Income Tax Preparation

tax preparation dilemma

Tax Preparation Dilemma: DIY or Hire an Expert?

tax preparation dilemma

Tax Preparation Dilemma: DIY or Hire an Expert?

Are you facing the age-old dilemma of hiring a tax preparer or tackling your taxes on your own? It's a question that plagues many small to medium business owners like yourself. After all, the decisions we make regarding our finances can have a significant impact on our bottom line.

Going solo has its perks, and one of them is complete control. You have a firm grip on your financial reins, and every decision is yours to make. You can pick your tax software, set your own schedule, and, in the process, save a bit of cash.

If you're tech-savvy, handling online tax software should be a breeze. Platforms like TurboTax and TaxAct can guide you through the process, providing step-by-step instructions. Plus, there's a wealth of online resources at your fingertips, from IRS publications to YouTube tutorials.

Pros of going solo:

  1. Cost Savings: Doing your taxes yourself can save you money, as you won't have to pay a tax preparer's fees.
  2. Empowerment: You gain a deep understanding of your business's financials, which can empower you to make better financial decisions.

Cons of tackling your own taxes:

  1. Complexity: Tax laws are intricate; navigating them without expertise can lead to costly mistakes.
  2. Time-Consuming: Preparing your taxes can be time-consuming, taking you away from other critical business tasks.

On the flip side, hiring a tax preparer is like having a trusty guide who knows the ins and outs of the tax landscape. They're the experts in tax codes, deductions, and credits. They can spot opportunities for you to save money that you might have overlooked.

By outsourcing your tax preparation, you free up valuable time that you can dedicate to your clients or grow your business. You won't have to worry about deciphering complex tax jargon, and you'll have peace of mind knowing that a professional is handling your finances.

Pros of hiring a pro:

  1. Expertise: Tax preparers are well-versed in tax laws and can help you maximize deductions and minimize liabilities.
  2. Time Efficiency: They save you valuable time that you can redirect toward growing your business.

Cons of outsourcing:

  1. Cost: Hiring a tax preparer comes at a price that can impact your budget.
  2. Dependency: Relying on a tax preparer may mean you're less hands-on with your finances.

Which path you should choose really boils down to your unique situation and preferences.

If you're confident in your ability to navigate the tax maze, have the time to spare, and are budget-conscious, going solo might be the right choice. It's a valuable learning experience and can save you some bucks.

On the other hand, if you'd rather focus on your clients, want the assurance of expert guidance, and are willing to invest in professional services, hiring a tax preparer is a wise move.

Consider your own financial acumen, the complexity of your business, and the resources at your disposal. Whether you choose to sail solo or enlist the expertise of a tax preparer, remember that the ultimate goal is to ensure your business stays on a steady course toward success.

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Tax Season Tips

Mastering Tax Season: 7 Essential Tips for Small Business Owners

Tax Season Tips

Mastering Tax Season: 7 Essential Tips for Small Business Owners

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Tax season is upon us, and I know how crucial it is to navigate it smoothly. That's why I've put together these seven essential tips to help you make the most of this period.

By following these tips, you can simplify your tax season and potentially save money in the process. Remember, taxes are a part of running a business, but with the right approach, you can make the most of them.

1. Get Organized from the Start

The key to a successful tax season is organization. Start by gathering all your financial documents, receipts, and records in one place. Use digital tools and apps to streamline the process, making accessing everything you need when filing your taxes easier.

2. Understand Deductions

Deductions are your best friends during tax season. Familiarize yourself with the tax deductions available for small-to-medium business owners. Knowing what you can deduct from office expenses to home office deductions can save you a significant amount.

3. Keep and Eye on Deadlines

Missing tax deadlines can lead to penalties and headaches. Mark important dates on your calendar, such as the filing deadline and estimated tax payment due dates. Consider setting up reminders to ensure you never miss a deadline again.

4. Maximize Retirement Contributions

Contributing to a retirement plan not only secures your financial future but can also lower your taxable income. Explore retirement options like SEP IRAs or 401(k)s that offer tax advantages to small business owners.

5. Consider Tax Software

Tax software such as Turbotax and TaxAct can simplify the filing process and help you avoid costly mistakes. Invest in reputable tax software tailored to your needs, whether for your business or your personal requirements.

6. Seek Professional Advice

Sometimes, taxes can get complex, especially if you have unique circumstances. Don't hesitate to consult a tax professional. They can provide valuable insights and help you optimize your tax strategy.

7. Plan for Next Year

Tax season isn't just about the present; it's also an opportunity to plan for the future. Review your financial situation and adjust your tax strategy accordingly. Explore tax-saving investments and strategies for the upcoming year.

Tax time doesn't have to be a daunting task. With these tips, you'll be better prepared to tackle your taxes efficiently and make the most of available deductions. Stay organized, be proactive, and consider seeking professional advice when needed. Here's to a successful and stress-free tax season!

