Everything You Wanted To Know About Taxes But Were Afraid To Ask
Today’s installment of our Afraid To Ask: TFD’s new expert interview series to launch, is all about how to navigate questions you have for your accountant. The Afraid To Ask series is meant to provide a deeper insight into a variety of subjects, and shed light on things people are sometimes ignorant about (myself included in every topic I cover!).
This week I sat down (via the internet of course) with a friend, Roseann Moore, who has worked in the accounting industry for 30 years. Along the way, she has picked up invaluable knowledge in the industry which she is sharing with us today!
Roseann was kind enough to answer the questions that follow, which are a mix of my own questions and reader-submitted questions. While this interview is not exhaustive, and there is a ton more to learn on the subject, it’s a great way to learn some basic knowledge that you’ll need to navigate working with an accountant and filing your taxes. Take a look!
What can a client do to make their accountant’s job easier/more productive/organized?
Glad you asked! A client should always send tax information in a timely manner and notify their accountant of important financial changes whether business or personal. This helps us to serve the client more effectively and get a clearer picture into their finances.
What are some of the top life events/changes that someone should be keeping track of and fill their accountant in on?
Some of the top life events/changes a business or individual should notify their accountant of are things like major investments, purchases of assets, opting in to a retirement plan, a change in filing status (you can learn more about that here and here), additions or deletions of any dependents (rules on dependents here), change of residency, and changes in sources of income.
What traits/attributes should someone look for in any great accountant?
The skills and degree of expertise that any individual should look for in an accountant would be looking for professionals who are highly proficient in their work, licensed as a Certified Public Accountant, very detail orientated, organized, have great follow-up with client needs, and offer effective and timely advice that makes it easy for you to understand what you need to do. You want to trust your accountant and feel that you can be open and honest with them about your financial details, history, and long-term goals.
What are the most important deadlines I need to know about, and how often should I be checking in with you as they come up?
Important filing dates for individuals, Schedule C, and Partnership filers is April 15th. C Corporations and S Corporations have a filing date of March 15th. Legislation just recently enacted changes to the filing dates for certain business entities for the 2016 tax year (but that’s not relevant for a good deal of people). If applicable, estimated tax payments for federal and state taxes should be paid as per schedule to avoid penalties and interest! It’s best to keep an open line of communication with your accountant — it’s better to err on the side of too much communication rather than too little.
What do I do if I move out of state? Do I switch accountants?
Generally, it is not necessary to change accountants if an individual moves out of state. It’s more important to retain an accountant who is well-versed with multi-state tax laws, forms, and maintains updates and changes in tax filings. With todays cloud-based application, accountants are capable of serving clients remotely from all over the world so you don’t need to utilize one in your state necessarily.
What if I’m unemployed or a freelancer who isn’t bringing in any money for a period of time…do I have to talk to my accountant? How will that affect my taxes?
A business or individual should always notify their accountant of changes to their income and expenses. Changes may impose a positive or negative impact on your current estimated tax obligation for that year. Again, speak with your accountant often if there are significant changes going on with your salary, job, income, etc. There are great articles for freelancers about the importance of having basic accounting knowledge here, here, and here, which talk about this in more detail.
Are there any websites that will put me in touch with a great accountant?
I think that referrals are one of the best ways to find a qualified tax professional. When you use a referral, you can get a better sense of the accountant working style, abilities, professionalism, and efficiency. Additionally, you can use LinkedIn, which is an effective tool for finding an accountant. The American Institute of Certified Public Accountants also has a directory of licensed accountants as does each state’s society of certified public accountants.
Why can’t I just wait to file my taxes until the last minute, and ask for an extension?
You don’t want to wait until the very last minute to file your taxes, as this can delay a potential refund you might be eligible for. There are some great resources that explain why it’s beneficial to file your taxes earlier if possible and the penalties of filing late, below. Check them out!
- Five Reasons To File Your Taxes Early
- The Top Four Reasons To File Your Taxes Early
- Eight Facts About Penalties For Filing Taxes Late
- Should You File An Early Tax Return?
A lot of our readers write in asking us for tips on how to stay organized as freelancers, for tax season. What are some ways I can keep myself organized?
Invest in some basic office supplies to help keep essential paperwork in one place. Buy things like folders, a filing cabinet, labels, a receipt jar (if you plan to write off expenses and want to physically keep the evidence!), or look into downloading an app that will digitally track your spending. We wrote about resources to track budgets (and spending) here. Real Simple magazine wrote an article about five steps to simpler record-keeping here.
Do I have to use an accountant? Can I do my taxes online by myself?
There are both pros and cons of using online tax software and using a professional CPA/accountant. Using online tax software is usually cheaper, can be quicker, and relatively simple if you have a good understanding of what you’re doing. However, it is only less stressful if your tax preparation process is simple — meaning you only have a few deductions, sources of income, or investments. Once you have all your necessary documents in front of you, it’s a pretty straightforward process that shouldn’t take too long to complete. However, if you run into difficulties, it’s not as easy to get someone to help. While there are some tax softwares that come with support/customer service, it’s not the guaranteed face-to-face time you receive with an accountant.
Hiring a tax professional is obviously a safer route for anyone who freelances, has to deal with multiple returns, list multiple sources of income, etc. Tax professionals are much more sophisticated and can answer your questions (year round for that matter), comments, and issues in real time. While they are much more expensive, you’re paying for the security of knowing that your taxes are getting prepared correctly. Another perk is that your accountant knows your history and long-term financial goals.
Below are some really helpful reading that can assist you while trying to find the best accountant possible, and what to look for!
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