5 Reasons to Hire a Tax Preparer

5 Reasons to Hire a Tax Preparer

Right about now you’re probably trying to gather necessary documents to get ready for tax season such as W2 forms, various 1099 forms and other business expenses. You might be thinking that once and for all you’re going to be in control of your finances and will file your taxes on your own. Let’s face it though, tax season can be frustrating and for many, anxiety inducing. If you have a complicated tax situation due to owning a small business or having a few side hustles, you’re taxes will likely be even more confusing. Misfiling or not filing by the deadline may also lead to fines from the IRS. The good news though is that you don’t have to go at it alone. Hiring a tax preparer can relieve much of the stress associated with filing your taxes. If you find yourself thinking, should I be looking for a tax consultant near me, here are 5 reasons to hire a tax preparer. 

1. It Will Save You Time

Did you know that there are over 40,000 pages of federal rules and information when it comes to taxes? The statutes that Congress passed regarding taxes totals about 2,700 pages, totaling well over 1 million words. To put that in context, that’s longer than the King James Bible which has 788,280 words. That’s not all though. The IRS has additional statutes and regulations that implement the federal tax laws. According to the National Taxpayer Advocate, there are roughly 9,000 pages worth of IRS regulations, totalling approximately 4 million words. That doesn’t even include individual state tax rules either. It would probably be a safe bet to say the average American simply doesn’t have time to read through all these documents. That’s why hiring a tax preparer will save you time. Even if it might not be possible to know every detail, they know where to find the information that you need. 

2. Tax Preparers Will Be Updated on All the New Tax Laws

This year in particular filing taxes may be more daunting than ever as this will be the tax season that many Americans will see how new tax cuts will affect them. In fact, the 2018 tax overhaul will have Americans dealing with the most significant tax changes that they’ve seen in over 30 years. Making mistakes with filing your taxes can even lead to triggering an IRS audit, which will lead to even more stress and confusion down the line. Part of a tax preparer’s job is to be knowledgeable of all new tax changes that have occurred. Taxes are already confusing and this year you’ll likely have to dedicate a large amount of time and energy trying to read through and understand the new tax changes. Hiring a tax preparer means you can work with someone who’s already researched all the new changes so you don’t have to. 

3. You Could Owe Less in Taxes

The only thing worse than doing your taxes is finding out you owe a significant amount of money to the state or federal government. That’s where tax deductions and exemptions come in. Deductions will lower the amount of your income that you have to pay taxes on by lowering your taxable income. There are two main ways to do this, through standard deduction or itemized deductions. The IRS notes that it can generally be best to itemize deductions if the total itemized deductions are greater than the standard deduction. Sound complicated? Don’t worry, that’s were a tax preparer comes in.  A tax preparer will be knowledgeable on all deductions or tax credits that you will qualify for. Often times, when doing your own tax returns, you might miss out on some of the tax credits you can be qualified for simply because you didn’t know. With a tax preparer, you can work with someone who makes a living by knowing all the tax credits that may be available to you. Hiring someone who is specifically working for you will likely be the best way to owe less in taxes. 

4. You’ll Have Help in the Event of an Audit

Taxes are confusing, and if you make a mistake, you may find yourself getting a letter from the IRS. Filing your taxes yourself or through an online system does not guarantee that you’ll have someone represent you in the event of an audit. While audits are rare, they do happen, and having to stand in front of the IRS by yourself is certainly not something for the faint of heart. If it doesn’t come to an audit, there are also other things to be aware of such as a CP200 or CP3219a, which requires you to follow up with the IRS. If you ignore these letters, it can cause problems for you with the IRS, which you probably want to avoid. Having someone to explain these letters and help you through it will be a huge relief and significantly reduce your stress in an already stressful situation. If your tax preparer is also a CPA, they will be able to prepare you for the situation and represent you in front of the IRS if the need ever arises.  

5. It Will Give You Peace of Mind

Benjamin Franklin had it right when he said that one of the only things you can be certain in life about is taxes. Just because they come around every year, doesn’t mean that you have to be caught unprepared – again. There are so many different aspects that go into filing taxes and concerns about filing them correctly. When you hire a tax preparer, you can rest easy knowing that a knowledgeable professional will take care of it for you. Additionally, a professional will be able to explain various categories, claims and exemptions that you might have normally skipped over. Knowing that you can call an individual who knows your specific case and not a stranger can give you peace of mind. Should you have any questions about the process, being able to easily reach out to someone will help you feel less overwhelmed. 

