Answers
Frequently Asked Questions
The questions the firm is asked most often, gathered from the pages that answer them.
Questions by section
Bookkeeping
Read the pageHow often will my books be updated?
The frequency depends on the engagement and the needs of the business. Many businesses benefit from monthly bookkeeping and reconciliation.
Can you help if my books are behind?
Yes. We provide cleanup and catch-up services to bring accounting records current and address prior-period issues.
Do you provide virtual bookkeeping?
Yes. We serve businesses virtually throughout Virginia, Maryland, and Washington, DC, with in-person appointments available in Ruther Glen and Fredericksburg.
Can you coordinate my bookkeeping and tax preparation?
Yes. When we provide both services, the accounting and tax processes can be coordinated so issues can be identified earlier.
Business Formation
Read the pageShould I form an LLC?
An LLC may be appropriate for many businesses, but the decision involves legal, tax, ownership, and operational considerations.
Does forming an LLC automatically change how I'm taxed?
No. LLC tax treatment depends on ownership and any tax elections made.
Can you obtain an EIN?
Yes, this can be included within an appropriate formation engagement.
Can you help with an S corporation election?
Yes, when appropriate.
Tax Planning
Read the pageWhen should I start tax planning?
Planning can occur throughout the year, but significant transactions should ideally be discussed before they occur.
Is tax planning different from tax preparation?
Yes. Tax preparation reports completed transactions. Tax planning evaluates future or upcoming decisions and their potential tax consequences.
Can you calculate estimated tax payments?
Yes. We can evaluate projected income, withholding, prior payments, and other relevant information to determine appropriate estimated payments.
Do you provide tax planning for both businesses and individuals?
Yes.
Entity Selection
Read the pageIs an LLC the same as an S corporation?
No. An LLC is generally a state-law entity, while S corporation status is a federal tax election.
When should I consider changing entity structure?
A review may be appropriate when profitability, ownership, compensation, business activities, or long-term plans change significantly.
Does an S corporation always save taxes?
No. The result depends on the specific facts and the additional costs and requirements associated with the election.
Can you work with my attorney?
Yes. Tax and legal considerations frequently overlap during entity structuring, and coordination can be valuable.
Individuals
Read the pageDo I need a CPA to prepare my individual tax return?
Not every tax return requires a CPA. Professional assistance can become particularly valuable when you have business income, rental properties, investments, K-1s, multiple states, significant transactions, or other complex tax matters.
What's the difference between tax preparation and tax planning?
Tax preparation primarily reports transactions that have already occurred. Tax planning looks forward and evaluates decisions that may affect your future tax liability.
Can you calculate my quarterly estimated taxes?
Yes. We can project federal and state tax liabilities based on expected income, withholding, investments, business income, and other relevant information.
Can you help with rental property taxes?
Yes. We assist with rental income and expenses, depreciation, passive losses, property sales, and other tax issues associated with rental real estate.
Do you prepare multi-state returns?
Yes. We assist clients whose circumstances require filing income tax returns in multiple states.
Can you help if I receive an IRS or state tax notice?
Yes. We can review tax notices, determine what information the agency is requesting, and assist with an appropriate response.
Payroll
Read the pageHow often can payroll be processed?
Payroll schedules can vary depending on the business and engagement, including weekly, biweekly, semimonthly, or monthly schedules where appropriate.
Do you handle payroll tax filings?
Depending on the engagement, we can assist with federal and state payroll tax filings and deposits.
Can you help correct prior payroll problems?
Yes. We can review payroll records and help determine the appropriate steps when prior filings, deposits, or payroll records require correction.
Can payroll be coordinated with my bookkeeping?
Yes. Integrating payroll with bookkeeping helps ensure wages, taxes, and liabilities are properly reflected in your accounting records.
Tax Preparation
Read the pageCan you prepare both my business and individual returns?
Yes. Coordinating business and individual filings can be particularly valuable for owners of pass-through entities.
Do you e-file tax returns?
Yes, eligible returns are generally filed electronically.
Can you prepare returns for multiple states?
Yes, when applicable.
What documents will you need?
The documents required depend on your situation. We provide clients with guidance regarding the information needed for preparation.
Business Consulting
Read the pageDo I need to be an existing accounting client?
Not necessarily. The appropriate scope depends on the issue and the information required.
Can you help with financial projections?
Yes, when projections are appropriate to the engagement and adequate underlying information is available.
Do you provide legal advice?
No. We provide accounting, tax, and business guidance. Legal matters should be addressed with qualified legal counsel.
Is this a Fractional CFO service?
No. Our Business Consulting service provides CPA-level accounting, tax, and business guidance without positioning the firm as an outsourced CFO.
