SWF ISO DC CPA
February 3, 2010 11:41 AM Subscribe
Looking for a recommendation for a good CPA or accountant in the DC, NoVA, or Southern Maryland area to field a set of somewhat-complicated questions about taxes. (Read: H&R Block is not going to cut it here.) The problem? All my close friends use TurboTax, and I'm reluctant to mass e-mail my entire contact list for recommendations, since I think the type of CPA (or accountant--is there a difference?) might matter in this situation and figuring out what flavor I need means disclosing more personal financial details than I'm comfortable with.
I'm in the happy position of having inherited a share of a family member's business interest, but it's pretty opaque to me how I should be claiming this money on my taxes. The family member in question was a self-employed salesman, and what I've inherited is the residual income that continues to be generated by those past sales, although no more work is actively being done for the company. I'm clueless as to whether I need to pay self-employment taxes on this money (or report it as some other type of income?). Complicating the whole matter is the fact that I receive a 1099 from a family member who was the original business partner, not from the company that actually pays the partnership. The family member cutting the check is, to put it politely, totally clueless about taxes in general, uses H&R Block herself rather than a real accountant, and can't answer any questions about how I should be reporting this to the IRS.
I know, I know: see an accountant. But what kind? Which one? Once I'm there, what do I ask to figure out whether this person is any good? (And, um, how much will this cost, generally? We're not talking about a ton of money here, and I don't want to pay more than I'm actually receiving from the inheritance.) Any personal recommendations for a good CPA would be appreciated, particularly one who might be able to help with sorting out this mess. If you don't know anyone in the DC/NoVA area, but you know what type of CPA or accountant I should be looking for--one who specializes in some specific area--that would also be welcome. I'm understandably hesitant to just rely on Google for this, but I have no clue how else to find someone good without waaaaay oversharing personal info with acquaintances.
Questions can be sent to dc.cpa.question@gmail.com.
I'm in the happy position of having inherited a share of a family member's business interest, but it's pretty opaque to me how I should be claiming this money on my taxes. The family member in question was a self-employed salesman, and what I've inherited is the residual income that continues to be generated by those past sales, although no more work is actively being done for the company. I'm clueless as to whether I need to pay self-employment taxes on this money (or report it as some other type of income?). Complicating the whole matter is the fact that I receive a 1099 from a family member who was the original business partner, not from the company that actually pays the partnership. The family member cutting the check is, to put it politely, totally clueless about taxes in general, uses H&R Block herself rather than a real accountant, and can't answer any questions about how I should be reporting this to the IRS.
I know, I know: see an accountant. But what kind? Which one? Once I'm there, what do I ask to figure out whether this person is any good? (And, um, how much will this cost, generally? We're not talking about a ton of money here, and I don't want to pay more than I'm actually receiving from the inheritance.) Any personal recommendations for a good CPA would be appreciated, particularly one who might be able to help with sorting out this mess. If you don't know anyone in the DC/NoVA area, but you know what type of CPA or accountant I should be looking for--one who specializes in some specific area--that would also be welcome. I'm understandably hesitant to just rely on Google for this, but I have no clue how else to find someone good without waaaaay oversharing personal info with acquaintances.
Questions can be sent to dc.cpa.question@gmail.com.
Can't help with specific recommendations, but hopefully I can offer a few tidbits that may be of use. (Obligatory disclaimer: I am not a CPA, not your accountant, and this is not legal or tax advice. I hold a post-bac certificate in accounting and have a special interest in taxation.)
Your situation sounds complex enough that it would be a good idea to consult an accountant for advice. Whether or not you engage an accountant who is also a CPA is up to you. The CPA credential is the most widely recognized professional designation in the USA. All CPAS are accountants, but not all accountants are CPAs. CPAs are required to complete educational and work experience requirements, pass a grueling exam, and adhere to a strict code of ethics. A CPA's fees will, understandably, be higher than those of a non-CPA.
In your case, I would seek advice on how to report this income from someone who specializes in income taxation of trusts and estates, especially since laws in this area are complex and ever-changing. In the USA, this will very likely be a CPA.
I doubt you will need to worry about self-employment taxes on this income, as you are not self-employed. This income is an inheritance; you are a beneficiary. Gift and inheritance income is generally not taxable. But whether or not income is taxed to a fiduciary entity (e.g., your family member's estate or trust) or to a beneficiary (you, in this case) depends on several factors, including the nature of the income and the timing of distributions. Ask your accountant about this.
Partnerships themselves are not taxable entities; they are "flow-through" entities, which just means that all income, gains, losses, etc., are passed through to the partners or shareholders. But as I understand it, if you have inherited partnership income and are required to report it, you should have been issued a Form 1041 Schedule K-1 (note: link is a PDF), rather than a Form 1099-INT. Ask your accountant about this, too.
Hope that helps get you started. Oh, and here is an article on how to hire a good accountant. It's tailored toward small businesses, but it may help answer some of your questions, or at least better understand how to determine the right questions to ask your accountant. Good luck!
posted by velvet winter at 5:59 PM on February 3, 2010
Your situation sounds complex enough that it would be a good idea to consult an accountant for advice. Whether or not you engage an accountant who is also a CPA is up to you. The CPA credential is the most widely recognized professional designation in the USA. All CPAS are accountants, but not all accountants are CPAs. CPAs are required to complete educational and work experience requirements, pass a grueling exam, and adhere to a strict code of ethics. A CPA's fees will, understandably, be higher than those of a non-CPA.
In your case, I would seek advice on how to report this income from someone who specializes in income taxation of trusts and estates, especially since laws in this area are complex and ever-changing. In the USA, this will very likely be a CPA.
I doubt you will need to worry about self-employment taxes on this income, as you are not self-employed. This income is an inheritance; you are a beneficiary. Gift and inheritance income is generally not taxable. But whether or not income is taxed to a fiduciary entity (e.g., your family member's estate or trust) or to a beneficiary (you, in this case) depends on several factors, including the nature of the income and the timing of distributions. Ask your accountant about this.
Partnerships themselves are not taxable entities; they are "flow-through" entities, which just means that all income, gains, losses, etc., are passed through to the partners or shareholders. But as I understand it, if you have inherited partnership income and are required to report it, you should have been issued a Form 1041 Schedule K-1 (note: link is a PDF), rather than a Form 1099-INT. Ask your accountant about this, too.
Hope that helps get you started. Oh, and here is an article on how to hire a good accountant. It's tailored toward small businesses, but it may help answer some of your questions, or at least better understand how to determine the right questions to ask your accountant. Good luck!
posted by velvet winter at 5:59 PM on February 3, 2010
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Firstly you need a registered CPA. The following link is to the Greater Washington Society of CPA's. You will need to meet a few and provide a high level overview of your situation, a few more facts than you provide above. A good CPA will give you an overview of how they can help and an estimated cost. Once you meet a few I recommend you basing your decision on who you feel most comfortable to discuss and disclose your personal financial information with.
http://www.gwscpa.org/tiertwo.asp?bid=51
posted by taxpayerlotus at 2:01 PM on February 3, 2010