Technical Questions How many allowances should I claim for withholding at work on Form W-4? Why did I receive a notice from Pennsylvania regarding underpayment of taxes? Should I buy or lease my next business vehicle? Do I have to make estimated payments of my tax liability? Will I owe tax if I sell my home? How much tax will I owe if I sell my rental property? Should I be exercising my employee stock options? What type of entity should I use for my new business? What are the 2007 and 2008 PA personal income tax rates? Administrative Questions How is the best way to get my tax information to you? How long will it take to prepare my tax return? How can I check the status of my return? How will I know when my return is ready? Can I electronically file? How are your fees determined? What is the best way to get questions answered during tax season?  Technical Answers  1. How many allowances should I claim for withholding at work on Form W-4? Two entries are required on Form W-4 in addition to your name, address and social security number.  The first is your filing status.  The choices are "Married", "Single" and "Married, but withhold at the single rate".  They should more properly be labeled "Married and my spouse does not work", "Single" and "Married and my spouse works", respectively.  Select the appropriate filing status based on your marital status and whether your spouse works. The second entry is the number of allowances you are claiming.  To calculate the correct figure, add your total income for which there is no withholding (dividends, interest, pension and IRA distributions with no withholding, taxable social security, etc.) and subtract your allowable itemized deductions and personal exemptions.  Your prior year return can be used as a guide with adjustments for changes to income or deductions.  Divide the result by $3,500 for 2008.  The result is the number of allowances you can claim to breakeven on your tax return.  Married couples should aggregate their income and deductions for this purpose and can split the allowances any way they see fit. 2.Why did I receive a notice from Pennsylvania? There are several reasons but the Pennsylvania Department of Revenue is now sending notices on a regular basis to those who owe more than $221 of taxes on their prior year return.  The notice assesses interest for not making quarterly estimated payments.  In order to avoid future notices, quarterly estimates should be made.  For further information, please fax the notice to us for review.  3. Should I buy or lease my next business vehicle? There is a calculator included on this website which analyzes the exact figures involved in this decision.  In general, there are three factors.  They are the cost of the vehicle, the length of time you plan to use the vehicle for business and the number of miles you plan to drive per year.  Lower costs, longer holding periods and higher miles generally favor purchased vehicles.  Higher costs, shorter holding periods and lower miles generally favor leased vehicles. 4. Do I have to make estimated payments of my tax liability? Estimated payments are normally required if you have significant income which does not have withholding.  This includes, but is not limited to interest, dividend, business, IRA, pension, trust and social security income.  Payments are generally not required if you meet one of two exceptions.  The first is that your current year withholding exceeds your prior year tax liability. The second applies if your balance due at filing is less than 10% of your current year liability.  The first exception increases to 110% of your prior year tax liability if your prior year adjusted gross income exceeded $150,000.  The second exception applies on a quarterly basis.  Federal, state and local estimates may be required.  We can help you apply these complex rules to your particular situation. 5. Will I owe tax if I sell my home? The rules covering taxation of home sales have been significantly relaxed.  Reinvestment of sale proceeds is no longer a requirement for exclusion of gain.  Neither is reaching age 55. Up to $500,000 of gain can now be excluded on a joint tax return ($250,000, if single) if you have lived in the house for at least two of the previous five years.  This is true regardless of your age or whether you buy another home.  If you had an office in the home or rented it while you owned it, you may owe tax on depreciation you have taken.  Also, Pennsylvania now excludes the entire gain from a home sale unless you used the home for business.  6. How much tax will I owe if I sell my rental property? Capital gains on the sale of a rental property are generally taxed the same as stock gains at a maximum rate of 15% except that recapture of depreciation taken on the building is taxed at a maximum rate of 25%.  No exclusion of gain is allowed similar to the sale of your home discussed in Item 5 above.  Gain can be deferred in a Section 1031 like kind exchange by swapping the property for similar property.  Because like kind exchanges have several additional requirements for gain deferral, please call us if you are considering such a transaction.  Also, state taxes are due on the gain from the sale to the state in which the rental property is located. 7. Should I be exercising my employee stock options? There are generally two different kinds of employee stock options.  The first are known as Non Qualified Stock Options (NQSO) and the second are Incentive Stock Options (ISO).  Vastly different tax results can result from the exercise of each. Consideration must be given to market factors, current and projected tax brackets, cash flow requirements as well as the alternative minimum tax.  We can evaluate the tax effects of alternative employee stock option strategies, but investment considerations remain paramount.  Call us if you would like to discuss your particular situation. 8. What type of entity should I use for my new business? New businesses can be organized as sole proprietorships, C Corporations, S Corporations, Limited Liability Companys (LLCs) or partnerships.  We can help you evaluate the best option for you from a tax standpoint together with your attorney.  Consideration should be given to the type and number of owners, the initial capitalization of the business, the level and character of income to be recognized, the level of recommended liability protection, the method of withholding income taxes and several other factors.  If you would like to review the alternative types of entities for your particular situation, please call or Email us. 9. What are the 2007 and 2008 PA personal income tax rates? Pennsylvania's personal income tax rate remains at 3.07% for 2007 and 2008. Administrative Answers 1. How is the best way to get my tax information to you? Clients use various techniques to deliver their tax information to us including mail, fax, Email, drop off or appointments.   Appointments generally last 30 to 60 minutes and are important if a particular item needs discussion.  If no appointment is necessary, please consider another form of delivery, such as a drop off, and we will follow up with questions and discussion after our review.  More important than the way the information gets to us is the date it arrives.  Our fees vary depending on the date the information arrives in our office with increases occurring on a weekly basis as tax season progresses. 2. How long will it take to prepare my tax return? We generally complete all tax returns within two weeks after all the information is received.  Quicker turnarounds are more likely earlier in the tax season.  If the information is received after April 1st, an extension may be necessary.  3. How can I check the status of my return? It is normally not necessary to check the status of your return because we will contact you if we have questions or as soon as the return is complete.  However, if you would like an estimated completion date, please call or Email us and we will get back to you promptly. 4. How will I know when my return is ready? Our office will call you when your return is complete and ready for pickup.  If you prefer your return to be mailed to you, please indicate your preferred mailing address. 5. Can I electronically file? Yes! We offer Federal electronic filing for every qualified return.  Electronic filing can speed up your refund from six weeks to two weeks and insures the IRS computer receives exactly what you send and eliminates the possibility of an IRS keypunch error.  We also offer electronic filing of state returns at your discretion. 6. How are your fees determined? Our fees vary depending primarily on three factors.  These are the complexity of your return, the date the majority of the information arrives in our office and how well the information is organized.  Our basic fee structure and minimum fees are available upon request. 7. What is the best way to get questions answered during tax season? Because David and Carole are frequently in client appointments during tax season, questions are answered much quicker by Email or by leaving a detailed message rather than asking for a return phone call.  Another alternative is to ask for any available accountant to expedite your answer.