Business Tax
Read the pageWhen should a business consider an S corporation election?
An S corporation can be beneficial in some circumstances, but the decision should consider profitability, reasonable compensation, payroll requirements, state taxes, administrative costs, and the owner's overall tax situation.
Does an LLC file its own tax return?
It depends on the number of owners and the tax classification elected. An LLC is a legal entity type and can be taxed in several different ways.
Can you prepare the business return and owners' individual returns?
Yes.
Can you help with quarterly estimated taxes?
Yes.
Financial Reporting
Read the pageHow often should financial statements be prepared?
It depends on the organization. Many businesses benefit from monthly reporting, while some organizations may require quarterly or other reporting schedules.
What's the difference between bookkeeping and financial reporting?
Bookkeeping focuses on maintaining accurate accounting records. Financial reporting organizes that accounting information into statements and reports that help users understand financial performance and position.
Can you prepare reports for a lender or board?
Yes, depending on the reporting requirements and scope of the engagement.
Can you help me understand my financial statements?
Yes. We can help explain significant balances, trends, and changes reflected in the reports.
Small Business Owners
Read the pageShould my LLC elect S corporation taxation?
Possibly. The potential benefit depends on profitability, reasonable compensation, payroll costs, state taxation, administrative requirements, and your overall circumstances.
What is reasonable compensation?
Reasonable compensation is the salary an S corporation shareholder-employee should receive for services performed. Factors can include responsibilities, experience, time devoted to the business, and comparable compensation.
How often should my books be reconciled?
For most active businesses, bank and credit card accounts should generally be reconciled monthly.
Can you handle both my business and individual tax returns?
Yes. Coordinating the two can be particularly helpful for owners of pass-through businesses because business income ultimately affects the owner's individual return.
Do you provide year-round tax planning?
Yes. We encourage business owners to plan before year-end rather than waiting until the tax return is prepared.
When should I change business entities?
Entity structure should be reviewed when profitability, ownership, compensation, growth plans, or tax circumstances change materially.
Controller Support
Read the pageHow is Controller Support different from bookkeeping?
Bookkeeping handles day-to-day accounting activity. Controller Support provides higher-level review, oversight, financial close coordination, and accounting process guidance.
Do I need a full-time controller?
Not necessarily. Organizations that have become too complex for basic bookkeeping but do not require a full-time controller may benefit from outsourced controller-level support.
Can you work with our existing bookkeeper?
Yes. Controller Support can complement an existing internal or external bookkeeping function.
Is this Fractional CFO service?
No. Controller Support focuses primarily on accounting oversight, financial reporting, controls, and accounting processes.
Government Contracting
Read the pageWhat is the difference between a direct and indirect cost?
A direct cost can generally be identified with a specific contract or cost objective. Indirect costs benefit multiple contracts or the overall business and are allocated using an appropriate methodology.
What are indirect cost pools?
Indirect cost pools accumulate related expenses such as fringe, overhead, or G&A so those costs can be allocated to appropriate contracts or cost objectives.
Does QuickBooks automatically make my company DCAA compliant?
No accounting software by itself guarantees compliance. The configuration of the accounting system and the company's underlying policies, procedures, timekeeping, and controls are important.
Why is timekeeping so important for government contractors?
Labor costs often represent a significant contract expense. Accurate timekeeping helps support proper labor allocation and contract costing.
Can government contractors elect S corporation taxation?
Potentially. The appropriate tax classification depends on ownership, profitability, compensation, state considerations, and other factors.
Can you help determine whether a cost is allowable under a government contract?
We can assist with accounting classification and applicable tax/accounting considerations. Contract-specific allowability may also require review of the FAR, contract terms, or specialized legal/contract guidance.
Individual Tax
Read the pageDo I need a CPA for my individual tax return?
Not every taxpayer does. Professional assistance becomes more valuable as income sources, investments, businesses, rental properties, K-1s, or multi-state obligations become more complex.
Can you prepare returns for multiple states?
Yes.
Can you help determine quarterly estimated payments?
Yes.
Do you provide investment advice?
Our work focuses on the tax consequences of financial and investment decisions. We do not provide investment-management services.
Strategic Business Guidance
Read the pageHow is Strategic Business Guidance different from Business Consulting?
Business Consulting can address a specific financial or operational issue. Strategic Business Guidance is generally broader and focuses on significant or longer-term business decisions.
Do you help create budgets and forecasts?
Yes, where appropriate to the engagement.
Can you advise on acquisitions?
We can assist with financial and tax analysis related to potential acquisitions. Legal, valuation, financing, and other specialized matters may require additional professionals.
Is this investment or financial advisory?
