Question: I’m married and I’m not sure which filing status I should choose for my personal tax return: ‘Married Filing Jointly’ (MFJ) or ‘Married Filing Separately’ (MFS)? What is the best choice?
Like most things in life, it depends on your situation. As a married couple, yes, you are allowed a choice of filing your personal tax return under the status of ‘Married Filing Jointly’ (MFJ) or ‘Married Filing Separate’ (MFS).
MFJ is usually the better choice although here are some situations where MFS might be right for you:
The best way to find out what is most beneficial for your particular situation is to prepare the return both ways and compare the results. If you’re not sure which way to go, ask your tax preparer to run a MFJ vs. MFS comparison analysis.
Disclaimer: This article provides general tax information, not legal advice. Individuals should seek specific advice from their tax advisor before acting on any information provided herein.
Question: I am a graphic designer residing in Brooklyn, New York. Do I have to charge sales tax to my clients on the services I provide?
Graphic design services involve the sale of creative ideas to your client. In New York State only the sale of ‘tangible personal property’ is subject to sales tax*. In this way the taxability of graphic design services and drug laws have something in common: it all boils down to the 'medium of delivery' i.e. in what form is the end product delivered to your customer?
If the final designs are delivered in hard copy format e.g. computer discs, printed materials, etc. then you are selling ‘tangible personal property’ and the work is subject to New York State Sales tax (this includes any design costs to you and any reimbursable expenses).
However, if the 'medium of delivery' is electronic then you are exempt from charging your client sales tax. A service provided electronically is not ‘tangible property’. In addition, to be subject to New York State sales tax, the sale must originate and conclude in New York. If you deliver the end product outside of New York for use outside New York then you are exempt from having to collect New York State sales tax.
In any case, please check the applicability of sales tax for the state of delivery.
Tip: If you are a graphic designer and have to charge sales tax, make separate invoices to segregate the tangible and intangible services you provide. Since tangibility of property is crucial to determining taxability it will be prudent to create a ‘design services’ invoice and a ‘tangible services’ invoice. For example, if you provide printing services with a design logo imprinted on the printing material always make sure there are separate invoices (or separate line items in one invoice) for the printing and designing of the logo. Otherwise, the state may consider it as one and levy sales tax on the entire amount you invoice your client.
*For detailed information on this please refer to the state website athttp://www.tax.ny.gov/pdf/advisory_opinions/sales/a06_32s.pdf
As a CPA client, do you prefer fixed pricing? i.e. this project will cost $X? Or do you prefer hourly pricing?
If hourly, why? Is hourly pricing just the way everyone does it? Or do you see a correlation between how many hours one takes to do something vs. what it is worth?
Law firms do a good job of hourly because it is tough to scale reading contracts and their hourly fees are quite high (generally). CPA firms, however, partially because of their connection to computations and technology, almost have to find ways to scale basic tasks.
This makes the hourly pricing harder and harder to support. If we can do some insanely complex task in 15 minutes, but it requires specific knowledge that has taken years to accumulate and practice, does the hourly arrangement still make sense? Should we just charge higher hourly rates? Change what we do?
The Tunstall Organization, Inc. prices most of our engagements based on an estimate of what the service is 'worth'. Sometimes this is called value pricing. This aims at finding what the service is 'worth' to the particular business, which requires learning more about the business. The investment in services then becomes budgetable and fixed and is intended to produce a return on investment. This ROI can be quantified in higher revenue/profits or lower expenses but usually is realized in the dimension of quality of life - comfort in the accounting system goes up.
It is definitely riskier from a pricing standpoint, and scope needs to be well defined...but when done right, it seems to work the best for both practitioner and client.
David Larcker, a professor of accounting at the Stanford Graduate School of Business, was quoted in the WSJ about CFO compensation as saying, “It would be very surprising if their performance evaluations weren’t heavily weighted to minimizing corporate taxes. That’s their job.”
Does this seems off to anyone as a way to evaluate and incentivize an accountant? It seems to me like this assumption of 'job' contributes to the disconnect between tax revenue and its purposes.
Yes, of course, a CFO should manage expenses and tax payments to pay the right amount, but what tax rate a company paid (if in compliance) shouldn't even be considered as an incentive metric, should it?