With April right around the corner, you’ll want to get a jump on hiring a tax preparer. When you have the help of a professional, filing your taxes no longer has to be such a dreaded process. So whether you’re new to filing taxes or you have a side hustle or you simply aren’t sure how the new tax act will affect you, save time and money and get the most from your upcoming tax return with the help of a professional tax preparer. Remember, the sooner you find yourself a qualified tax preparer, the better your chances will be of getting your taxes filed by the April 15th deadline. 

What Your New Business or Side Hustle Means for You This Tax Season

What Your New Business or Side Hustle Means for You This Tax Season

Did you decide to finally branch out and start your own business like you always wanted to? Or maybe you wanted to earn a little extra money on the side so you started freelancing. While these situations may be common, talking about how these decisions now affect your taxes is not. Oftentimes, there’s so many moving parts to starting a business or side hustle that you probably aren’t thinking of the tax implications that come along with it, including a likely increase in taxes. If you have questions on how working as a freelancer will now affect your taxes, you’re not alone. To help clarify some common issues that will now be affecting you, let’s take a look at two examples. 

Example #1 John 

  • Photographer
  • Started his own photography business in 2019
  • Works full time 

Example #2 Sara

  • Graphic designer
  • Works full time as an employee at a retail company 
  • Does freelance graphic designing as a side hustle only on the weekends 

What Does Being “Self Employed” Mean?  

In the examples above we have John, who started his own business and Sara, who just does freelance graphic designing on the side for some extra cash and works full time with another company. Are both John and Sara self employed or just one? You might think because Sara is employed full time at another company she wouldn’t be considered self employed. However, even though Sara is an employee full time at another company, for tax purposes she would be considered self employed due to her freelance work. John is also self employed as he is the sole proprietor of his business. When you are self employed, it means you are now responsible for the self employment tax.  

What is the Self Employment Tax?

When you’re employed through a company, taxes are taken out for health insurance as well as Social Security and Medicare. Additionally, your employer will pay a part of the taxes so you do not have to pay the full amount. When you’re self employed, however, this isn’t the case. The Self-Employment Tax is the amount of money for Social Security and Medicare that you are now responsible for paying. Here’s the breakdown:

  • 12.4% for Social Security
  • 2.9% for Medicare

That’s an additional 15.3% that you are now being taxed. It’s important to be aware of this tax as when you are self employed, the amount you have to pay may catch you off guard. 

Which Forms Will I Use for Taxes Now?

Now that you’re self employed, gone are the days of the W-2. You’ll have to determine which tax forms to use depending on the type of business. For example, whether you’re self employed, a sole proprietor, or partners in a partnership will determine the various tax forms you’ll need to complete. Most small business owners use a Schedule C and file it with a Form 1040. Determining which type of business you have for tax purposes can be confusing, and it could be a good idea to consult with a tax expert to see what is right for your situation. 

Do I Still Get Tax Deductions for Being Self Employed?

Absolutely! One of the biggest tax deductions for being self employed are start up costs. Start up costs can include the money it costs for buying a new website, advertising fees as well as products that are required to help you with your business. For example, if Sara were to have bought software that would make it possible to do her graphic designing on her computer, this would be a start up cost that would be tax deductible. To make sure you’re figuring out all the tax deductions you are eligible for, it’s best to hire a professional tax preparer. 

Which Tax Forms Do I Need as a Freelancer?

If you are a freelancer you will likely be getting income from a number of different companies. In the past, you would have received a W-2, which included all your earnings from one company. As a freelancer, you’ll now have separate tax forms such as a 1099-MISC that you’ll use to keep track of all your earnings from different clients. Essentially, this form is used to report the total payments you received from a person or entity during the past year. 

Should I Consider Getting Help With My Taxes This Year? 

If you recently started your own business, there are a lot of things to consider with taxes. With all the paperwork and receipts that you’ll acquire, as well as handling potential losses, it can be tricky to keep track of everything. A tax preparer can help you to sort things out and make sure everything is filed properly. Perhaps most importantly, a tax preparer can assist you with finding all the tax deductions and write offs that are available to you. By hiring a professional, you’ll ensure that you’ll save the most amount of money possible. Let’s take a look at another quick example. 