No. Our work focuses on accounting, tax, and business considerations. We do not provide investment-management services.
Architecture, Engineering & Construction
Read the pageWhat is percentage-of-completion accounting?
It is a method of recognizing revenue and income from certain long-term contracts as the work progresses.
What is a WIP schedule?
A work-in-progress schedule summarizes active projects and typically compares contract values, estimated costs, costs incurred, billings, and recognized revenue.
What is overbilling?
Overbilling generally occurs when amounts billed exceed revenue recognized based on project progress.
What is underbilling?
Underbilling generally occurs when recognized revenue exceeds amounts billed to the customer.
Why is job costing important?
Company-wide profit can hide poorly performing projects. Job costing allows owners to see profitability at the project level.
Can construction equipment be deducted immediately?
Certain qualifying property may be eligible for accelerated deductions, including Section 179 or bonus depreciation, depending on applicable law and circumstances.
IRS & State Representation
Read the pageShould I ignore an IRS notice if I think it is wrong?
No. Notices generally contain response deadlines. Even when the IRS is incorrect, the matter should be addressed.
Can you communicate with the IRS for me?
When properly authorized and within the scope of the engagement, we can communicate with the IRS or applicable state taxing authority on your behalf.
Can you help if I haven't filed for several years?
Yes. We can help determine which returns need to be prepared and develop a process for bringing filings current.
Can penalties be removed?
Penalty relief may be available depending on the type of penalty, compliance history, facts, and applicable rules. Approval is determined by the taxing authority.
Hospitality
Read the pageHow should POS sales be reconciled?
POS reports should be compared with cash receipts, merchant processor deposits, delivery platforms, refunds, discounts, gift cards, and sales tax activity.
Are employee tips taxable?
Generally, yes. Tips are taxable compensation and can create employee and employer reporting requirements.
What is the FICA tip credit?
Eligible food and beverage employers may qualify for a federal income tax credit for certain employer Social Security and Medicare taxes paid on employee tips.
Why should I track food and labor percentages?
They are two of the largest variable costs in many hospitality businesses and can materially affect profitability.
Can restaurant renovations qualify for depreciation deductions?
Certain improvements and equipment may qualify for Section 179, bonus depreciation, or other depreciation treatment depending on the property and applicable law.
Should each restaurant location have separate financial reporting?
Location-level reporting can be extremely useful for comparing sales, labor, food costs, margins, and overall profitability.
Professional Service Firms
Read the pageShould my professional firm be an S corporation or partnership?
It depends on ownership, profitability, compensation, benefits, state professional-entity rules, and future ownership plans.
What are guaranteed payments?
Guaranteed payments are generally payments made by a partnership to a partner without regard to partnership income and receive different tax treatment from ordinary distributions.
What is utilization?
Utilization generally measures the proportion of available professional time spent on billable or productive client work.
Why should we measure profitability by client?
Firm-wide profitability can hide clients or engagements requiring significantly more resources than their fees justify.
Does the QBI deduction apply to professional services?
Potentially. Certain professional businesses are classified as specified service trades or businesses, which can affect the availability of the Section 199A deduction based on applicable rules and taxable income.
Why are receivables so important for professional firms?
A profitable engagement does not generate usable cash until the firm bills and collects the amount owed.
Veterinary
Read the pageCan a veterinary practice elect S corporation taxation?
Potentially. Profitability, owner compensation, payroll, state rules, and other factors should be evaluated.
How should veterinary inventory be tracked?
Practices should establish consistent procedures for recording and monitoring pharmaceuticals, supplies, food, and retail products that materially affect financial reporting.
Can veterinary equipment be depreciated?
Generally, yes. Qualifying assets may also be eligible for accelerated deductions depending on applicable tax law.
What tax issues arise when buying a practice?
Purchase-price allocation, goodwill, equipment, inventory, financing, and transaction structure can all affect taxation.
Should practice owners review financial statements monthly?
Monthly financial statements can help identify changes in revenue, payroll, inventory costs, operating expenses, and cash flow before problems become larger.
Can you work with my practice-management system reports?
We can use information from practice-management systems as part of the accounting and reconciliation process, depending on the system and records available.
Nonprofit Organizations
Read the pageWhat is fund accounting?
Fund accounting helps nonprofit organizations track resources based on their purpose and restrictions.
Which Form 990 does our nonprofit need to file?
The appropriate filing generally depends on gross receipts, assets, organization type, and other circumstances.
Can a nonprofit owe income tax?
Yes. Certain income from activities unrelated to the organization's exempt purpose may be taxable.
What's the difference between Form 1023 and Form 1023-EZ?