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tax prep

Hire a Tax Preparer or Go It Alone?

tax prep

Hire a Tax Preparer or Go It Alone?

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Albert Einstein once said, "The hardest thing in the world to understand is the income tax".

But more and more people are making the move to doing their taxes at home. With programs like 1040.com andFreeTaxUSA available, the process can be simplified and the refund swift in coming. However, going it alone is not always the wisest or most cost-efficient choice.

Let’s weigh some of the key factors in determining whether you should go it alone, or enlist the aid of a professional tax preparer.

Is it worth your time?
For the self-employed, it may be more advantageous to enlist the services of a professional tax preparer or Certified Public Accountant (CPA). Doing your own taxes, especially those related to a business, takes time. And, time is money.

Do you have the knowledge to glean all of the tax-related benefits involved in owning your own business?
Being self-employed may just be one of the greatest tax strategies of our time. As a self-employed individual, you are in control of your taxable income. With the right know-how, you can fully control how much tax you pay. In fact, there are many tax advantages to being self-employed, and, oftentimes, a professional can find tax savings and deductions related to your business that you may have otherwise overlooked.

Ultimately, for the self-employed, it’s a matter of weighing the cost against the advantages of hiring a professional. Keep in mind, however, hiring a professional can often result in tax savings that more than make up for the cost of the service.

What if you aren’t self-employed? What if you are filing for yourself or your family?
In this case, it may be worthwhile to consider going it alone. Programs like 1040.com make it easier for you and will walk you through the process step-by-step and often make receiving your refund a simple and expedient process.

Above all else, though, the best rule of thumb to follow in either situation is to trust yourself. Base your decision on whichever route gives you the most peace of mind. If you are comfortable completing the tax forms and utilizing the programs available for going it on your own, then this may be the best route for you. If however, you have any doubts or concerns, your best bet may be to hire a professional tax preparer.

Whatever you decide, download our Tax Preparation Guide and Checklist to help you better prepare.Tax Planner

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7 Tax Tips

7 Tax Time Tips

7 Tax Tips

7 Tax Time Tips

Prepare Now, No Stress Later

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April 15th  will be here before you know it (March 15th for many small businesses). Start getting ready today with our FREE Tax Guide and ChecklistPreparing ahead of time for the filing of your income taxes can reduce your stress.

For many reasons, feelings of dread and the tax season seem to go hand in hand.  Waiting until the last minute to file and scrambling to find your documents will only add to that sense of dread and elevate your stress levels. Follow these seven tips to get organized and file your taxes on time:

1. Collect all income related documents

W-2 Forms: If you held a job in 2023, you should have a W-2 for each job. Find the W-2s for each person in the household that worked. A W-2 contains your wage information and the various taxes that were withheld. Your employer is responsible for getting this form to you by January 31, 2024.

1099s: You should receive a 1099 based on the source of income such as NEC: contract labor, G: unemployment, MISC: school loans, gambling winnings, DIV: Dividends, INT: Interest Income.

1098: You can find payment information on your 1098  for items such as property taxes and school loan payments.

Other income-related documents and Information:

    • Various income and interest statements from your bank or brokerage. Ensure you have a statement for each account.
    • Bank account number: If you’d like your refund deposited into your account, you’ll need your account number and routing number. This information can be found at the bottom of your checks.

Be sure to review all the forms and information. Is everything accurate? It’s not unusual to find a mistake or two. Take the time to review all documents with a fine-tooth comb!

2. Collect all paid receipts

  • Collect any work-related receipts for anything you purchased for your job and didn’t receive reimbursement. If you are self-employed, the list of qualifying items is likely to be much longer. Computers, furniture, marketing expenses, and utilities are all viable deductions for the self-employed. Using a Profit & Loss (Income) statement during the year is a great way to keep it all organized. Bonus: you can track your monthly cash flow at any point and adjust your goals as necessary.
  • Hiring a bookkeeper will take the burden off your plate, and in many cases, it's tax-deductible! 

3. Collect proof of energy-efficient improvements

  • Did you make any energy-efficient improvements during 2023?  You may be able to take a credit of 30% of the cost, limited to $500. Items like insulation and energy-efficient doors and windows qualify. Have your receipts handy.

4. IRA/Retirement Documents

  • Collect proof of your IRA contributions. Cancelled checks or the brokerage statement are ideal. Your employer will provide your 401(k) contribution information.
  • You will also need any payouts you received such as lump-sum distributions. You might have gathered this with your income related documents, so go ahead and put it in a separate pile. This type of distribution is not considered income, but may still be taxable.

