How to get the maximum from an Accountant?

It is not possible for every tax payer to do taxes on their own. Perhaps, the choice of doing taxes is influenced by varied factors, especially by the sources of income. If your source of income is through multiple channels then it is pretty difficult to calculate taxes by self. And that too, without a proper understanding of deductions and other intricacies, you can never kick start a tax calculation.

If your aim is to minimize on taxes and save the maximum, then you should hire an accountant who will get it right at any circumstance.

Categorize and summarize your finances

Are you aiming for the best tax outcome? If so, then you should be well aware of your own tax situation. For small business owners, there are set of common deductions apart from the standard ones that are applicable to an average tax payer. The list includes office expenses, wages and benefits paid to employees and so on. You can approach your tax accountant, if you have a lot of other expenses, but confused on whether to categorize it under deductible or non-deductible expenses. When you schedule an appointment with your accountant for tax discussion, be sure to summarize the deductible expenses and ensure that you make a note of those items that are without receipt. It is highly critical to maintain a spreadsheet on expenses with clear cut categorization of headings namely “Home Office Expenses” and “Entertainment”, which will in turn help your accountant to clearly identify the totals you’re claiming in each deduction category.

Get a clear clarity on the Basics

It is mandatory that you categorize all the expenses, regardless of whether they fit under specific deductions you’ve taken in the past. There is a very less possibility of you being aware of all the deductions you are entitled to, especially on business income, investment and so on. Hiring an accountant for your taxes means, you’re bestowing him/her the authority to filter the expenses, and identify to what extent the deductions are available for you in each category.

It’s quiet natural for every tax accountant to trim on areas with reasonable amount of deductions. But on the other hand, your accountant will have no option to proceed forward with the deductions, if in case you don’t possess the receipts to support your claims. However it is possible under Cohan Rule which states that, other credible evidence can be used to support the claims during audit. But the rule doesn’t guarantee you a full deduction, rather a partial deduction. Given the experience an accountant posses in dealing with audits, he/she would be in a position to decide what to include and what to hold back.

Schedule a Post-Filing Follow-Up

Don’t forget to schedule follow-up meetings with your accountant and during those discussions it is highly imperative you ask these two questions. 1. What are the areas to where you can maximize deductions and 2. How you can improve your summary/information. The first questions is cross-checking the accountant on the whether he/has captured all the right deductions. Perhaps this is the perfect time to ask your accountant’s opinion on the amounts you foresee to receive as a claim in different categories.

Though it’s improper on your part to change the spending plans just to get more deductions, it is always worth to seek your accountant’s view on these matters. Sometimes having a coffee-table conversation with your accountant will give you a lot more ideas on tax.

The second question is all about improving relationship with your accountant. To see some wondrous value from your accountant, it is necessary that you maintain a cordial relationship. Almost all accountants expect long-term relationship from clients, and by showcasing yourself as an ideal client, you will be able to see your accountant as a true tax professional, who advises you on all tax related issues and guide on how to minimize your tax burden.

P.S

It doesn’t mean that once you hire an accountant you can stop thinking about taxes. No it’s not true. Accountants are truly busy professionals. As a tax payer, it is your obligation to co-operate with the accountant by providing relevant information and answering the basic questions.

6 mistakes during tax filing process

Stay Alert. Don’t commit these 6 mistakes during tax filing process.

We all are affected by the “last minute” syndrome. Procrastination is tightly knitted into our lives, affecting our routine schedule. Why do we work at the eleventh hour? Perhaps it could be for various reasons- mix of positive and negative. But there are certain tasks that should be accorded due diligence and concentration, without any compromise. And one such task that requires your valuable time and attention is when you fill your tax forms.

Here we highlight the top 6 mistakes tax payers commit while filing tax returns.

Mistake: 1 Providing Incorrect Social Security Numbers

The greatest blunder most tax payer commits during tax filing process is by providing incorrect Social security number. In fact IRS identifies this as top most mistakes committed by many tax payers.

No longer does IRS allow tax payers to claim dependents without social security number. It has made it mandatory, that every member of the household, as specified in the return should possess Social Security Number. It is highly advisable that tax payers do multiple checks to ensure the correctness of numbers before submitting.

Mistake: 2 Spelling error in name

Sometimes a typo error can cost much. And so is the case, if your name has spelling errors in tax return form. Of course, we all do multi-tasking and are obsessed with wide range of thoughts. The resultant effect is that, we couldn’t commit our entire concentration on one single task, which leads to imperfection. This imperfection especially while filling up tax return forms, in the form of incorrect spelling will lead to rejection of returns and sometimes end up in delayed returns.