Let’s say Sara made $6000 with her graphic designing side hustle and she isn’t sure what she’s qualified for when it comes to write offs, so she doesn’t claim any deductions. Her taxable income remains $6000 and her taxes she owes this year comes out to $1200. Now let’s say that Sara decided to hire a tax professional because she is newly self-employed and she doesn’t feel confident about doing her own taxes. Her tax professional finds that Sara qualifies for $5000 in write offs, which makes her taxable income only $1000 compared to $6000. Now, Sara’s taxes this year only comes out to $200 vs $1200. By hiring a tax professional, she’s now saved $1000 and gets to keep more of her money. 

Starting a business or freelance work can be an exciting time but it can be disheartening to see so much of your hard earned money going to taxes. Hiring a tax preparer is one of the best ways to ensure you’ll be saving the most amount of money possible. This year, hire a tax professional and see how much money you can save. 

Actions to Take 30 Days Before the Tax Deadline

Actions to Take 30 Days Before the Tax Deadline

With March upon us, the tax deadline is coming up fast. However, there are still things to be done as you prepare for the April 15th tax deadline. With 30 days until the deadline, here are some last minute tasks to add to your to-do list as Tax Day approaches. 

Getting in Last Minute Retirement Contributions 

One last minute way to boost your tax refund is by maxing out your IRA contributions. While most retirement account contributions are made by the end of the year, taxpayers can actually make additional contributions all the way until April 15, 2020. The basic limit for 401(k) contributions for the 2019 tax year is $19,000, with the exception of those who are at least age 50 who then get an additional $6,000. When contributing to all traditional and Roth IRAs, those 49 and younger cannot exceed $6,000 and those 50 and older cannot exceed $7,000. 

Amend Your Tax Return 

Sometimes, no matter how meticulous you are, you still might end up making a mistaking your tax returns. That’s where amends come in. There are a number of reasons why someone might need to amend their taxes. For example, it’s possible that your employer made a mistake on your W-2 and had to send you a corrected document or you forgot to claim income from a one-time side gig. One of the most common reasons people make amends to their taxes is because they’ve received a notice from the IRS saying they did not accurately submit information from their 1095-A, Health Care Statement when filing. If you need to make an amend to your tax return, don’t worry, it happens more often than you might think. Simply file Form 1040X, Amended Tax Return, along with the corrected information, or the additional documents you forgot to file with your return.

Filing Your Taxes

It may seem obvious, but if you still haven’t filed your taxes, with 45 days until the deadline, you should make this a priority. One of the best ways to prepare is to start gathering necessary documents. This includes dependent information such as their social security numbers or necessary childcare records and your own personal information including your spouse’s full name and social security number. Gather sources of income such as W-2 forms or 1099s, rental income, retirement income such as through an IRA, savings or dividends such as a health savings account, and forms itemizing other income such as gambling income or trusts. You’ll also want to gather forms and paperwork related to the deductions you may be qualified for such as owning a home, charitable donations, medical expenses, childcare expenses, and educational expenses to name a few. Even if you are hiring a professional tax preparer, gathering all forms ahead of time will help ensure your filing is completed by the deadline. 

Filing an Extension 

If you’re struggling to get everything done and ready to file by the April 15th deadline, you may want to consider filing for an extension. The process is straightforward and requires you to simply fill out IRS Form 4868 before the regular tax deadline. Once the IRS receives and accepts the extension request, you will have until October 6th to file your taxes. However, it’s important to note that the extension simply gives you more time to file, it does not give you more time to pay. Therefore, any balance that you might owe the IRS will still be due by the April 15th deadline. 

Start Prepping for the 2020 Tax Year 

When it comes to taxes, it’s never too early to start prepping for the next year. Not only does this include being more organized about recording your expenses or getting in contact with your employer about adjusting your withholdings, it also includes being smart about your refund. When you receive your refund, it might be your first instinct to finally buy that new gadget or product you’ve had your eye on. However, you might want to consider other options such as saving or investing your return so that you see greater gains. 

What to Do After Receiving a CP Notice

What to Do After Receiving a CP Notice

If you’ve received a CP notice, don’t panic. While it’s not an ideal situation, there are ways to get it resolved. The IRS is more forgiving than most people think, and they’ll usually take the time to explain their notices. But you do need to take action once you receive the notice. The IRS is open to negotiation as long as you communicate with them.

Here’s what you need to know about what a CP means and how you should deal with it.

What is a CP Notice?

First: You can get a CP notice for some pretty minor things. A CP notice can be filed because your tax return was adjusted — and you owe a relatively small amount. A CP notice can also be filed because your tax return wasn’t able to be processed for other reasons. Usually, the CP notice is fairly clear regarding what happened, but resolving it can be confusing and necessitate contacting a tax preparer. For example, the IRS might need supporting documentation that you aren’t certain how to generate.