5. Social Security Documents

  • Collect social security information for everyone in the household you will be claiming on your return.  The social security number is required to ensure that each child/dependent is only claimed once. If you have a young child, it might be necessary to apply for a social security number. IMPORTANT: You must have a social security number for all dependents before any applicable tax credits will apply. This includes credits such as Earned Income Credit (EIC), Child/Dependent Care Credit, and Child Tax Credit.

6. Charitable Donations

  • Collect information regarding charitable donations. It’s becoming more important with each passing year to be able to detail and substantiate your charitable donations. Receipts are especially important. Taking pictures of donated items isn’t necessary, but recommended. Cancelled checks and credit card statements are also important.

7. Review Last Year

  • Review last year’s tax return. Last year’s return can be useful. You might find a carry forward from last year that should be applied to your current tax return. This is especially true for business gains/losses and depreciation.

Filing taxes doesn’t have to be a stressful process. Organization is the key. Keep track of your important documents and receipts. Take pictures of items you’re donating.

Make next year better than this year. After your return is filed, develop a system to manage your documents and receipts for next year. Choose a place to store everything you’ll need for the next time. A small amount of preparation can make everything easier in the future. When tax season rolls around, you’ll be ready to go!

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Pros and Cons and Filing Your Taxes Early

Pros and Cons of Filing Your Taxes Early

Pros and Cons and Filing Your Taxes Early

Pros and Cons of Filing Your Taxes Early

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Do you rush to file your tax returns as soon as possible? Do you gather all your documentation and stand at the IRS virtual door on opening day? As with everything, filing early has its pros and cons, but is filing early really a good idea?? Like many things in life, the answer is, “It depends.”

Not every situation is conducive to filing early. Filing for an extension and putting it off as long as possible may make more sense for some filers. Read on to learn the good, the bad, and sometimes the downright ugly of filing early and why waiting might be best.

The Good

Your security. This is probably the best reason to file early and therefore makes #1 on my list. Filing your taxes early can protect you from would-be cyber thieves.

The IRS will only allow one return per social security number, and it’s first come first served. If your social security number has been hijacked, you will get a rejection notice from the IRS.

At this point, you will need to file a claim and start the process of proving your identity, and you will have to show proof you weren’t involved in committing fraud against the IRS. Most of these cases do not get resolved until after tax season. Protect yourself now! Get ahead of the cybercrooks by protecting your computer and devices. Enroll in Cybersecurity At Home and discover how quick and simple it is to secure your home network.

Receive your refund sooner. Obviously, It’s your money! Who doesn’t want their money as quickly as possible?

If you’re owed a tax refund, then the earlier you file, the faster the refund. This is especially true if you’re going to mail your return (yes, 30% still use the mail). As you can probably imagine,  the IRS is less busy in February than in April.

Be free of the mental clutter. It has to get done one way or the other. It makes sense to get it over with and free yourself from it hanging over your head. Life is easier if you don’t procrastinate. Just do it.

The post office is less crowded. Remember what I said about 30% still mail their returns? That’s over 62 million of the adult US population trying to use the post office at roughly the same time. Many people don’t want to file electronically for a variety of reasons, one being security! Avoid the crowds and file early.

You won’t be late. I have a knack for stating the obvious. How can you be late if you file early?

Many of us plan to do things with the best of intentions, then life happens, and they usually end up waiting until the last minute.

I don't have to point out how risky that can be. What if you find out that you’re missing some key piece of information? What if you get sick? There are too many variables in life to put off something like filing your tax return until the last minute.

You’ll be more accurate. Starting your return early will keep you from rushing through it, thus ensuring that you have everything you need and that it’s done correctly. Remember, slow and steady wins the race. If you’re not rushed for time, you’ll be more likely to avoid errors.

The Bad

Why pay early? You want to file early when you expect a refund, but why would you want to pay early? It's your money!

If you owe the IRS, you’ll want to keep it as long as you can, maybe even make a little more in interest. It makes sense to keep your money as long as you can.

You might end up having to file a corrected return later. W-2s and 1099s are due February 1; however, It’s not uncommon to get them late or for providers to come back a month after sending your documentation and say, “Oops, we made a mistake.” Taking a little extra time to file your return will give you that much more time to gather your documents and ensure that you don’t have to do it more than once.

The Ugly

Early filers have a greater chance of being audited. If you file early, are you more likely to get audited? I’m not sure if we can ever answer that definitively. Still, it is believed that if the vast majority of the population is filing at the last minute, the odds of being selected are minimal due to the sheer number of tax returns the IRS agents must handle. Truth or fiction? No one knows, but why take a chance.

Consider the above factors when deciding to file your tax return. If you’re in a situation that puts you at risk of being audited, and you don’t need your refund or copies of your return right away, it can be wise to wait.

On the other hand, if your return is simple, you’re due a refund, and you need the refund now; there’s no time like the present to file your return.

Assess your situation and make the smart choice for your circumstances.

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