There’s no doubt about it. Tax preparation is grueling and difficult – so much paper to sort through, so much to calculate, so many forms to go through, which forms to file. While the IRS has many publications you can use to prepare your personal and business tax returns, they are long, detailed and difficult to process.
What I find most advantageous is the seamless method of importing data from my Quicken files. I actually own two businesses and use Quick Books for my accounting. All my information is instantly downloaded to my tax return. This saves at least 2 hours of tedious manual transfer. If you use Quicken for your personal finances, you’ll really appreciate this feature.
A costly mistake. Here’s what you’ll discover when you sift out the information as it applies to you. The government will give you five years to stop calling your operation a hobby and start calling it a business. Within those five years,* you should show a profit ($1 is a profit), at least two of those years. That means you could go two years without even selling a picture or showing a profit and still reap the tax benefits (more later). This applies to someone who has a salaried position and is starting a stock photo business on the side. If you are self-employed, with your stock business as your only enterprise, you don’t have to make a profit in any of those years, to qualify as a full-fledged business.
There may or may not be tax consequences as some lenders will issue you a IRS form 1099 reporting the amount they forgave as income to you. The recently passed Mortgage Forgiveness Debt Relief Act of 2007 may protect you from having to report forgiven mortgage debt as income but it is always best to consult a Torrance Tax Preparer or attorney.
The value of your home is less than what you owe. This means if you sold the house you could not get a price high enough to pay off the combined mortgages.
Did you pay the right amount of tax based on the filing status of the entity? People and businesses will often err in this regard. It is not an error that the tax agency is sure to miss so you will invariably end up with a letter of audit in the mail soon after making your filing. Again, try to avoid such errors on a return since they will invariably do you more harm than good as far dealing with a potential audit goes.
Tax laws change from time to time. Not greatly, but they change, go back to old rules, a new administration comes along and adjusts the tax laws, etc. Your tax advisor will inform you when these changes come about.