Three Emergencies Your CPA Can Save You From
Financial Emergencies
A CPA can be a life saver for any business. There are several reasons for this. CPAs are able to help you make better financial decisions, plan for a better tomorrow, and most of all they can position you to grow your company in a way that it may never have grown before. In addition to being a life saver, CPAs have been known to save their clients from several financial emergencies.
Here are three emergencies your CPA can save you from:
Bankruptcy
While a CPA may not be qualified to walk you through the bankruptcy process in its entirety, a CPA can help you determine if bankruptcy is right for you. If it’s not, your CPA can help you identify what financial precautions you should take in lieu of bankruptcy
Depleted Savings
Are your savings depleted? No worries. Your CPA is here to save the day. Your CPA can take an in-depth look into your finances and help you determine how to regain and rebuild the savings you depleted.
Credit Card Debt
Are you faced with thousands of dollars in credit card debt? Your CPA can not only help you determine what your debts are but can help you devise a plan of how to pay off the debt quickly and efficiently.
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The Advantages of Filing a Tax Return with a CPA
Filing Taxes with a CPA
CPAs are certified to handle all types of tax and accounting issues. Because they are so well acquainted with these types of issues, there are several distinct advantages of filing taxes with the aid of a CPA.
Here are a few of these advantages:
Organization
CPAs can help you create a budget to help you with unpaid taxes. They can assist you with working out payment plans with the IRS; they can also help you identify ways you can save or better invest your money. Hiring a CPA to do monthly accounting can also help you better organize your finances in the future.
Avoiding Fraud
CPAs are certified by the local government, and because of this, they are frequently audited by the IRS. As a result, hiring a CPA can help you avoid working with fraudulent tax professionals and also help you avoid identity theft in the process of filing your taxes because certified tax professionals are aware of the various tax identity scams most commonly perpetrated during tax time.
IRS Audits
The services of CPAs are among of the most effective ways of combating an IRS tax audit. CPAs often develop relationships with the IRS as well as tax lawyers; what’s more, they can also make referrals and can relay information to the IRS on behalf of their clients.
Saving Money
CPAs can help you save money with all of their specialized knowledge of deductions and credits. Additionally, hiring a CPA can help you avoid making mistakes on your return which could cause you to develop a higher tax burden.
Though individuals and businesses are able to file taxes on their own, it’s always best to consult with a CPA in order to receive the best bang for your buck.
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How to Know Whether You Need an Accountant to Help with Your Taxes
Personal Finance
According to the IRS, over 50 percent of taxpayers hire someone to prepare their taxes. While many Americans do so in fear of making a mistake when filing, there are quite a few people who don’t need a pro at all. The IRS suggests that the only people who need an accountant to help with filing taxes are individuals who have complicated financial lives.
Here are just a few ways to know if you need to hire an accountant to do your taxes:
Self-Employed
If you are self-employed, you may want to hire someone who is familiar with Schedule C. You may also want someone who can help advise you on when you should file a 1099 form or when you should report payments you’ve made to others.
Investors
Those who have several investments in different areas should consider hiring a CPA. Many investment activities can benefit greatly from having a little guidance from a CPA
Identity Theft Victims
Have you been a victim of identity theft recently? You may want to hire a professional. This could be because you want to make sure that you’ve done everything that is required of you as a victim in order to protect yourself.
Alternative Minimum Tax
If you are one of millions of Americans who may be subject to the Alternative Minimum tax, an accountant may be able to help you avoid taking such a huge hit during tax season.
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Tips to Maximize Your 2017 Tax Refund
Tax Refund Money
The holidays are here, which means that it’s almost tax time. We’re sure that in the midst of travel, friends, family, and food comas, that the last thing you want to think about right now is taxes. However, many of us tend to have some extra down time around the holidays, and we believe that’s a good time to start organizing and strategizing for next year’s taxes.
Get started early
While it’s impossible to project all of your expenses and income, it’s not a bad idea to start budgeting and planning now to get ahead of the game–especially if you plan any large purchases.
Get organized now
Planning to build a home office? Major home upgrades? New degree? Sending a child to college? Develop a roadmap for your major expenses or changes to income.
Research deductions
Deductions are numerous – all of the aforementioned examples could qualify for a tax deduction. Know your deductions; doing so may help you plan any major expenses and can get you ahead for subsequent tax years.
Get an app
From spreadsheets to dedicated tracking apps, expense and income tracking software is truly indispensable. Shelling out a few dollars for some budgeting software can help keep you organized for tax time, which can help you both balance your budget and increase your tax refund. That being said, always remember to back up your records!
Consider a CPA
Although we’ve often lauded the benefits of budget balancing software, that doesn’t mean it’s an adequate replacement for a good CPA. Rather the two are complementary: software can keep you organized, which can help your CPA make sense of your finances. In turn, a good CPA can help you with tax deductions and business recommendations, thereby maximizing your tax refund.
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Freelancers and Expense Tracking
Expense Tracking
Freelancers are often busy: outside of working odd hours, they have to track their own business expenses, invoices, and taxes. Whether you decide to hire a CPA or take on everything by yourself, these tips will help you keep your finances in order.
Be transparent about your income and expenditures
Avoid the dreaded audit and always have a clear sense of your finances by simply being honest. Doing so will make filing taxes easier, and should you ever hire a CPA he or she will thank you.
Know your deductions
Do you have a home office? You can deduct some operating costs. Do you have to travel to meet a client or do research for a job? You can deduct those expenses. It behooves every freelancer to know what is and is not eligible for a tax deduction.
