Are you wondering about your Federal tax refund?

Did you know that you can track the status of your tax refund? The IRS website has a place that you can check your refund status. You can also download an app called IRS2Go for your mobile device.

The refund status, page on, Where’s My Refund?  will require taxpayers to enter a:

  • Social security number or ITIN
  • Filing status
  • The exact amount of the refund

The IRS updates the page daily, and the information is available 24 hours after the return is e-filed or four weeks after mailing.

Should you call the IRS? The IRS says:

The IRS issues most refunds in less than 21 days, although some require additional time. You should only call if it has been:

  • 21 days or more since you e-filed
  • 6 weeks or more since you mailed your return, or when
  • “Where’s My Refund” tells you to contact the IRS

If you claim an Earned Income Tax Credit (EITC)or the Additional Child Tax Credit (ATC), your refund may be delayed. Legislation passed by Congress precludes the IRS from those refunds until mid-February.

Common Forms for Tax Returns

With the season for filing taxes underway, taxpayers are busy going through their mail looking for the documents they need to prepare their taxes. One way of figuring out the documents that you need is to review your returns from last year. If your returns were prepared by a CPA or other professional last year, then your preparer should have sent you an organizer or checklist.

Here is a list of some of the documents that you may need to prepare your tax return.

FormWhat It Reports
1095Form 1095 contains information related to the Affordable Care Act (Health Insurance) There are several varieties of this form depending on who is reporting.
1098This form reports mortgage interest. It may also include property tax if that is paid through an escrow account.
1098-EDo you have a student loan? This form will report interest.
1098-TYou will need this form if you paid tuition of received reimbursements, scholarships, or grants.
1099-BThis form reports securities transactions.
1099-CYou will receive this form if you had debt that was forgiven. Forgiven debt is considered income.
1099-DIVDividends, capital gains, and some other distributions
1099-GGovernment payments are reported on this form. This includes unemployment compensation and state or local tax refunds.
1099-INTInterest income
1099-KCredit card payments. You will receive these if you accept credit cards for payments.
1099-LTCPayments under a long-term care insurance contract
1099-MISCRents, Royalties, prizes, awards, non-employee compensation, attorney’s fees, and substitute payments
1099-RRetirement plan and pension distributions including IRAs
1099-SThis form reports information about real estate sales
1099-SADistributions from an HSA, Archer MSA, or Medicare Advantage MSA
5498This family of forms reports fair market values or contributions for IRAs (including SEP, SIMPLE, and Roth IRAs), Coverdell and ABLE accounts, and HSAs, Archer MSAs, or Medicare Advantage MSAs
SSA-1099Social Security Payments
W-2Wages. This includes sick pay and benefits.
W-2GDid you hit it big at the casino or race track? W-2Gs report gambling winnings


The First Form 1040 in 1913 Was Only 4 Pages Long!

Did you know that the first IRS 1040 was published in 1913. As you struggle through pages of forms and stacks of instructions, think about how nice it would be to complete a tax form that was only four pages long. One of those four pages was the instructions. You can download the form from the IRS website.

Tax rates ranged from one percent to six percent on taxable income over $20,000.


Taxpayer Bill of Rights

Did you know that the IRS publishes a Taxpayer Bill of Rights? The Taxpayer Advocate Service (TAS) explains taxpayer rights on the TAS website. What are the ten rights?

You have:

  1. The right to be informed
  2. The right to quality service
  3. The Right to Pay No More than the Correct Amount of Tax
  4. The Right to Challenge the IRS’s Position and Be Heard
  5. The Right to Appeal an IRS Decision in an Independent Forum
  6. The Right to Finality
  7. The Right to Privacy
  8. The Right to Confidentiality
  9. The Right to Retain Representation
  10. The Right to a Fair and Just Tax System

To learn more about these rights, click on the links above.

Save Money on Tax Preparation

Paying a lot for tax preparation? Paying a CPA, Enrolled Agent, attorney or other professional to prepare tax returns does not have to be expensive. Hiring an expert may be a good idea, and most of the fees are money well spent. However, some habits could be costing you a lot of money, and they could lead to errors. What are these habits?

  • Disorganization
  • Inadequate Records or sloppy bookkeeping
  • Unresponsiveness

This is how those habits cost you and what you can do about them.


