Common Misconceptions: My Tax Preparer Made Me Do It

“My spouse and I separated last year and lived apart for most of the year – so I can file Single.”

Unless you were legally divorced or separated as of the end of the year, you cannot file as single.

“Even though we are married, I want to file as Head of Household”

If you are married on December 31st – your filing status is either “Married” or “Married Filing Separately”

 

“I will take dividends instead of wages from the S corp I own.”

S corporation shareholders must pay themselves a reasonable compensation amount before any dividends or loan repayments are reported. What constitutes a reasonable salary is not statutory and is based on facts and circumstances. Failing to properly report wages could result in reclassification by the IRS of the dividends or loan repayments to wages resulting in payroll tax issues, interest and penalties.

“I’m a signer on a foreign bank account, but not the owner – so I don’t need to disclose it”

Foreign asset information reporting is a hot topic these days and is under particularly heavy scrutiny right now. There are a number of factors that determine the need to disclose these accounts and/or the assets. The penalties for non-disclosure are extremely onerous. You will want to make absolutely sure that that you don’t have a responsibility to report any of your foreign assets including foreign pension amounts. Your tax preparer should be well versed in this area and will be able to assist you in navigating the various filing requirements.

“I want to drop my information off on April 14th and have you complete the return by April 15th

DUH – do you really want your tax preparer to rush through your return, when they are working on 25 other things and they are sleep deprived and irritable and not going to give you the benefit of a happy smiling face? Let them put your return on extension and then take the time to go through it and offer you the best quality service with the benefit of a good night’s rest.

 

 

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