Daily News - Don't fight an IRS audit by yourself, and other times to rely on a CPA (ContributorNetwork) Daily Business News
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As a tax professional with several years' worth of experience, it can be more than a little annoying to be compared to TurboTax. After all, what I do every day is not the same as a do-it-yourself tax preparation computer program.
Similarly, there are many tax issues that, with a little organization, you can handle yourself. These are the tax versions of a parking ticket, for which you would not bother hiring an attorney. You can handle these small items and move on with your life.
Bigger issues, however, may mean that you would be wiser to call in a professional who can help you to make sure that you do not inadvertently land yourself with a large tax bill. The peace of mind that you get from a Certified Public Accountant (CPA) is well worth the fee that you will pay for his or her time.
When you can act without a tax professional at your side...
Most taxpayers can handle most tax issues on their own with a little common sense, a lot of good record-keeping and making certain they adhere to whatever filing deadlines apply. If most of your income, aside from a small amount of investment interest and dividends, comes from your wages, then you can handle determining your withholding each year without consulting a tax professional.
Your withholding is tax shorthand for the income taxes that your employer will withhold and pay to the federal and state governments on your behalf each pay period. When you file your income tax return after the year ends, if you have overpaid, you will be entitled to a refund. However, if you have underpaid, then you may be subject to penalties and interest in addition to a potentially tax bill.
To avoid penalties and interest, you should make certain that you have paid 100 percent of your prior year's tax during the year or 90 percent of the current year's tax. Use the IRS's withholding calculator to make sure that you are having the right amount withheld this year, and if you are not, contact your human resources department. If you are married, remember to check your spouse's withholding as well.
Another tax item that you can cross of your list without seeking the assistance of a tax professional are your children's tax filings. Even if your own income tax return is too complicated for you to handle, if your minor children have had tax withheld that you want to get back for them (irrespective of filing thresholds) or if they have only a single form W-2 and assorted Forms 1099, then you likely can file either Form 1040 EZ -- if they do not have dividends, or Form 1040A if they do have dividends. Use thissimple chart from the IRS to find the simplest return to file.
Do not forget to visit your state's department of revenue website to find out whether you have to file a return, and if there is an equivalent version of these simplified income tax filings available for low-income filers. If you are pressed for time, but do not want to spend hundreds of dollars to have a tax professional prepare very simple tax returns, then try out TurboTax or another online tax software that will calculate the returns based upon the information that you enter.
... and times when a tax professional's guidance is a must.
Just get an audit notice in the mail from the IRS or your state department of revenue? Whether it was for your personal or business tax returns, it is time to call your CPA, and ask him or her to assess your exposure. A CPA is trained to evaluate potential issues that an auditor will flag. They also will help you to assemble the documents that will be sent to the auditors.
Ultimately, however, the benefit of hiring a CPA to assist you in handling your audit will be realized when he or she helps you to negotiate down the penalties, interest and taxes that the auditor wants to charge you with, upon completion of the audit. Trying to argue with an auditor on your own can be aggravating and leave you owing thousands of dollars more than you would with a CPA to help toguide you in your communications with these financial sleuths. One wrong move on your part, such as allowing the auditor to audit your business on your premises instead of at your CPA's offices, could mean that the auditor picks up another reason to add to your tax bill.
Another tax planning area that too many Americans ignore is estate planning. Consult your CPA firm, or hire one to help you to draw up a tax efficient estate plan. This type of plan is intended to help you to pass as much of your estate onto your heirs as possible, rather than letting it become property of the government.
Even if you do not consider yourself wealthy, an estate plan is still a low-cost way to ensure that you will be able to provide for your family after you are gone. Without one, your assets can be frozen for months or even years, while your children, elderly parents or others that rely upon you go without. Contrary to popular belief, a savvy estate plan does not need to be elaborate, but one drawn up by a CPA will be attune to current tax laws and should be revisited annually or biannually to stay current.
Similarly, there are many tax issues that, with a little organization, you can handle yourself. These are the tax versions of a parking ticket, for which you would not bother hiring an attorney. You can handle these small items and move on with your life.
Bigger issues, however, may mean that you would be wiser to call in a professional who can help you to make sure that you do not inadvertently land yourself with a large tax bill. The peace of mind that you get from a Certified Public Accountant (CPA) is well worth the fee that you will pay for his or her time.
When you can act without a tax professional at your side...
Most taxpayers can handle most tax issues on their own with a little common sense, a lot of good record-keeping and making certain they adhere to whatever filing deadlines apply. If most of your income, aside from a small amount of investment interest and dividends, comes from your wages, then you can handle determining your withholding each year without consulting a tax professional.
Your withholding is tax shorthand for the income taxes that your employer will withhold and pay to the federal and state governments on your behalf each pay period. When you file your income tax return after the year ends, if you have overpaid, you will be entitled to a refund. However, if you have underpaid, then you may be subject to penalties and interest in addition to a potentially tax bill.
To avoid penalties and interest, you should make certain that you have paid 100 percent of your prior year's tax during the year or 90 percent of the current year's tax. Use the IRS's withholding calculator to make sure that you are having the right amount withheld this year, and if you are not, contact your human resources department. If you are married, remember to check your spouse's withholding as well.
Another tax item that you can cross of your list without seeking the assistance of a tax professional are your children's tax filings. Even if your own income tax return is too complicated for you to handle, if your minor children have had tax withheld that you want to get back for them (irrespective of filing thresholds) or if they have only a single form W-2 and assorted Forms 1099, then you likely can file either Form 1040 EZ -- if they do not have dividends, or Form 1040A if they do have dividends. Use thissimple chart from the IRS to find the simplest return to file.
Do not forget to visit your state's department of revenue website to find out whether you have to file a return, and if there is an equivalent version of these simplified income tax filings available for low-income filers. If you are pressed for time, but do not want to spend hundreds of dollars to have a tax professional prepare very simple tax returns, then try out TurboTax or another online tax software that will calculate the returns based upon the information that you enter.
... and times when a tax professional's guidance is a must.
Just get an audit notice in the mail from the IRS or your state department of revenue? Whether it was for your personal or business tax returns, it is time to call your CPA, and ask him or her to assess your exposure. A CPA is trained to evaluate potential issues that an auditor will flag. They also will help you to assemble the documents that will be sent to the auditors.
Ultimately, however, the benefit of hiring a CPA to assist you in handling your audit will be realized when he or she helps you to negotiate down the penalties, interest and taxes that the auditor wants to charge you with, upon completion of the audit. Trying to argue with an auditor on your own can be aggravating and leave you owing thousands of dollars more than you would with a CPA to help to
Another tax planning area that too many Americans ignore is estate planning. Consult your CPA firm, or hire one to help you to draw up a tax efficient estate plan. This type of plan is intended to help you to pass as much of your estate onto your heirs as possible, rather than letting it become property of the government.
Even if you do not consider yourself wealthy, an estate plan is still a low-cost way to ensure that you will be able to provide for your family after you are gone. Without one, your assets can be frozen for months or even years, while your children, elderly parents or others that rely upon you go without. Contrary to popular belief, a savvy estate plan does not need to be elaborate, but one drawn up by a CPA will be attune to current tax laws and should be revisited annually or biannually to stay current.
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