At tax time many people simply gather up any documents they think might somehow be related to their income tax, stuff them in folders or large envelopes, and send them to their CPA. The tax preparer will review and make copies of everything. Many of the documents will turn out to be unnecessary. Even so, once their CPAs start going through the files, they find that many important items are not included. The CPA will then have to contact the client and ask for the missing documents. This adds to the expense of preparing the return because the accountant spends additional time and expense on the unnecessary items and the spends extra time tracking down the missing itemsAsk your CPA or tax professional for an organizer or checklist.

Inadequate Records or Sloppy bookkeeping

The IRS requires taxpayers to document income and expenses. Without documentation, the IRS will disallow many deductions or credits. If you worked and received a salary or wage, then your income and any withholding will be documented by your employer with a W-2. If you were a contractor, then you will receive a Form 1099-MISC if you were paid more than $599 during the year.

Income from banks or brokerage accounts will be documented with various 1099s for interest, dividends, or capital gains.

On the expense side, individuals may be able to deduct charitable contributions, interest, some, medical expenses, and many other things. Depending on the expense, you will have received some sort of document explaining the expense.

If you own a business, you will also have to document your income and expenses. Many businesses hire bookkeepers to keep track of their income and expenses. If you go this route, about all you should need to provide your CPA or tax professional is a copy of your financial statements. Your accountant may also ask you for copies of bank records. If you take credit cards or receive 1099s, your tax professional will also ask to see copies of those.

If your business finances are simple, you may be able keep your records on a spreadsheet. If you use this approach, group your expenses by logical categories so that your tax preparer will be able to know how to put them on the tax form.


Many clients do not respond when their accountant tries to contact them. The reason the accountant is calling is either to find missing information or to clarify something that is not clear. Unresponsiveness increases the cost of preparing your return because it is difficult to work with missing information and it takes longer to prepare the return. In addition, every one of those phone calls and emails take time.

Change your habits!

Now that you know about these habits that cost you money, you can start changing your behavior.

Get organized!

Talk to your CPA or the professional that prepares your filing. He or she can tell you exactly what you need to do in order to simplify your tax filing and to make it less expensive to prepare your return. Take advantage of the checklists and organizers your accountant provides. Spend a little time reviewing your documents before you take them to your accountant.

Keep records throughout the year, and organize them so that they will be ready for your accountant. If you drive an automobile for work, get one of those auto record books and keep it. Your CPA may be able to provide you with an expense log. Keep your business and personal records separate.

Get help with your records.

It is worth your time to talk to your CPA or to a bookkeeper to learn how to set up your records. If you have a small business, seriously consider purchasing bookkeeping software. If you do, it is worth your while to ask your accountant or bookkeeper to help you set up your books. If you don’t want to organize your own records, or if they are too complex, then hire a bookkeeper. The cost of paying a bookkeeper to do your books throughout the year will be less than the cost of asking your accountant to do it a month before your taxes are due.

Return your calls! Respond to email!

When the CPA calls or emails, assume it is important and respond! If you do not return your calls or answer your email, then one contact becomes two or three or more. Your CPA will be able to complete your return faster and for less cost if you respond when he or she tries to contact you.


A New Year for Identity Theft. Be Careful With W-2s!

Identity Theft continues to be a growing issue for the IRS, tax payers, and tax preparers. One scheme affects businesses and their employees, and it involves W-2 forms that are used to report employee wages and withholding. The way that the scam works is that the fraudster pretends to be a CEO or other senior executive and sends an email to Human Resources or Payroll departments asking for copies of W-2s. Alternatively, the email pretends to be from HR or Payroll asks individuals for information “necessary to prepare W-2s.”

In either case, if the email recipient responds, then he or she has provided the swindler with personal identifying information or PII as well as important financial information. The fraudster can then use the information to create fake accounts. This time of year, a common scam is creation and filing of fraudulent tax returns.

The key to this fraud is that the perpetrator can create an email that pretends to come from someone official. Recipients want to be helpful, and reading what they think is an authentic email, they provide the information. The best way to guard against this is with healthy skepticism. When in doubt, contact the sender directly but do not reply to the email. If the email address is spoofed, then you will send the response to the scammer if you simply hit reply. In addition, ask yourself if this is a normal procedure. Why would an employer need to ask existing employees for information necessary to create W-2s? Why would a senior executive ask for a copy of W-2 forms unexpectedly?

Be security conscious and do not become a victim of fraud this year.

