Ask a CPA Anything - Continued

Hi Guys, sorry for the old thread getting archived before I could respond to everyone.

Took a visit to the vet with the new puppy, pic is of him.

If you posted and I didn't respond previously, you will find those responses here.

Green Text will be the questions:

> (OP)
>what's the best ways I can write shit off as a >small business owner?
>What are some cool things that I didn't know >I could write off.

1) You can write off what you spend as business expenses. The most commonly missed ones are mileage traveling for work (not commuting, but to vendors, from one business location to another, etc).

2) Nothing "Cool" you can write off really, but, I will give you the best advice as a small business owner. Become an S-Corp. I will briefly explain why. In an S Corp, the K-1 profits are passed through to the owner, and the owner pays taxes on them (no tax at the corporate level). However, these profits are NOT taxed with Social Security and Medicare, just straight income tax (that's 7.65% in your pocket).

Now, the IRS requires that you take a fair and reasonable salary. So, if you profit $50,000, you can give yourself a $20,000 salary, and save FICA taxes on $30,000 ( $2,295 dollars saved).

>Sophomore in College studying Accounting and hoping to be a CPA. What is some advice/stuff you wish you would've done in college to prepare yourself for the workforce. Also what is the best way to get your foot into the door at an Accounting firm?

1) Read, read, read. You see all those 1,000+ page books you get, but only read parts of? Read the whole thing. Re read those books. Know your shit so well that anyone could quiz you 100 different ways and you will not only be correct, but confident you are correct.
That is invaluable.

2) Best way to get your foot in at a firm? Big 4? network network network. Find out where they are going for job fairs, get your resume and cover letter up, practice your public speaking and go out and contact them.

>I moved to CO from IA at the end of 2010. Didn't do my 2009-2013 taxes until last year. Years ago IA said I owed them like 1.5K for 2009 (for the taxes I never did). Ignored it. Ignored it. They then sent me a letter claiming I owed them state taxes for 2009-2013 (for income earned in CO). Like 11K.

>Called IA Dept of Revenue. Since I never filed any returns they think I was still a resident of IA. I never got a new driver's license and mostly used my parent's address (forwarded things from there). That didn't help. Explained to them that I haven't lived in Iowa for 4 years and obviously been working in CO. They said I could be working there yet still a resident of IA. Don't really remember what was said beyond that, but I haven't heard anything. I haven't gotten any letters in about 1.5 years.

>How likely is it that this has just gone away? Does filing all of my old returns last year help clear it up?

1) Chances it is just away? 0. The statute of limitations for collecting or auditing a tax return doesn't start until you have actually filed your tax returns.
For a matter like this, I suggest either doing the reserach yourself on IA state tax laws (could take you a long time) or hire an Enrolled Agent or CPA to represent you.
They are correct about being able to tax your income if you were in CO, but a resident of IA. Except you get a credit for taxes paid to another state (which they would have no idea about, since you never filed your return letting them know that).
I would prepare all your returns. Figure out how each year should have been, then submit them and go from there.

Filing the old returns will not toally clear up the issue, but it will start the statute of limiations for them to change the return and to collect $ from you.

>How does one make a living as a CPA. I only see you guys actually working during tax season. How do you get paid the rest of the year?

Well, my friend, there are MANY types of taxes, and lots of people file extensions. In Summary, if you ONLY do taxes (which we do not) you have the following:

a) Federal Income Tax - April 15th extended to Oct. 15th
b) State Income Tax - April 15th Extended to Oct. 15th
c) Partnership Tax - April 15th extended to Oct. 15h
d) Corporate Tax - March 15th extended to September 15th
e) Sales Tax - Ranges from Weekly, semi monthly, monthly, quarterly, and annually.
f) Payroll Tax - each pay period, both state and federal

Now, there are indiviual cases where people have to deal with the IRS and that is whenever it happens.
Also, we do tax planning year round.

Now, small to medium sized businesses we are involved with daily to make sure everything is compliant, and to maintain a high level of planning.

That is just basic tax, there is tax research, tax court, international tax, estate tax, and more.

Other services offered: Financial planning, audits, compilations, reviews, business analysis, business valuations, forensic services, etc, etc, etc.

>What was your process of becoming a CPA? (as in what major and classes you took) How long did it take to where you are now?
>What did you do after you graduated?

1) CPA goes Undergrad in accounting, masters in accounting related topic (I did taxation). Take 4 tests, pass all with at least a 75. 1 Year work experience under a CPA, then Presto, NY State gives you a license (if you pass ethical interview).
Each state has its own requirements, though all are pretty much the same. I needed 120 college credits (36 being in accounting and 20 being in general business) to sit and take the exam, and 150 college credits to get licensed).

2) After I Graduated (and while I was in school) I worked for a CPA firm, left around sohpmore year to take a position as a controller for a media company, then graduated and opened my own practice.

>I've recently incorporated a start up food biz I'm working on. I know I need a CPA sooner or later (still pulling all the parts together, expect to start selling June/July time frame). How soon do I need one? Just saving receipts at the moment. How do I pick one? I've put out feelers but haven't gotten any references yet. What do you think of Quickbooks? Seems like the go to software for small biz. Any questions I haven't asked you feel need answering?

1) The most imporant thing for a start up and small business is to accuratley and correctly keep records of everything.
By this, I don't mean to keep receipts. I mean make a spreadsheet, and keep track of everything. Here is what the format should look like:

Date: Memo (what you bought or $ coming in from): Store (or customer): Amount: Bank Account (or cash):

2) You should talk to a CPA or EA soon, and get a better understanding of your tax requirements (sales tax, payroll tax, unemployment, disability, etc).

>I'm actually going to school for accounting and I plan on getting my CPA, do sometime in public to get a feel for the different types of industries and strike out to start my own business. In your professional opinion what type of business is it easy to get into with the potential of netting me an upper-middle class lifestyle? I know a CPA who got into the telecom business and runs a successful mid-size firm but it seems like that's a crowded field.

Taxes. Hands down Taxes. By far the easiest to get into, little barrier to entry, slow start but the best cash flow for years and years to come. Losing clients is hard (unless you fuck up) and they typically stick with you for 10+ years, making the client lifetime value very attractive. Easy to make $100k a year doing taxes, plus you learn the ins and outs of almost all businesses (since they are your clients).

I took what I learned from my clients mistakes, I'm investing in real estate on the side, and I always, always, ALWAYS have an open mind and try to learn from others/my clients who are successful, and from the ones who are not.

>How do I cheat on the CPA exam?

Let me refer you to the AICPA on this one:

.07501-6—Solicitation or disclosure of CPA examination questions and answers. A member who solicits or knowingly discloses the May 1996 or later Uniform CPA Examination question(s) and/or answer(s) without the written authorization of the AICPA shall be considered to have committed an act discreditable to the profession in violation of rule 501 [ET section 501.01].

Also known as, you will lose your license, and all that schooling you paid for.

Sorry it took so long to get back to you guys, hopefully didn't lose you!

is that an eurasier?

The breed is Leonberger

Assuming that I'm somewhat competent at tax at a Big Four, what are the chances of someone making it to partner if they stick around?

Where do people usually exit to at the senior and above level where pay can ever compare?