person is an employee or an independent contractor?

The determination is complex, but is based on who has the right to control how, when, and where the person performs services. It is not based on how the person is paid, how often the person is paid, or whether the person works part-time or full-time.

There are three basic areas which determine employment status:

  • Behavioral control
  • Financial control and
  • Relationship of the parties

For more information on employer-employee relationships, refer to Publication 15, Circular E, Employer's Tax Guide and Publication 15-A (PDF), Employer's Supplemental Tax Guide.

If you would like the IRS to determine whether services are performed as an employee or independent contractor, you may submit Form SS-8 (PDF), Determination of Worker Status for Purposes of Federal Employment Taxes and Income Tax Withholding.

How do you distinguish between a business and a hobby?

Hobby expenses:

  • Are deductible only to the extent of hobby income.
  • Distinguished hobby expenses from expenses incurred in an activity engaged in for profit.

In making this distinction, all facts and circumstances with respect to the activity are taken into account and no one factor alone is decisive. Among the factors which should normally be taken into account are the following:

  • Whether you carry on the activity in a businesslike manner.
  • Whether the time and effort you put into the activity indicate you intend to make it profitable.
  • Whether you depend on income from the activity for your livelihood.
  • Whether your losses are due to circumstances beyond your control (or are normal in the startup phase of your type of business).
  • Whether you change your methods of operation in an attempt to improve profitability.
  • Whether you, or your advisors, have the knowledge needed to carry on the activity as a successful business.
  • Whether you were successful in making a profit in similar activities in the past.
  • Whether the activity makes a profit in some years, and how much profit it makes.
  • Whether you can expect to make a future profit from the appreciation of the assets used in the activity.