Fraud affects your relationship with the IRS and your tax preparer too. Your tax preparer will probably ask you for additional identification this year. In addition, if you have ever been the victim of tax-related identity theft, the IRS will have provided you with a code that will have to be entered on your tax forms.

The IRS provides helpful advice about identity theft. If you become a victim, you should make a report to the Federal Trade Commission.

The IRS’ Ten Tips for Choosing a Tax Preparer

It is cliché that the only thing certain in life is death and taxes. The other thing that death and taxes have in common is that both can be a bit frightening for some people. With taxes, at least, you can find help. There are many people that can assist you. If you know what you are doing, and you are comfortable doing your own taxes, you can even get free help from the IRS.

However, many people do not have simple tax situations, and they prefer the peace of mind that comes with hiring a professional. If that describes you, please know that there is not a lot of regulation of tax preparers. You want to be careful when you make your choice. The IRS published a list of tips for choosing a tax preparer. The article is from last year, but the advice is still good.

Here’s the list:

  1. Check the Preparer’s Qualifications.
  2. Check the Preparer’s History
  3. Ask about Service Fees.
  4. Ask to E-File. 
  5. Make Sure the Preparer is Available.
  6. Provide Records and Receipts.
  7. Never Sign a Blank Return.
  8. Review Before Signing.
  9. Ensure the Preparer Signs and Includes Their PTIN.
  10. Report Abusive Tax Preparers to the IRS.

You can read the details directly on the IRS website. The short version of the article is to check the preparer’s qualifications and make sure the prepare will be there after tax season, ask questions, provide documentation, efile and don’t sign blank returns. If you do come across a tax preparer that acts unprofessionally or unethically, report him or her to the IRS.

The first day to file your 2017 returns will be January 29, 2018 this year. You should wait to visit your tax professional until you have organized all of your documents. However, it is probably a good idea to go on and make an appointment now so that you will be at the front of the line. Good tax professionals are busy this time of year.


Understanding Your Business: Setting the Right Price

One of the more challenging things for small business owners to do is to set prices correctly. Figuring out what to charge for goods and services requires figuring out how to charge enough to cover expenses and make a profit while not charging so much that potential customers will refuse to pay. There are several theories about pricing. One theory that works with commodity type products says to charge a very low price and try to sell a lot. Another theory that works with specialty items or very high quality items is to charge a premium. Your approach will probably be somewhere in between those two approaches. Before you can do anything, however, you must know what it costs you to produce your product.

If you break your costs into parts, you will find that you have both fixed and variable costs. Fixed costs are the costs that you have before you begin selling anything. Variable costs are the costs of each product that you sell. If your business is a coffee shop, your fixed costs are rent, utilities, payroll, and the like. You will have those costs even if you sell no coffee or food. Your variable costs are what it costs you for coffee, food, and whatever else you sell. Fixed and variable costs behave differently as your sales increase. Variable costs per unit sold usually stay the same. If costs you a dollar to make a cup of coffee, put it in a cup, and then wash the cup when the customer is finished, then if you sell 100 cups of coffee your cost is $100. If you sell 500 cups, your cost will be $500. Fixed costs, on the other hand, get less expensive per unit as you sell more. If your monthly rent and utilities total $2,000 and you sell 1000 cups, your fixed cost per cup will be $2.00. Your cost per cup will drop to $1.00 if you double your sales. In this simplified example, if you 1000 cups of coffee in a month, you will have to charge $3.00 per cup to cover your variable cost of $1.00 plus your fixed cost per cup. If you sell 2000 cups, your price can drop to $2.00. Even though the variable cost remains the same, your fixed cost per cup is only $1.00.

The lesson is that your price must be high enough to cover your variable costs plus some portion of your fixed costs plus a reasonable profit.



Understanding Your Business: Budgets

One of the things that I help my clients understand is budgeting. Using a budget seems like something that should be easy. Unfortunately, many people have some misconceptions about budgets, and that makes using a budget harder than it needs to be. In this article, I will briefly explain some common types of budgets and address the budgeting myth that makes creating and using budgets difficult.

Let’s begin by answering the question, “What is a budget?” There are a lot of ways to answer this. The easiest answer is simply that a budget is a plan for resources. In a business setting, budgets are plans for income and expenses. However, budgets don’t have to be just about money. They can be a plan about any type of resource. A SCUBA diver, for example, will budget air for a dive by considering how much air is contained in a tank and how rapidly a diver uses the air. Farmers may develop water budgets that consider rainfall, humidity, how much moisture crops need, and how much water must be purchased for irrigation.

