Why You Need an Accountant on Your Side
Most people seek the assistance of an experienced accountant during tax season. That’s a good thing, because taxes are complicated and there are repercussions for not doing them right. On the one hand, you do not want to give the IRS money they didn’t ask for, but on the other hand, you have to pay what you legally owe. And while you may not give the matter much thought after the April filing deadline has come and gone, it’s a good idea to have an accountant on your side for other reasons, too. For example, you may need help with tax planning, audits, and making payment arrangements with the IRS.
Who wants to think about income taxes in May? After your taxes have been filed and paid, you probably don’t want to be bothered with the topic again until next year. However, it’s much better to prepare ahead of time to reduce your tax liability. The financial decisions you make throughout the year directly affect your taxable income and income tax due next year. Your accountant can help you avoid costly mistakes by helping you structure your finances.
For example, if you wanted to make contributions to your retirement account, your accountant can help you when you max out your tax-deductible amount. It may be in your best interest to set up a Roth IRA to save money on taxes, but you won’t know unless you ask an export. Similarly, an accountant can advise you to wait on selling your home until you have lived in it for at least two years to avoid having to pay capital gains tax. Before you make any big financial decisions, you should probably talk to your accountant to find out how you can minimize your tax liability.
Changes in the Tax Law
The year 2018 brings numerous changes to the current tax code that probably affect you beyond your current take-home pay. Many people will have seen a reduction in income taxes and bring home more cash as a result of the tax law changes. If this is the case for you, you should take advantage of the extra money and allocate it before you spend it. Whether you contribute more funds to a retirement account, start saving for a big purchase or vacation, or use the money to make other investments, an accountant will explain the proposed transactions from a tax standpoint. Since taxes can be quite high, it’s always a good idea to evaluate the end result after taxes.
Review Your Returns
Have you filed several returns by yourself in the last couple of years? It may be prudent to have an accountant review them for accuracy and completeness. If you’ve made a mistake, it’s not too late to correct it. Your accountant can file an amended return if necessary, but not every mistake requires notifying the IRS. In some cases, the mistake can be corrected on the next year’s return by adjusting income or deductions accordingly. A tax return review can also help you discover tax-saving strategies you could have been using and should be using in the future.
Being audited by the IRS is no small matter. It’s kind of scary when the big boys take a closer look at your tax records, especially if you’re not sure that you filled out the returns correctly. In this case, your accountant is there to protect you. They’ll handle the audit for you, which is often conducted via mail. If you’re asked to come to an IRS center in person, your CPA can represent you there as well. With their experience, the entire process gets less intimidating, because your accountant understands the tax matter thoroughly and can argue on your behalf.
It’s not unusual for individuals to owe money to the IRS. It could be in the form of back taxes or tax penalties for a return that was filed late. If you owe the IRS more money than you can pay right now, you may want to speak to your accountant about arranging an installment agreement. If you owe more than a certain amount, the IRS needs you to take the initiative in the payment schedule. That means without the help of an experienced CPA, you may not get your request approved. Needless to say, the IRS has great power to collect those taxes, and you don’t want them to use those. It’s better to have your accountant set up payment terms that work for you instead.