If there was missing documentation or the documentation that you filed was deemed to be incorrect, the first step is to talk to your tax preparer or EA. Your tax preparer will be able to go over the notice and either furnish the documents they need or file a corrected, amended return that addresses the problems. 

If there’s money that you still owe, you may need to talk to the IRS. While there’s always the possibility of simply sending the money in, there’s also the potential that you may not be able to pay the amount that they’re asking for. If you’re unable to pay for the CP Notice, you need someone to contact the IRS and negotiate a payment plan for you.

How Can You Resolve a CP Notice?

CP notices that requestion either documentation or a small payment are fairly easy to resolve. You can do as the notice says, or you can furnish documentation that shows you’re exempt from whatever they’re asking for.

But if the CP notice is about money that is due, you may need to correct your filed return and make sure that you can pay the debt. If you can’t pay it all immediately, the IRS generally grants automatic payment plans for balances under $20,000. More than this, and you may need to furnish an accounting of all your assets, to show that you can’t afford to pay that amount right away.

It’s important that you don’t ignore a CP notice. It can be the first step before the IRS starts levying your accounts or garnishing your wages. The IRS will send you multiple notices, but will eventually need to start collecting your debts.

A CP notice doesn’t have to be alarming. Most people aren’t wild about talking to the IRS, but they do tend to be reasonable. Luckily, if you have an accountant, they can do all the talking for you. Contact your accountant right away.



Here’s what you need to know.

LENDERS ARE AS MYSTIFIED AS YOU ARE

Lenders have not yet received comprehensive directions regarding the processing of forgiveness applications. This isn’t a good thing; the original deadline for even applying for forgiveness used to be mid-July. It’s since been extended, but the fact remains: there is a time limit for filing for forgiveness and it has changed before.

Because there’s no set path towards filing forgiveness, borrowers need to connect with their lenders directly. Lenders will give borrowers a list of documents and start preparing their paperwork, but it’s possible the lenders won’t be able to actually file this paperwork until the government gives them additional guidance.

THE RULES FOR FORGIVENESS

The rules of forgiveness for the PPP loan have changed. But luckily, they’ve changed to be more forgiving, rather than less. First payroll costs can be forgiven up to $15,835 per individual over an eight week period, or up to $46,154 per individual if a 24 week maximum period is chosen instead. But it should also be noted forgiveness does differ depending on the type of entity. Sole proprietors have different requirements from LLCs.

It’s likely that organizations are going to need to show how their funds have been spent if they’re going to apply for forgiveness. While the exact ins and outs of applying for forgiveness may be questionable, organizations should already start getting their documents together and sending them in to their lender. Only then will their lender be able to start processing documents on their end.

SUBMITTING FORGIVENESS DOCUMENTS

So, because of the way that everything has panned out, organizations can fill out their forgiveness forms — but will need to wait until their lender is ready to process them. Because every lender is different, every lender is also going to have a different way of processing these documents. In addition to the documents themselves, organizations should get together:
  • Their monthly account statements.
  • Their monthly accounting reports.
  • Their monthly payroll stubs or payroll reports.
These should be enough for an organization to produce a forgiveness document, but there’s no guarantee that this document will be accepted. However, it should be noted that lenders have a vested interest in getting the loans forgiven as well, as this means they get paid back with certainty.

The PPP loan has been a little questionable from the start, because there has been so little guidance for lenders. Many lenders started processing the PPP loans themselves even before they were certain what the requirements would be. Unfortunately, those who have already acquired a PPP loan may be left somewhat adrift until lenders come forward with their forgiveness requirements. Organizations that are waiting to get their loans forgiven should inquire with their lenders as soon as possible.

Negotiating For An IRS Payment Plan: What Do You Do When You Can’t Pay

NEGOTIATING FOR AN IRS PAYMENT PLAN: WHAT DO YOU DO WHEN YOU CAN’T PAY?

It can happen to anyone, whether a business owner or an entrepreneur. You may have miscalculated your taxes at the beginning of the year — or simply experienced a financial shortfall. Either way, you can’t pay your tax bill. What do you need to do now?

DON’T PANIC: IT’S NOT AS BAD AS YOU THINK

The IRS can come across as a boogeyman. To some extent, they should. If you don’t pay your taxes, they can initiate liens against your property, empty your bank accounts, and take your wages. But there’s a very important reason you shouldn’t be too scared of them:

The IRS doesn’t actually want to do any of that.

