Low-Income Taxpayer Clinic

If you would have difficulty paying for professional representation and your income is less than the amount listed in this brochure, you may qualify for the assistance of the NM Low-Income Taxpayer Clinic. If you are located outside of New Mexico, you here a list of LITCs in other states.

Should business owners prepare their own returns?

Preparing one's own personal income tax returns is not necessarily difficult. Many people have straightforward income from jobs and only a few deductions. Business returns are another story. 

I've seen many returns prepared by business owners. A number of them contained mistakes that resulted in larger tax bills than were necessary. The most common is not being aware of what expenditures might be deductible in the first place. Other returns get audited, not so much because of the deductions they took, but in the way the deductions were presented on their returns. 

One example is a N.M. gross receipts tax case where the return contained the wrong standard industry code. The code was for a real estate development business. The owner was actually a real estate sales associate. In N.M. those people are not subject to GRT. Using the wrong SIC code caused N.M. Taxation & Revenue Dept. to mistakenly believe this was a taxable business that had't reported its GRT. In the end no tax was due. Nevertheless, there were other consequences. Understandably, the owner worried a lot about having to undergo an audit.  The owner had to take time away from earning their living. And they paid for professional representation. (They could have represented themselves; but, hat's a topic for another discussion.)

Another case involved a return where the deduction for office expenses included other types of expenses. The owner used it as a sort a catch-all because they shoehorned everything that wasn't a preprinted line item into office expenses. The result was that the amount of the office supplies deduction was unusually large compared with the business's sales. The IRS noticed this and flagged the return for an audit. While many of the misclassified expenses were legitimate, the IRS uncovered some that weren't.

How about sharing your stories of what went wrong because you prepared your own return or the success you had by having your return professionally prepared.

Articles on my website

FOR EVERYONE

• Are estimated taxes really estimates?
• Do's and don’ts if you get a letter from the IRS.
• How can I minimize the estimated tax penalty?
• How do I correct a tax return?
• How does the IRS contact taxpayers?
• How do I know if my donation is deductible?
• I plan to donate my time to charity. Can I get a deduction for my travel expenses?
• What do I need to do if I want to deduct charitable donations?
• How do I get copies of my tax returns and transcripts?
• How long should I keep my tax records?
• I have bank accounts, brokerage accounts & retirement accounts outside the United States. Do I have to report them?
• I'm thinking about retiring early. What sorts of tax information should I know about?
• I've heard about the sharing economy. Does it affect my taxes?
• What are amended tax returns?
• What are the tax ramifications of having a hobby?

FOR BUSINESSES

• I didn't get a 1099. Does that mean the money I received is not taxable?
• My business has been issuing 1099s to workers who are really employees. What can I do to correct this?
• Who is supposed to get a 1099?
• Three things to know when starting a business.
• How do I determine whether the individuals providing services are employees or independent contractors?
• I use my home for my business. Am I allowed to take a deduction for that?
• What do I need to know about recordkeeping?
• Independent contractors are businesses.
• What are the taxes that self-employed people have to pay?

TAX PROBLEM RESOLUTION

• What happens if I default on my installment agreement?
• What does tax problem resolution mean?
• If I have a problem with the IRS do I have to deal with it by myself?
• I owe the IRS more money than I can pay. What are my options?
• What is a taxpayer representative?

NEW MEXICO

• What is the New Mexico tax amnesty I've heard about?
• Is it true that independent contractors owe New Mexico gross receipts taxes?
• Isn't the New Mexico gross receipts tax the same as sales tax?