It’s the middle of May 2020, when spring is ending and summer is just around the corner. We’re looking forward to Memorial Day and the warmer weather. Unlike last year, we are in the middle of the COVID-19/Coronavirus Crisis in the DMV/Beltway area. The pandemic has put a kink in our summer plans as well as our tax plans.
Our new normal is where some businesses are closed. Quarantines are still in place. The streets and parks are quiet. Life, as we know it, has been put on hold until the government issues new guidelines. It is only speculation as to when life will resume with the same kind of normalcy before the pandemic gripped our country. How can we possibly plan ahead in an uncertain world, let alone a tax plan?
At A.K. Burton PC, we are still open for business. We are available by phone and execute our work virtually and remotely. We are working to help our clients during this unprecedented global pandemic. Our clients are our first priority. Even though the pandemic has turned our lives upside-down here’s a friendly reminder of some tax planning strategies:
- Health Insurance: If you’ve had a major change in income for 2020, and you have your health insurance coverage through the marketplace; update your income information. It may lower your monthly premiums. If you have had a major life change such as losing your job, you may qualify for a “Special Enrollment Period” and be able to enroll in health insurance coverage through the marketplace at healthcare.gov.
- Home office deduction: Since the COVID-19 epidemic, you may have needed to work from home. Depending on the method your income is earned you may or may not qualify for business use of home deduction on your 2020 tax return. If you do qualify for a deduction, your office must be the square footage in your home that is EXCLUSIVELY used for business. It can not be the sofa where you watch TV or your bed where you sleep at night. Keep track of expenses for your home including electricity, WiFi, water, and phone expenses. Keep track of any office supplies such as printer ink or computer paper.
- Capital gains/ losses: Keep records of your trades and holdings in stocks, cryptocurrencies, and commodities. Save all of your trade data so you can report all reportable transactions accurately.
- Online software for business: In order to do business from home, you may have had to purchase or rent certain software. This may include subscriptions to Zoom or other pertinent software programs. Keep accurate records of these receipts.
A.K. Burton, PC, has experienced tax advisors who can assist you in this unprecedented time. We are here for our clients working to file their tax returns. Call us at (301) 365-1974 for a phone consultation. We serve the Bethesda, Rockville, and Montgomery County. MD area.
Albert Einstein once said, “The hardest thing to understand in the world is the income tax.”
Even Einstein, the smartest man in the world at that time, didn’t even understand how income taxes work! So, why does the average person tackle their income tax returns every year, thinking they can do it?
We are not elitists here as we know most people do their tax returns to save money and also to keep their earnings confidential. However, most tax filers miss important information or commit several common errors. ***
So, as July 15, 2020, (the new Tax Day date due to the COVID-19 crisis) draws closer, you may want to consider having a certified public accountant (CPA) complete and file your taxes for these reasons:
- The tax laws are always changing: Every year, Congress makes changes to the tax laws which are then sent to the Internal Revenue Service to enforce. Most people do not have the time or patience to keep up with these laws. CPAs keep up with all these new laws and changes and can advise you on them.
- Earn $200,000 or more: Top income earners are always in the bullseye for the IRS. Thus, they are more likely to be audited. CPAs can assist the high-earner in filing everything correctly and also in watching for any red flags that might bring an audit.
- Back taxes are owed: Your CPA will help the client find out how much they owe, how they can pay in installments and how to avoid future issues. The CPA can also contact the IRS for you, represent you to them and work out a reasonable payment plan if it is needed.
- Saving for children: Children may go to college or need a trust. A CPA can help you set up a trust or financial investment.
- Inheritance: A large inheritance of cash or property can be both a blessing and a curse. A CPA can figure out how much needs to be paid to the IRS (if any) due to inheritance taxes. They can also advise on how much to pay in the future.
- Side-hustle or second job: Many people have side jobs now such as Uber or Lyft or rent out a room as an Airbnb. CPAs can determine how much is owed to the IRS and then advise for future earnings and withholdings.
