Napa and Solano tax advice for individuals and small businesses:


  1. What are my options if I can’t file my tax return on time? Can I get an extension of time?

The important thing to understand is that an extension of time to file your tax return is a simple process which gives you until October 15th to file your tax return. However, if you owe any tax liability, you must pay that liability when your tax return first becomes due on April 15th, even if it is only your best estimate of your tax liability.

Small businesses who are operating as an LLC or Corporation have different tax rules and deadlines and you should always consult your tax professional regarding these requirements and deadlines.

Most importantly, LLC’s and Corporations (S-Corps, C-Corps) must timely pay the annual minimum estimated tax of $800.00 per year, regardless of whether the business entity made any money or not. Failure to timely pay the minimum tax can result in serious penalties and interest being assessed by the Franchise Tax Board and the entity may become suspended from doing business by the Secretary of State until the tax arrearages are cleared up.

  1. What if I can’t pay what I owe the I.R.S. or the Franchise Tax Board at the time the return is due? Are there any options?

It is always best to file your tax return on time, even if you can’t pay the full amount that is due. For any amount due that remains unpaid, you will be charged interest for unpaid amounts (IRS charges ( .5% ) per month interest. However, when you don’t file on time an additional penalty is assessed for “late filing” which is substantially higher at (4.5%) per annum.

In most cases, your tax professional can assist you with setting up an installment payment plan or explain other options that may be available to you.

  1. Is there a limitation as to the number of over-due tax returns that I can file?

There is no limit to how far back you can file tax returns for years that you may not have filed. However, there are limitations about how many years back you can amend a previously filed tax return. You should know that if you are due refunds for any of the back tax returns you file, you can only receive refunds due to you for the last three most recent years (the Three Year Limitation Rule imposed by the I.R.S.) and for four years (the Four Year Limitation Rule imposed by the Franchise Tax Board).

  1. What should I do if I receive a Collection Demand letter from the Internal Revenue Service or the Franchise Tax Board?

You should never ignore a collection/demand letter that you may receive from the I.R.S. or the Franchise Tax Board, even if you believe that they are in error. If you haven’t filed a tax return for one or more years, you will eventually hear from the tax entity to whom the tax return is overdue.

If you have received a collection or demand letter from any tax entity, you should immediately contact a tax professional and find out your options and what you need to do to resolve the tax arrearage with the tax entity. If you fail to do so, you could find your wages garnished and worse. Keep in mind that any taxes, penalties and interest assessed continue to accrue until you have reached a resolution with the tax entity. Interest continues to accrue until the indebtedness is paid in full.

Keep in mind that the IRS has the authority to file a tax return for you and assess what they believe to be your tax liability based upon reported income. They will not give you the benefit of tax deductions and your tax liability will be much higher in that situation than if you filed your own return.

  1. I owe a lot of tax debt to the I.R.S.   I’ve seen a lot of commercials on T.V. advertising that they can substantially reduce my I.R.S. debt; is this really possible and do I have to contact one of the advertisers on T.V. to get this relief?

The I.R.S. has expanded its programs to help consumer’s gain control of substantial tax indebtedness to the I.R.S. which includes the ability for the tax payer to submit Installment Payment Plans or to seek compromise of their indebtedness with the I.R.S.

We can help you with this process and you do not have to search for one of the many advertisers in the media to help you with real solutions to gain control of your tax indebtedness.

  1. What if my tax preparer made an error on my tax return which resulted in assessment of additional taxes, penalties and interest?

We all make mistakes. To err is human. However when an error has occurred in the preparation of your tax return, it can be the fault of the preparer or the client who did not provide significant information necessary to prepare an accurate tax return. In the event that the error was caused by the Tax Preparer’s error or omission, you should go back to that tax preparer and explain the situation and ask him/her to prepare an amended return.

If the error or omission was the Tax Preparer’s fault, the preparer should always prepare the amended return at his/her cost and also pay any penalties or interest that occurred as a result of the error.

If the error was the taxpayer’s fault, then the taxpayer is responsible for the fall-out from the erroneously filed return which may include additional fees to be paid to the tax preparer for the consultation and review of the error and for preparation of the amended tax return. Any penalties and interest due would then be the responsibility of the tax preparer.

In the event that you cannot find your previous tax preparer or do not trust that preparer to resolve the error, you should seek the advice of another tax preparer who is licensed and experienced in the preparation of tax returns and he/she can better advise you of the situation and provide you with options.

  1. What is the best option for a small business start up? I am confused about the differences, in terms of taxation, between a sole proprietor/general partnership and an LLC or Corporation.

Choosing the type of business entity for your Small Business will be one of the most important decisions you will make when planning a business start up. There are very big differences in how taxation is treated between the various types of business entities.

Your professional tax preparer can assist you with evaluating the pro’s and con’s of each type of business entity and how it would affect the tax liability, for you as an individual and for your business entity.