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Taxes for Two

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I’m a college senior graduating this coming May with a degree in business. For the last couple of years, my roommate and I have been running a fledgling business out of our apartment. The two of us built a web tool that lets users upload data, which is then analyzed and used to make automated recommendations.

 

The idea was originally the result of a group project. A former instructor was so impressed that he suggested we try running with it. The rest is history. Only a handful of customers are actively paying us. They’re mostly startups and nonprofits with limited resources.

 

Our quickly approaching graduation complicates matters. We’d both prefer to take the business further, since we’ve made real progress. Unfortunately, remitting taxes is also approaching, and we’re almost positive that our documentation isn’t in proper order. What should we be doing in our situation?

 

One of the first things to remember is that the American tax code has long been characterized as too unnecessarily complex for the grand majority of its citizens. While it can be tempting to think that those with college degrees, especially related ones (e.g., business, economics, mathematics, etc.), have a major advantage over their peers, that simply isn’t the case. During an interview with NPR, New York University (NYU) professor and the Editor-and-Chief of Tax Law Review, Deborah Schenk, openly admitted that research shows most tax filers make significant mistakes.

 

Those errors can range from simple (e.g., incorrectly recording your SSN) to some of the most complicated (e.g., filing separate returns for different employers). Many individuals have few resources to tap into when it comes to filing their taxes, and, as a result, they choose to do the best they can. In your particular case, it might be prudent to begin by exploring both the New York state tax profile and the specifics concerning personal income taxes. Nothing should be all that surprising, but be certain take note of any major concerns for future reference.

 

There are some under the impression that industry players contribute to and actively benefit from tax complexity. Other experts make less conspiratorial claims and instead pinpoint a wide variety of influential variables. Regardless of your stance on the matter, you’ll still have to find a way to successfully navigate the confusion and uncertainty. There’s no shortage of online tools designed to expedite the process and ensure filing accuracy. Although as you might imagine, such solutions aren’t free to use.

 

The last thing to consider is whether or not it makes sense to enlist the help of a qualified expert. Unlike filing personal income taxes, corporate and small business taxes take unique circumstances into account and might very well require a formal audit. For that reason, you don’t want to underestimate the value of briefly consulting a New York tax attorney. Your roommate and business partner should be present, too. Just be sure to finish your background research well in advance so the both of you can make a sound decision.

 

“In every success story, you will find someone who has made a courageous decision.” — Peter F. Drucker

Provided in cooperation with Scholarship Media

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