Unauthorized withdrawals; enrolled agent vs CPA; dependent's taxes
Why bank statements shouldn't sit unopened
I just got around to reconciling the last three monthly statements for a savings account and I found more than $2,000 in electronic withdrawals that I didn't make. I've notified the bank, but how much of the money can I expect to recover?
The bank has no obligation to absorb any losses that occurred more than 60 days after it sent you the oldest of the bank statements showing unauthorized transfers. You'll recoup part or all of the losses that took place within the 60 days after the oldest statement mailed, however. Your maximum potential liability during that time is $500. If the total of the unauthorized transfers made during those 60 days was less than $500, the most you can lose is $50 or the amount illegally transferred within the first two business days-whichever is less-plus the total transferred after two business days.
A colleague says I should have an enrolled agent prepare my tax return this year. How do they differ from CPAs?
Enrolled agents are tax practitioners who are federally licensed and can represent taxpayers in their dealings with the IRS. They're either former IRS agents who worked with the agency for at least five years in positions requiring interpretation or application of the tax code and regulations, or they've passed a comprehensive exam that tests their knowledge of all aspects of the tax code. Enrolled agents' specific focus on taxation makes them quite competent to prepare returns, but it doesn't necessarily mean they're knowledgeable or experienced in dealing with broader business or accounting issues. If you need that kind of expertise, you may be better off seeking a Certified Public Accountant. CPAs are licensed by the states rather than the federal government, however, and not all specialize in taxes, so you'll still need to ask questions before settling on one. Whichever type of tax professional you choose, make sure he or she routinely prepares returns for physicians.
Does being a dependent boost a kid's taxes?
Our 19-year-old son, a college freshman, will take on a part-time job this summer and file a tax return for the first time. If my wife and I claim him as a dependent on our return, will that affect his tax rate?
It won't change his tax rate per se, but it could affect his tax bill in other ways. For instance, if he has any student loans, claiming him as a dependent will prevent him from deducting the interest he pays on them. And he won't be able to take an education credit for any qualified college expenses that he (or you and your spouse) paid on his behalf. If your first concern is to minimize the tax he'll owe, have your accountant explain all the potential ramifications before you claim the dependency exemption.
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