The IRS wants to work with you. They don’t benefit from taking harsh action. It’s just more work for them. They only take aggressive action when people don’t communicate with them. And that brings us to lesson one…

GET AN ACCOUNTANT AND GET YOUR DOCUMENTS IN ORDER

Your first step is to reach out to an accountant to find out exactly how much you owe. Your accountant can talk to the IRS for you and help you with negotiating a payment plan. Importantly, you have to file all your tax returns before you can negotiate a payment plan. That’s why it’s so critical to find tax help.

Once your tax returns have been filed, payment plans can be applied for online if you owe less than $50,000. Otherwise, you will need to file more extensive paperwork, which outlines your debts and income. It can take up to 30 days for approval, but once you’re on the plan, you’ll be in the clear from additional negative actions.

GETTING ON AN IRS PAYMENT PLAN

Under an IRS payment plan, you tell the IRS how much you can afford every month. The IRS then creates a plan for you to pay off your debt over time. An IRS payment plan can be over six years. But you should also know that you need to remain current on your taxes during this time, or the payment plan could be recalled. The payment plan could also be recalled if you miss a payment.

IRS payment plans are auto-deducted from your bank account until they have been paid off. It’s easy, but you do need to make sure you’ve got the amount to pay it every month.

ALTERNATIVES TO THE IRS PAYMENT PLAN

An IRS payment plan is almost always going to be better than borrowing money and paying off the IRS. The interest rates and penalties are quite low, comparatively. But those aren’t the only two solutions available.

Another optional together is a settlement. Sometimes, you can ask the IRS to settle your debt for less than you owe. If you owe $20,000, you might be able to claim hardship and pay only $12,000. But this is extremely dependent on your financial situation and it’s a little more challenging to do than a payment plan — and, of course, you need to have the cash at hand.

It’s actually not hard to get on an IRS payment plan. It’s much easier with the right tax support. And while it’s not an ideal scenario to be on an IRS payment plan, it’s much better than dodging their calls.

Tax Tips For Private Practitioners And The Self-Employed

If you’re a Schedule-C business owner, your company is yourself. You’re self-employed, a private practitioner, a contractor, a gig worker, or otherwise engaged in your own business operations. And that makes your taxes especially complex because your Form 1040 also includes all your business information. At the end of the year, your personal and business expenses will factor into how much you owe the government — and, usually, you’ll owe.
You can greatly improve your tax situation by following the below tips.
  • Set up a SEP-IRA. A SEP-IRA is more flexible than a traditional IRA. Designed for the self-employed, a SEP-IRA lets you put away up to 25 percent of your compensation or $57,000 a year untaxed (whichever amount is less), far more than a traditional IRA or a 401(k).
  • Use your prior-year tax returns for estimates and future tax preparation. Your prior returns will tell you how much you should be paying as estimated taxes every quarter. It’s best to pay estimated taxes so you aren’t hit by a huge tax bill and penalties later on.
  • Get ESAs, HSAs, and other tax-advantaged accounts. ESAs are educational savings accounts (great if you have kids) and HSAs are health savings accounts (great if you’re concerned about your health). These accounts are tax-advantaged just like IRAs, so you don’t pay taxes on the money you put into them.
  • Pay attention to your home office. For most business owners, the home office deduction is going to be the most significant deduction. Don’t underestimate the amount that you pay for your office, including the portion of utilities devoted to it.
  • Install some apps. Personal finance apps that automatically categorize your transactions are a great way to keep a budget. Plus, you can download or export the information directly to your accountant when tax time comes, which will reduce the amount of work they have to do.
  • Pay attention to the Alternative Minimum Tax. For some individuals, deductions won’t even matter, because the AMT is better. The AMT is an alternative to actually calculating all your deductions; it just assumes you have an average amount of deductions. The AMT changes every year, so you should check with the IRS.
  • Don’t forget your depreciation. Any item that you’re using solely for your business can potentially be depreciated, though you need to figure out how long its usable life will be. You may also be able to deduct property repairs and improvements.
And most importantly…
  • Meet with your accountant before the tax year is through. Too often, people come to their tax preparer after the year is over just to prepare their taxes. But it’s better to meet with an accountant at the beginning of the year to strategize. This is how you actually reduce your taxes, rather than calculating it.

    • Meeting with a tax professional is a great way to get more information about your unique situation. It could be that you’re better off as a corporation rather than a Schedule C — or it could be that you just need to pay more attention to deductions and expenses. A tax professional can help.