Many small business owners get along just fine without using budgets. Their businesses may be small enough or simple enough that they can keep track of everything without a budget. However, at some point, most businesses need to begin budgeting to be successful. Service businesses need to consider how many hours of service they can provide, and they need to manage their overhead. Manufacturing businesses need to track raw materials and job costs as well as sales so that they can be efficient. Businesses that resell goods need to be able to track inventory and sales. All businesses need to keep track of their cash, and growing businesses need to plan for capital purchases. If all of that seems complex, don’t worry. Once you understand budget basics, then the budget will make these things easier.

While it seems like there are many ways to create a budget, we will consider three simple types: 1.) Operating, 2.) Cash, and 3.) Capital. The next few paragraphs will summarize each type. I’ll provide more detail in later articles.

Operating Budget

An operating budget is a plan for obtaining revenue. and managing expenses. The most difficult part of preparing an operating budget is making accurate estimates of sales. I’ll spend an entire article describing how to build an operating budget later. For now, simply recognize that your sales drives both your income and your expenses. Begin by estimating what you will sell. From that you should be able to develop an estimate for your gross sales. Then figure out what it costs you to produce the goods or services that you sold. That is your costs of goods sold. Subtracting your cost of goods sold from your gross sales will leave you with gross profit. Note that the sales and cost of sales figures are typically variable expenses. The next item in this type of budget is going to be your general and administrative expenses. This includes items such as rent, equipment, office supplies, and similar items. The key to successful budgeting is to put in the effort to make accurate estimates for each category of expense. Another important point about operating budgets is that they are typically used over a single operating cycle. It is possible to create an operating budget that covers several years, however the out years in a multi-year budget are frequently unreliable.

Cash Budget

A cash budget is a close cousin to the operating budget. However, the intent of the budget is to help plan cash flow. Cash does not always track business activity in a firm. Business owners extend credit to good customers, and vendors often offer terms. Businesses also borrow and repay debt, and they purchase expensive capital items. Most business owners recognize that they need some sort of minimum amount of cash. The aim of a cash budget is to help manage cash flow so that the business can maintain the minimum desired amount of cash on hand. For each month in your budget, begin with your cash on hand. Then add your cash income. This is going to be equal to any cash sales. Remember that not all sales are cash sales. Some sales are credit sales. Add the current collections for credit sales to the cash sales number. Add any other cash from other sources. Next subtract all of your cash expenses. Remember that if you purchase goods or services on terms that you may not have paid cash. Use only cash expenses. Then subtract all your payments for previous expenses that are unpaid. The balance will be the cash available to your business.

Remember your minimum desired cash on hand? Compare your available cash to your desired minimum. If your available cash is less than your minimum, then you need to find a way to increase your cash. If the available cash is greater than your minimum, then you may want to pay down a line of credit or use your excess cash in some other productive manner.

Capital Budget

Businesses frequently need to make large purchases that cannot be made from operating funds. It is one thing to purchase office supplies or inexpensive office equipment. It is something else to purchase expensive equipment, furnish an office, or replace a company-owned automobile. Sometimes businesses can save and purchase the types of things. Sometimes businesses must borrow. In either case, smart business owners plan these purchases. Remember that the operating budget typically covered a single year and included operating expenses. A capital budget covers many years and includes expensive items that would normally be capitalized and depreciated. For example, most computers have a working lifespan of three to five years. A smart business owner would develop a plan for replacing the computers periodically. A commercial property owner might also develop a plan for HVAC replacements and roofing.

Budget Myths

The biggest myth about budgeting is that once the numbers are entered, the budget is fixed. Remember that a budget is based on estimates. As more information becomes available or as circumstances change, estimates can change too.

Another myth about budgeting is that variance or results different than what was planned is bad or reflects some sort of failure. That is not necessarily true. The problem with budget variances is when they cannot be explained. I’ll write more about this at a later time.

The most important things to know about budgets

A budget is a plan based on estimates. The most important reason for preparing a budget is that it forces you to think about your business and make assumptions about sales, revenues, and expenses. It also gives you a plan for the operating cycle.

A cash budget helps you keep track of your cash flow.

