Frequently Asked Questions

How long should I keep my tax records?

We believe you are safe to keep your records for four years. That gets you at least equal to both statutes of limitations for the IRS and State. Basically, you should keep any document that reflects income (i.e. W-2, interest, dividend, unemployment, etc) and tax deductions (i.e mortgage statement, charitable donations, medical expenses, license plate fee, etc.). In addition, you should keep records of items you purchased but have not sold yet, like real estate and stocks. If you are in business you must keep all records like bank statements, customer invoices, and any document to support a deduction for the same period. You should also keep permanent records like incorporation documents, leases, loan documents, and fixed assets purchases for as long as they remain in effect.

When do I have to take money out of my IRA, 401K, or Pension plan?

In the year you turn 70½, you must take a Required Minimum Distribution (RMD). The RMD is calculated based on the balance in all tax deferred accounts at December 31st of the previous year. There are heavy penalties for non-compliance, so ask your financial advisor if you qualify. The RMD is a “minimum” calculation, so you could take out more than the RMD. You may also take the money out at anytime during the year, and more than once if you choose, as long as the total equals or exceeds the RMD.

How long can I take my child as a dependent?

You may take your child every year up through age 18, between the ages of 19 and 23 if a full-time student (regardless of the amount of income), or any year (regardless of age) if the child becomes totally and permanently disabled. The parents must provide more than half the support of the child for the calendar year (what the child makes in that year counts as his/her support, except when in college) and the child must live with the parents for at least half the year (away at college counts as living with the parents). Scholarships do NOT count as the child’s or parent’s support. If the child fails to meet the criteria for age or principal place of abode, he/she could still be claimed as a dependent if his/her annual income is less than the IRS required minimum.

Is it better to file Married Separate or Married Joint?

Typically, you will pay less tax if you file Joint. Married Filing Separate can be beneficial if one spouse has low income and high medical or charitable donations. Other unusual scenarios may apply, so feel free to ask.

How many exemptions should I claim on my W-4 when I start a new job or get work for the first time?

Remember, withholding from your pay is only meant to have enough taken out to avoid penalties. I always recommend taking the least amount out as possible to avoid leaving your money with the government agencies. However, as a guide, filing 0 exemptions (Single or Married) should generate a larger refund, filing 1 exemption should result in a smaller refund, and filing 2 exemptions would be about breakeven if you don’t itemize or have any other dependents. If you wish to put a number higher than 2, then you should contact us first (there are severe penalties for under withholding).

If I start my own business what type of entity should I form?

In general, if you are a sole owner an S Corporation is the best option. If you have multiple owners, especially including a corporation, then an LLC might be your best option. Any other variation of owners requires a discussion, so please contact us.

Do I have to report a bank account in a foreign country?

Yes, but only if at any time during the year it had a balance of $10,000 or more. A U.S. citizen must fill out the required form and submit it by April 15th of the year following the one in which you had accumulated $10,000. This requirement applies to dual citizens as well. For instance, if you hold Canadian and U.S. citizenship and you have an account in Canada with a balance of $10,001 for only one day, the IRS rule says you must submit the form. The filing is annual, so if for any entire year the balance was under $10,000, no filing is necessary. The term "account" also includes a stock broker investment account. The IRS is making this a hot topic and there are sizeable fines for noncompliance. Please inform us if you have any bank account outside the U.S. (Canada and Mexico count) that had $10,000 or more at any time during the year.


If you have any other questions or require clarification on the FAQ’s listed above, please feel free to contact us. Please refer to the “Contact Us” tab on the home page for guidance.