Business

Implications Of Filing An Extension For Your Tax Return

Implications Of Filing An Extension For Your Tax Return

 

Tick… tick… tick…

That’s the sound of the tax-filing clock winding down to April 15. What if you don’t think you’ll make the deadline? The consequences may not be as serious as you fear — if you take some simple steps before the deadline.

FILE AN EXTENSION

 

About 6 million people file tax extensions each year.

 

In past years, there were a couple of different applications you could file, but most recently there is just one. The extension is 6 months long, giving you until October 15th to file your taxes.

 

What’s most important, is that these extensions are meant to give you more time to FILE your taxes, not to pay them! When you request your extension, try to send an estimated payment along with it. If you don’t pay 100% of your taxes by April 15th, you WILL get hit with penalties and interest for the underpaid amount when you do finally file.This penalty can go up to 1% per month.

 

If you plan on making quarterly estimated tax payments for the following year, you should send in your first payment for the following year, along with your extimated taxes by April 15th. That way, you will have an overpayment on this years taxes, and can apply that over payment to the following years return, in place of your first quarterly payment. The benefit in doing this, is that it provides cushion against an underpayment penalty in case your estimate is too low.

 

 

IF YOU DON’T FILE AN EXTENSION

 

If you do not complete the steps above before April 15th, the IRS will penalize you 5% per month, up to 25%. They will also charge you interest.

 

 

IF YOU CAN’T PAY WHAT YOU OWE

 

The penalty for not filing at all, is much worse than filing and paying what you can. The penalty for not paying is only 0.5% each month until you pay it off.

 

 

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Call me if you have any questions or wish to discuss your taxes further. I’d be happy to do so without any charge or obligation.

 

Choosing a Legal Professional for Your Business: FAQs

Westchester NY accountant Paul Herman of Herman & Company CPA’s has all the answers to your personal finance questions! The following are frequently asked questions our Westchester accounting firm regularly receives regarding choosing a legal professional for your business.
▼ Should I hire an attorney?

It is necessary to hire an attorney for some disputes that require a lot of time. Having an attorney makes you more prepared, but you may also hire one for a significant business transaction. http://www.flickr.com/photos/safari_vacation/6260723020/If there is a problem where the court is concerned, it is advisable to hire an attorney.

 

 

The following should be considered when determining if an attorney is necessary:

  • Is this a difficult legal dispute or will I end up in court? What is involved in terms of money, property, or time? Positive answers demonstrate the need for an attorney.
  • Does a book exist that will be able to help me so I don’t have to hire an attorney? Some problems can be resolved with little help.
  • Have you looked for non-Lawyer legal resources to help?

Certain disputes can be solved without needing an attorney. For example, a living will can be prepared by a non-legal organization such as the American Association of Retired Persons. There are several organizations that can aid in the process of obtaining a living will form from the state along with information for filling it out.

▼ What process do I follow to handle the dispute by myself?

The use of letters and negotiation solves many disputes without the need of an attorney. Arbitration or mediation may also be used. There are legal self-help manuals and conferences that can aid in resolving disputes.

Idea: Instead of hiring an attorney to fully represent you, only use them for paper review or advice.

Negotiation without a lawyer: This can resolve many small disputes. Many books cover the process of negotiation.

Idea: Make sure to learn about the legal issues that could be brought up before the negotiation by speaking with a legal hot line or consulting resource.

Mediation or arbitration: You can find dispute resolution centers in almost every state. The areas that they commonly focus on are complaints from consumers, rental property disputes, and arguments between neighbors or members of a family.

Mediation consists of a third party who helps the two parties talk about the problems and hopefully reach an agreement. Arbitration is a more formal process where a third party reaches a conclusion after hearing both sides.

These are the low cost options in comparison to going to court or hiring a lawyer for representation.

Small claims court: Each state defines the limits for the amount of damages, which can be filed in small claims court. These are less formal and require less paperwork than normal courts. You must be prepared to function as your own lawyer in small claims court, which involves compiling evidence, investigating the law and making your story known in court.

 What method should I use to find a good attorney?

Speak with friends, relatives, clergymen, social workers or your doctor for their opinions. You can also use the referral lists that are compiled by the Bar Association.

Pay close attention to the specialty area in the Bar Association lists, as many attorneys work in different areas. A lawyer that is a part of one of the organizations may have just what you are looking for.