A capital budget is a tool that you can use to plan expensive purchases over a period of time in the future.

All budgets are based on estimates and information that was available at the time. Budgets can be dynamic and change as information becomes available and circumstances change.






Understanding Your Business: Keeping the Books II

I’m frequently asked why it is important for small businesses to keep their books in good order. Some of my clients run their businesses with nothing more than a checkbook and a notepad. If you are a small business owner and you can keep track of everything that way, great. However, businesses grow, and when they grow they tend to become more complex. Many business owners discover that the simple checkbook is no longer sufficient. Keeping track of receivables and payables and inventory becomes increasingly difficult with a notepad and a spreadsheet. As a business owner, you use many tools to manage and grow your business. Those tools might include advertising and marketing, staffing, and bookkeeping. Your business toolkit should grow as your business grows. Whatever stage of business you are in, you need to be able to keep track of your activities and summarize your results.

You need to keep books your books organized and produce financial statements for two reasons. The first reason is that you need them to manage your business. The three financial statements give you a complete picture of the financial health of your business.

  • An income statement summarizes your revenue and expenses. It is a picture of the activity that took place over time. Some people call this a profit and loss statement.
  • A balance sheet summarizes your assets and liabilities. The balance sheet is a snapshot of what you own and what you owe.
  • A statement of cash flows summarizes your sources and uses of cash. If you want to know if you made or spent cash in operations, investing in your business, or financing your business, the cash flow statement is the place to look. The statement of cash flows is very important if you are using accrual accounting.

The second reason is that you may need to provide financial statements to other people such as lenders or your tax preparer. If you want to borrow money, your lender will want to have some assurance that you will have enough profit and cash flow to cover the debt service and that you will ultimately be able to repay the loan. Your tax preparer will need to be able categorize all your transactions to be able to prepare your return. Your business may be small enough that your tax return does not require a balance sheet, but you will still have to summarize your revenue and expenses.

Here’s a sad but true story that makes the point. Several years ago, I had a client with a small manufacturing business. He produced limited runs of very high quality goods on contract. In the beginning, he was the only employee. He made the sales to customers. He purchased the raw materials and made the goods. He ran his entire business with just a checkbook and he kept invoices, receipts, and records in a shoebox. As time went by, he grew. He had enough volume with his suppliers that they began offering him trade credit. He began expanding and started adding customers, including some large accounts. Some of his newer accounts took longer to pay. He wasn’t worried about the slow pay, because his vendors were giving him terms, and he was making a lot of money. Unfortunately, he was still managing his business using a checkbook and a shoebox. By the time I met him, he had lost track of what was going on in his business. The slow pay by some of his accounts could have been managed, but he did not know how. He could not keep up with his payables and his vendors began demanding cash on delivery. He was running a cash basis business and trying to manage receivables and payables, but he did not have a way to account for them. He started writing checks to pay vendors so that they would stop complaining that he was past due, and then his checks bounced. When I asked why he did not hire a bookkeeper or at least purchase bookkeeping software and learn to keep his own books, he told me that it cost too much. It is true that he saved money by sticking to his checkbook and shoebox. But the money he saved was more than offset by the cost of losing control of what was happening in his business. Losing access to trade credit meant that he needed more cash to run his business.  He had to turn away business because he could not always purchase raw materials. Not having a robust bookkeeping system meant that he could not keep track of his slow paying accounts and he was unable to do anything to speed up collections. Finally, once he started losing control of his checkbook, the fees for overdrawing his account quickly added up. To make matters even worse, while he may have avoided paying bookkeeping fees, before his tax preparer could prepare his tax returns, he had to turn the shoebox full of receipts and invoices and the checkbook and bank statements into a set of financial statements. In effect, the tax preparer did a year’s worth of bookkeeping in two weeks. It turned out that he paid for bookkeeping after all. Unfortunately, it was too late to do him any good.

This example is a cautionary tale. As your business grows more complex, so should your accounting processes. The business owner above managed just fine with his checkbook and shoebox until his business began to grow.

My colleagues in the accounting world have similar stories of small businesses that outgrew checkbook and shoebox accounting. Savvy business owners realize that the processes they use in their business need to grow along with their business. Whether you hire a bookkeeper or do your books yourself, as your business grows, make sure that your management toolkit grows as well. However you manage your books, keep them in good order and make sure that you can summarize your results.