Use a separate bank account
Don’t count on your memory to track expenses and income. Doing so can lead to unfavorable discrepancies: if you overstate your income, you’ll pay too much in taxes; if you understate your income and the IRS finds out, you’ll have to pay back taxes which may include penalties and interest.
Utilize software
There’s an app for that. Even if you employ an accountant, proper software will help you stay organized and be able to present your expenses, invoices, and income.
Backup everything
Millennials and older generations remember tracking everything with paper records. While the tactile feeling of books may still be appealing, in the age of the cloud it’s a largely irresponsible way to track expenses by the simple fact that paper is hard to backup.
Backup your backups
This probably sounds absurd after we just pitched you on digital records over paper records. However cyber security threats are real and cloud storage is cheap–and in some cases free.
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Some Do’s and Don’ts of Business Expense Tracking
Do:
Business Expense Tracking
Track everything
If you want to maximize your tax return, there’s no such thing as having too many records. Keep receipts and invoices. Log mileage. Keep records of any and all business-related expenditures.
Backup everything
One record is not enough, and you should always backup for your backups. Many expense tracking apps provide backup options, or the ability to export data so you can back it up to your personal cloud or external hard drive.
Be honest about your expenditures
Don’t round up. Or Down. If you are unable to procure a record of an expense, ask your accountant for options if you had planned to claim a deduction.
Track as you go
Don’t rely on your memory to claim mileage or expenditures. In the event of an audit, any discrepancies or inaccuracies will only invite further scrutiny.
Don’t:
Fudge the numbers
As previously mentioned, don’t round or estimate your income or expenses. Doing so may come back to bite you during tax time.
Rely on one set of records
We’ve recommended software before, but we can’t stress enough how indispensable expense tracking software can be. More robust offerings will also allow you to export and backup your files, meaning you can keep backups of your backups in case of a disaster or cyber attack.
Mix business and pleasure
At least do not mix them when it comes to tracking expenses. While there are some potential workarounds to a family trip–for example if you have a legitimate business trip and decide to bring your family along, you can deduct your own transportation expenses but if you start trying to claim business trips for yourself, spouse, and kids, or claim a day spa as a business expense, you’re sure to draw the attention of the IRS at tax time.
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End of Year Tips to Prepare for the 2017 Tax Season
Preparing for Tax Season
It’s autumn, which means that the holidays are almost here: time for food, family, festivities, and perhaps traveling. It also means that tax season is just around the corner, and while no one wants to think about taxes early, getting organized now will prevent headaches when you’re filing your 2016 return.
Here are a few tips to help you prepare:
- Catch up on records from previous months: if you’re behind on your financial and expense records from previous months, there’s no time like the present to get that all in order. Don’t wait until tax time to get caught up, as you’ll have an even longer backlog come February.
- Organize everything: this may seem like a no brainer, but the sooner the better. Plan ahead if you’re planning to claim deductions or tax credits, and organize the associated documentation. Dig up receipts and invoices now, so you won’t have the extra hassle of rummaging through records at tax time.
- Take time to put everything in order: with the holidays coming up, you’re bound to be busy, but after the festivities you’ll likely have some extra downtime. Use some of that extra time to organize things.
- Find a good CPA: you’re organized, but you don’t feel like going through the hassle of crunching numbers? A good CPA can help you with that, and can help you maximize your tax return.
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How to Maximize Your Tax Refund
Tax Refund
Taxes may not cross the minds of many people until January or February, but planning ahead can greatly benefit the size of your return. From planning to tracking, here are a few tips to help you get the most out of your return.
Be organized: keep records of everything! For expense tracking, make copies of receipts or keep the originals, write down mileage, and hold onto any bills or invoices. Keeping the originals will be helpful to both you and your CPA. Make all your files easy to access and manage, which will make your life easier in the event of an audit. Your CPA will thank you, too.
Maintain records throughout the year: as previously stated, keep track of everything! Logging expenses and deductions throughout the year can save you a ton of time and stress at tax time. You don’t want to play catch up at the 11th hour; doing so is stressful and could cause you to overlook deductions or make mistakes on your return. Struggle with organization? Never underestimate the usefulness of spreadsheets, or a good expense tracking app. Or both.
Dedicate time to researching deductions: plan ahead for which deductions and credits you want to claim. Doing so will minimize stress when you are filing taxes, and will help you ensure that you qualify for the deduction. If you employ a CPA, discuss your intended deductions and tax credits: they can make sure you qualify and can help you maximize your return.
Find a good CPA: returns, deductions, credits, tax shelters, it can all be confusing and a good CPA can help you make sense of all of it.
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Should You Discard Your Records After Filing Taxes?
How long should you keep your tax records after filing? Both individuals and business owners struggle with this question every year. It is important that you are holding onto your records for the suggested amount of time in case of an audit or when filing an amendment is required.
2 Years
You can discard your tax returns two years after a tax liability is paid. You can also toss your tax records after two years if you received a refund. Businesses should keep their records, at least in the form of a copy of a filed return.
3 Years
If you have filed your tax return and all of the liabilities or monies owed to you are taken care of, you can discard the return after three years. This only applies to individuals. Businesses are advised to keep records for the entirety of the business.
7 Years
If you have filed any type of claim that shows a loss, such as a capital loss on an investment, you should keep your records for 7 years. This is also the case if you have losses from worthless securities. Bad debt deductions, when documented, also require that you keep your records for 7 years.
Final Thoughts
It is a good idea for businesses to keep record of all of their taxes from the date of origin. Delayed tax issues and scandals can come about, meaning that a look further into your tax history may be required. If you do not file a paper return, maintain access to your electronically filed returns and print physical copies to keep on file.
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