Form 1023-EZ is a streamlined exemption application available only to organizations meeting specific eligibility requirements.
What are donor-restricted funds?
These are contributions whose use has been limited by the donor for a particular purpose or period.
Why are internal controls important for a small nonprofit?
Even small organizations benefit from controls over cash, payments, approvals, and financial reporting. When staffing is limited, controls can be designed around the resources available.
Healthcare
Read the pageShould my medical practice elect S corporation taxation?
Potentially. Professional-entity rules, profitability, owner compensation, payroll, benefits, and state taxation should all be considered.
How should insurance reimbursements be reconciled?
Accounting should account for amounts billed, contractual adjustments, insurer payments, patient responsibility, write-offs, and actual deposits.
Can medical equipment qualify for accelerated depreciation?
Potentially. Certain qualifying assets may be eligible for Section 179, bonus depreciation, or other depreciation methods.
What should I consider before purchasing a practice?
Consider the transaction structure, equipment, receivables, goodwill, patient relationships, financing, liabilities, and purchase-price allocation.
Why should I monitor accounts receivable?
Growing receivables may indicate collection problems even when reported revenue remains strong.
Can you coordinate my business and personal tax planning?
Yes. For practice owners, coordinating entity-level and individual tax planning can provide a more complete picture.
Homeowners Associations
Read the pageIs an HOA automatically tax-exempt?
No. State nonprofit corporate status does not automatically create federal income tax exemption.
Should our HOA file Form 1120-H or Form 1120?
It depends on the association's income, expenses, qualification requirements, and tax position. The alternatives can be evaluated annually.
What's the difference between operating and reserve funds?
Operating funds generally support recurring annual expenses. Reserve funds are generally accumulated for significant future repairs, replacements, and capital projects.
Are homeowner assessments taxable?
Tax treatment depends on the nature and use of the assessments, the association's filing method, and other facts.
Does interest earned on reserve accounts matter for taxes?
Yes. Interest and other investment income can affect an association's taxable income.
What happens if the association sells property or receives condemnation proceeds?
These transactions can create significant federal and state tax issues and should be evaluated individually rather than treated as routine operating income.
Can you provide reports directly to the board?
Yes. We can structure financial reporting to help boards understand the association's financial position and activity.
Insurance
Read the pageHow should commission income be recorded?
Commission income should be reconciled with carrier statements, deposits, receivables, renewals, bonuses, and chargebacks to create a more complete record of agency revenue.
Should an independent insurance agent elect S corporation taxation?
Potentially. Profitability, reasonable compensation, payroll costs, state taxation, and administrative requirements should be evaluated first.
How is a purchased book of business treated for tax purposes?
The purchase price may need to be allocated among customer-based intangibles, goodwill, restrictive covenants, and other assets. Certain acquired intangibles may generally be amortized under IRC §197.
What happens when I sell my insurance agency?
The tax consequences depend on entity structure, transaction structure, purchase-price allocation, goodwill, other assets, and payment terms.
Should I track revenue by producer?
For agencies with multiple producers, producer-level reporting can help evaluate productivity, compensation, and profitability.
How should commission chargebacks be handled?
Chargebacks should be properly recorded and reconciled with carrier statements so revenue and receivables are not overstated.
Can you help evaluate the purchase of another agency?
We can help analyze the accounting, tax, cash flow, and financial implications of a proposed acquisition.
Real Estate & Property Investors
Read the pageCan I deduct repairs made to my rental property?
Some repairs may be currently deductible, while improvements that better, restore, or adapt property may need to be capitalized and depreciated. The proper treatment depends on the nature and circumstances of the expenditure.
Can depreciation reduce the taxes on my rental income?
Generally, rental buildings and qualifying property are depreciated over applicable recovery periods. Depreciation can reduce current taxable rental income, although depreciation may also affect the tax consequences when the property is eventually sold.
Should each rental property have its own LLC?
Not necessarily. The appropriate ownership structure depends on factors including the number and type of properties, ownership arrangements, financing, administrative costs, tax considerations, and liability concerns. Legal liability questions should be discussed with an attorney.
What is a 1031 exchange?
A §1031 exchange can allow qualifying real property held for investment or business purposes to be exchanged for other qualifying real property while deferring recognition of certain gains. Strict requirements and deadlines apply.
Do I qualify as a real estate professional for tax purposes?
Real estate professional status is determined under specific federal tax rules involving the taxpayer's activities, hours, and participation. Owning several rental properties by itself does not automatically qualify someone for the tax treatment.
Can you help if I own rental properties in multiple states?
Yes. We can assist with federal and applicable state income tax reporting and help evaluate how owning or selling rental properties in multiple jurisdictions affects your filing obligations.