More sources are the Who’s Who in America Law and the Martindale Hubbell Law Directory. Make use of referral services for particular groups (for example, people with disabilities, elders or victims of domestic violence).

If using the referral service, ask for details on how the lawyers were selected. Many referral services use lawyers who are members of a certain organization.

The court and your bank can be great referral sources as well as the yellow pages. After the list is compiled, spend time with each of them and slowly eliminate attorneys.

▼ What should I ask my possible lawyers?

Before beginning a consultation, the following questions should be asked:

  • Is the first consultation free?
  • How long have you been an attorney?
  • Do you have a lot of cases that are like mine? (Try to find an attorney that has experience in your problem area.)
  • Are there references, such as trust officers in banks or other attorneys that I can contact?
  • Are there any clients or special-interest groups that you work for that may cause a conflict of interest?
  • Can we make a fee agreement? May we discuss the fees?
  • Is there anything in particular that I should bring to the first consultation?

Make sure to consult with at least two of the attorneys from your list. There is no need to be embarrassed about choosing the best attorney or changing appointments with an attorney after all investigation is complete.

It is now time to interview the possible attorneys. Make sure to have a brief summary of the case at hand as well as general questions to ask the attorney. There are two objectives for meeting with the attorney: 1) to see if the attorney has the talent needed to represent you, and 2) to see if you are comfortable with attorney and the fee agreement.

 Is a certain fee agreement better for me?

The basic rate for legal services depends on location. Based on your knowledge of the fees, a “fair” fee should be selected. Here are a few factors that play a role in the decision:

  • What can you afford?
  • Is this a routine case or do I need someone with special experience?
  • What is the going rate for the attorneys in my area?
  • What can I take care of without the attorney?

The following are basic fee agreements in use by attorneys:

Flat fee: There is a specific total that will be charged for work on your case.

  • Idea: Make sure to ask if copies, transcribing and other expenses are included in this rate.
  • This is normally offered only if the case is simple or routine.
  • Note: Litigation is not usually a flat fee, but an attorney can give you a fair estimate beforehand.

Hourly rate: A rate will be charged for each hour or part of the hour that the attorney works on your case. For example, if the attorney’s fee is $50 per hour and puts in five hours of work, then the cost will be $250. Some rates may vary depending on whether they are hours spent in court or doing investigation and preparation.

  • Idea: If you decide on an hourly rate, find out how much expertise the attorney has in your particular problem area. Someone who is less experienced will need more hours to complete the work, even though the hourly rate is lower.
  • The size of the firm also affects the price. Smaller firms and urban lawyers usually charge a higher hourly rate than lawyers in rural areas and large law firms charge the most.
  • Idea: Find out what is included in the hourly rate. Will you be charged for other staff members time put into the case and if so, how? Are there any other expenses that I will be billed for besides the hourly rate?

Contingency fee: The final amount owed is based on the amount awarded in the case. In this scenery, if you lose the case, the lawyer does not receive anything besides expenses. This is normally one-third of the total.

  • Idea: Find out if the fee will be calculated before or after expenses are taken into account. This can make a significant difference in the amount of the fee.
▼ What can I do to save money on legal fees?

Bear in mind that attorney fees are usually negotiable even though you will not be asked to bargain over the fees. The following are a few tips to make sure you save the most money possible:

  • Shop around for flat fees on routine cases.
  • Discuss the method of billing for hourly rates. To avoid problems, have a written agreement stating the fee agreement as well as what is involved.
  • Find an attorney with the qualifications necessary for your case. The majority of legal work is fairly routine. Knowing what form needs to be completed and then who to file that with plays a large role.
  • Propose to help with the workload.
  • Use the lawyer as the middleman. If you only need a letter written to the opposing party, some attorneys will negotiate a lower fee.
  • Work the lawyer as your coach. Hire a lawyer to guide you and review documents and letters that you prepared and signed if you would like to represent yourself in court (pro se).
  • Select an attorney that specializes in your particular case.
  • Always arrive prepared to lawyer meetings. The more information you have at hand means that less time that the lawyer needs to spend looking for that information.
  • Be forthcoming with your attorney. To save time and money, make sure the attorney knows all the pertinent facts as soon as possible to reduce the need for more investigation.
  • If factors change, inform your lawyer immediately. This can possibly save the lawyer’s time or keep the lawyer from working on the case in the wrong direction.
  • Be prepared when having contact with your lawyer. Ask all questions in one call. When you receive a letter or information in writing, pass it on to other staff members instead of contacting the attorney, unless you have a specific need.
  • Pay close attention to invoices. Ask that you receive an invoice regularly. This applies to all types of fee agreements including a contingency fee. If you have a question regarding any of the items, you should immediately speak with your attorney.