- Save money…lots of money: As we discussed earlier, many people do their own tax returns thinking they can save money from having to pay an accountant. Unfortunately, they may end up losing money by not filing complete returns or listing all their write-offs. So, they end up paying the IRS thousands of more dollars than they should have. CPAs can save them a lot of money by filing correct and accurate tax returns.
These are just a few of the reasons you may want to hire a CPA to do your 2019 tax return and your tax returns in the future. They have the knowledge, experience, and credibility. And, they do what is best for you.
A.K. Burton, PC, has experienced certified public accountants (CPA) on staff who can file your tax returns and represent you to the IRS. Call us at (301) 365-1974 for a consultation. We serve the Bethesda, Rockville and Montgomery County. MD area.
**For more about common errors on tax returns, visit this page at the IRS website.
It’s only mid-way through the fall but it’s not too early to be thinking about your tax returns for next year.
In fact, now is the time to be thinking about your personal and business tax returns especially if you have had issues in the past and want to do it right or better this time. Your tax records and tax filings are too important to be done just by anyone, including yourself, who is unfamiliar with tax laws, deadlines and forms. It could be a serious financial and legal mistake to do it on your own without any advice.
So as the holidays draw closer, begin the search for a tax advisor. Here are Five Things to Consider When Choosing a Tax Advisor:
- Relevant Industry Experience: No tax advisor can know everything about every industry. Make sure you are comfortable with the amount of experience the tax advisor has with your industry. Don’t be afraid to ask the advisor if he has other clients in your industry and how long he has been doing work for them. The accounting firm partners should be able to tell you if they have enough experience to handle your case. If not, ask them to send you to a firm that can do it.
- Five-year Minimum experience: The senior member should have at least five to ten years of experience in completing business tax returns. Also, better to find a larger accounting firm with a variety of tax advisors. This means that the accountants have had diverse experiences with a variety of industries.
- Certified Public Accountant (“CPA”) Designation: As a business owner, your tax advisor should be a CPA at a minimum. You can also choose an Atty/CPA as your tax advisor. An Atty/CPA is a dually designated individual who is both an Attorney and a CPA and is generally more knowledgeable than an advisor who is just a CPA. Either way make sure you have one or the other. As a business owner you cannot afford not to.
- Audit Representation: IRS audits are a fact of life. Even though IRS audits are down recently, you never know and cannot control whether they will audit you next. Even the most honest among us have had to go through the stress and endure the headache of having an IRS auditor reviewing our tax returns. It is, then, crucial for your tax advisor to agree to represent you during any and all audits. They can answer questions, find documents and, most importantly, advise you on any issues druing the audit. You do not want to go through an audit alone. Make sure your tax advisor is there every plodding step of the way.
- Fees and Fee Structure: Before you sign up with any tax advisor, find out what they charge for their services. Make sure that you are comfortable with how and what they charge. Being organized with your business records can help prevent your Accounting Bill from getting out of control. Quicken, Quickbooks, Mint or other accounting programs can help maintain your records in reasonable workable shape. Any paper documents should be organized by type and date. Avoid the “shoebox style of organization” which forces advisors to spend hours (and your money) trying to put it all together. You will save a lot on time and fees (and bad will) by organizing your documents.
- Location: With the advent of the internet and the 21st century, your tax advisor does not have to be a few blocks down the road, though being local saves on expenses, especially if you are audited. They can be in another city or state. However, if you have multiple businesses that require a lot of attention from professionals, then you will probably be better served by having someone local who can drop by and advise you on a more frequent basis and keep abreast of your local issues as well.
Yes, it seems too early to be talking about tax advisors, but you may already be rethinking that after reading this blog. That’s good because the next quarterly filing is coming up in January. Don’t go it alone. Find a licensed and experienced tax advisor today.
A.K. Burton, PC has experienced and licensed tax advisors on staff. If you need more advice on business and individual tax planning, contact us at (301) 365-1974 for more information or email us at firstname.lastname@example.org.