Q: What should I do if I made a mistake on my tax return that I have already filed?
A: It depends on the kind of mistake that you made. Most mathematical errors are caught in the processing of the tax return itself, thus the IRS will recalculate the 1040 and will send you the proper return based on the recalculation, so you don’t have to do anything in that instance. If you did not attach a required schedule, the IRS will contact you and ask for the missing information. If you did not report all your income or did not claim a credit, you should file an amended or corrected return using Form 1040X (PDF), Amended U.S. Individual Income Tax Return.
Q: Why do some companies offer a tax refund in as little as one day, while others do not and is this a good thing?
A: When chain tax preparers offer tax refunds in as little as one day, what they are giving the client is essentially a loan based upon the tax return. The company gives the client the loan in advance of the actual refund, but often for an extremely high fee. My advice is that nobody should take a loan like this as the fees charged are exorbitant for getting your refund just a few weeks quicker. If you want a quick return, file early, don’t wait until April 15.
Q: Is it possible to reduce income taxes if I own a business by shifting income elsewhere?
A: Absolutely. Business owners have the advantage of making decisions that ordinarily they would not be able to make to provide them and their families with advantages. One of these advantages is known as income shifting. In this process, you can hire family members to perform labor and receive reasonable compensation for their services. While paying your son $100,000 per year to fold mailers will not be “reasonable compensation” under the IRS’s position, there is plenty that can be done to shift income and reduce taxes.
By: Basi & Basi at the Center for Financial, Legal and Tax Planning for Transworld M&A Advisors