If it is so that, you are a recently married or a divorced one and haven’t registered name with concerned authority, ensure that you use your old name. The name on the form and name listed in social security records should match at any cost.

Mistake: 3 Committing math errors

Entry of correct figures during calculation process will minimize math errors. Despite the fact that, tax calculations are predominantly dependent on software, the process of feeding correct numbers into software is done by human being. No doubt, software can’t verify the correctness of numbers inputted into it.

For those calculating tax returns with the help of pen and calculator, it is highly recommended to double check the figures and results.

Mistake: 4 Forgetting to sign

Once again this is the common mistake committed by many. After spending long hours in calculating and filling up the form, and thereafter in which case if you fail to sign the papers, it will lead to lengthy delays in processing returns.

Hence it is recommended to file and sign papers electronically.

Mistake: 5 Choosing wrong filing status

Once again it is the costliest mistake which many single parents commit. In the case of unmarried parents, amongst whom those with qualifying dependent and who pay more than half the cost of keeping home would be eligible to file as a head of household. This status will increase their standard deduction by $2900. The concerned person will be called “unmarried”, as long as he/she doesn’t live with the spouse for the last six months.

Mistake: 6 Ignoring Deductions or Credits

Many at times we tend to ignore the deductions and credits that we are entitled for. Maximizing tax refund depends much on how we take advantage of every tax deduction and credit available to us. Of course there are plenty of deductions available, through which one can reduce the tax liability amount.

Here are the list of tax deductions and credits one can utilize to reduce the tax liability

American Opportunity Credit: College students of all ages are eligible for avail this credit option. The amount of credit depends upon the college expenses and one can save up to $2500 tax reduction per year for a four year period.

Earned Income Tax Credit: Low income families are entitled to avail this credit option. Under this credit scheme government will pay cash to the families, even at instances when families don’t owe any taxes. The credit can be up to $6044 for some families.

Child care credit: If parents have put their children under the care of someone else, when they are to work, they will be eligible to claim a credit of up to $1000 on expenses incurred.

State Income or Sales Tax: One can deduct any state income tax paid from one’s federal return. If the state doesn’t charge income tax, one can claim for the paid sales tax.

IRA contributions: Contributions to both IRA’s are not deductible. However one can deduct up to $5500, if the money has been used in traditional IRA.

How small businesses can save on taxes? Part-I

Month of December is all about merry-making, singing carols, and attending endless year end parties. There is no better month in the calendar that will raisen up our spirits and usher in loads of excitement as like December. But for business owners it is quite different. It is the month of hectic board deliberations to verify the financial numbers, attending to an array of lined up consultations with tax planners, financial advisors, and tax preparation service agents– You know why it goes like this? All to figure out, how best the business can save on taxes. And that too for small business owners, it’s a month that takes their toil. Perhaps a number crunching month with hosts of financial brainstorming.

Sanjay TaxPro Inc gives you a breather by suggesting Tax Deductable tips to save money.

1. Expenses incurred for setting up Business

Keep a proper account of all the expenses incurred while setting up business such as advertisement cost, utilities cost, office supplies cost and other associated costs. All these costs can be deducted under current business expenses, provided you start the business operations. Small businesses will benefit a lot out of this, if they chalk out a detailed yearly Tax saving plan with tax saving targets for their business.

1. Interest Payment

Let’s presume that you have taken credit to start off your business- at this juncture the monthly interest paid along with the carrying charges will come under tax deductible bracket. If you have availed personal loan and have utilized it for your business purpose, justify it with proper records to prove that it was used for business. By doing so you can save money on both business tax and personal tax as well.

1. Taxes

If you are running a business, by default you are liable for taxes, and these taxes are generally deductible. The pattern of deduction varies on the nature of tax.

• Items brought for the businesses’ daily operations are levied sales tax, and the quantum of amount depends on the original cost of each item. It will not be deducted separately. Consultation with local business tax accountant in your business area will shed more light on sales tax, increasing your tax savings.
  • In case of employment taxes, employer’s contribution is deductible under business expenses. However self-employment tax paid by employees will not liable for business expense deduction, as it is not a business expense.
  • The component of Federal income tax which businesses pay on the income generated is not liable for deduction. However your federal return is liable for state income tax deduction as an itemized deduction, but not as a business expense.
  • Real estate tax levied on the property used for business operations is liable for deduction, and so is in the case of any local assessments for repairs or maintenance. If the assessment is for anew enhancement or for an additional improvement- it isn’t liable for one time deduction, rather deductible over the years. To ensure a strong and stable financial position, small businesses can prioritize and focus much on Tax saving investments at the initial level, which will in turn will bring financial stability to their business.

  This isn’t the end. You have lot more tax deductible tips for your business to save more on taxes. Find it out in our next blog.