Westchester NY accountant Paul Herman of Herman & Company CPA’s is here for all your financial needs. Please contact us if you have questions, and to receive your free personal finance consultation!

Herman and Company CPA’s proudly serves Armonk NY, Bedford NY, Harrison NY, Chappaqua NY, White Plains NY, Scarsdale NY, Purchase NY, Greenwich CT and beyond.

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Financing FAQs

Scarsdale accountant Paul Herman has all the answers to your personal finance questions! business loan tips from westchester accountantThe following are FAQs our Westchester accounting firm regularly receives regarding options for different situations that may require financing.

▼ What can I do to raise money for my small business?

Although the process is complex and frustrating, raising capital is the most basic of all business activities. When looking for financing, there are various sources to consider. For most new businesses, the main source of capital comes from savings and other forms of personal resources. There are better options available than credit cards that are often used for financing, even a small business loan.

When beginning, entrepreneurs usually look to private sources like friends and family. Generally, the money is loaned at a low interest rate or interest free, which is very beneficial at the beginning.

The most common source of funding, not including personal resources, are credit unions and banks who will provide a loan if it is possible to show that your offer is worthwhile. Other sources are venture capital firms that aid businesses in exchange for partial or equity ownership.

 For business financing, what kinds of loans exist?

You must know the exact amount of money that you need, what your purpose is and how you will repay it in order to be successful in getting a loan. You must convince the lender in a written proposal that you are a good credit risk.

There are two basic kinds of loans, although terms vary by lender:

Short-term and long-term, maturity periods of up to one year are generally short-term, which include accounts receivable loans, working capital loans and lines of credit.

Maturities greater than a year and less than seven years is a typical long-term loan. Equipment and real estate loans can have maturity up to 25 years. Major business expenses such as purchasing real estate and facilities, durable equipment, construction, vehicles, furniture and fixtures, etc. are a few purposes for long-term loans.

▼ When considering a loan request, what do banks look for?

The bank official who reviews the loan request is focused on repayment. Most loan officers request a copy of your business credit report to determine your ability to repay.

The lending officer will consider the following issues while using the information you provided and the credit report:

  • Have you invested at least 25% or 50% of savings or personal equity into the business for the loan you are requesting? (Keep in mind that 100% of your business will not be financed by an investor.)
  • Do your work history, your credit report and letters of recommendation show a healthy record of credit worthiness? This is a key factor.
  • Do you have the training and experience necessary to operate a successful business?
  • Do your loan proposal and business plan document your knowledge of and dedication to the success of the business?
  • Is the cash flow of the business sufficient to make the monthly payments on the requested loan?

▼ What do I need to include in a good loan proposal?

The following main points should be contained in a good loan proposal:

General Information

  • Reason for the loan: the exact purpose of the loan and why it is necessary.
  • Amount needed: the specific amount needed to reach your goal.
  • Business name and address, names of officers and their social security numbers.

Description of Business

  • Describe the type of business you have, its age, current business assets, and number of employees.
  • Structure of ownership: describe the legal structure of the company.

Management Profile

  • Prepare a short statement that is focused on each principal in your business; give details about education, background, accomplishments and skills.

Market Information

  • State clearly the products of your company as well as its markets. Name the competition and explain how you plan to compete in the market. Describe what the business will do to satisfy the needs of its customers.

Financial Information

  • Submit your own personal financial statements as well as those of the principal business owners.
  • Financial statements: the income statements and balance sheets for the past three years. If you have a new business, provide the projected balance sheet and income statement.
  • Specify the collateral that you are able and willing to give as security for the loan.

Our Scarsdale tax preparers here at Herman & Company CPA’s are here for all your financial needs. Please contact us if you have questions about these provisions or any other tax compliance/planning issues, and to receive your free personal finance consultation!

Herman and Company CPA’s proudly serves Bedford NY, Bronxville NY, Purchase NY, Rye Brook NY, Larchmont NY, Pound Ridge NY, Scarsdale NY, Stamford CT and beyond. 

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Any U.S. tax advice contained in the body of this website is not intended or written to be used, and cannot be used, by the recipient for the purpose of avoiding penalties that may be imposed under the Internal Revenue Code or applicable state or local tax law provisions.