bookmark_borderStarting A Tax Preparation Business

Tips for success in tax season

No matter how long you have been or will be in the industry, tax season will never be described as “easy.” Packing the bulk of the year’s work into a few short months defies all possibility of normalcy in the workplace. The combination of long days, lack of sleep and piles of work takes a toll on even the most put-together accountant

Luckily, you can take measures now to make the rest of the 2019 tax season a more manageable, fulfilling experience. To give you some ideas, 10 of Canopy’s in-house tax professionals shared their tips for tax season success. So, whether you are interested in improving teamwork at your firm, taking better care of your health, or learning about specific tax regulations, keep reading for tips you can implement right away.

Set team expectations early and often: “As I’ve worked with various teams through busy seasons, one of the most valuable things we’ve done was set clear expectations. We meet early in the season to discuss as a group how each member of the team will be allowed enough flexibility to take personal time. For example, the team may decide that on certain days the whole team gets to work from home, or we may choose one night each week for a particular team member to leave the office early. Allowing each team member to retain some personal time is crucial for surviving busy season.

Work smarter, not harder: “It is important as an accountant to take care of your mental health during tax season. Work smarter and more efficiently so that you can be home at least twice a week for dinner with family, or make it a point to treat yourself to a movie. In order to work more efficiently, scrub your calendar. Remove all unnecessary meetings

Don’t forget the new pass-through deduction for business income: “Are any of your clients a sole proprietor, partner, member of an LLC or shareholder of an S corporation? If so, remember to apply pass-through income and they may be able to deduct up to 20 percent of their business income when filing their taxes. Based on the title of the deduction, many people are surprised that sole proprietors filing a Schedule C may be qualified for this tax break. As a tax professional, take extra time to understand the specific rules for this new deduction, so you know exactly how to help clients who are in these situations

 

steps for first-time tax filers

Filing your federal income tax return can seem overwhelming. But you can tackle tax season one step at a time—and avoid rookie mistakes—while you take advantage of money-saving opportunities.

You need to file a tax return if you meet or surpass certain levels of income during the year. If you’re employed, look at your pay stub for the “year to date” income—and if you have more than one job, be sure to add up your income from all your employers. Remember to include income from other sources, too, such as money you make on rental property, anything you sell, investments or interest

Stay on top of tax-related paperwork throughout the year; it will make your life easier during tax season. You might want to keep receipts for things like charitable donations, work-related expenses and medical bills, or other items from step 4. You may also want to keep statements from student loans or investments and any grants or fellowships. Having these handy and organized can help you determine whether to itemize and make the process easier. You should keep your paperwork after you file, too. The IRS recommends keeping records for at least three years.

You should receive forms about how much income you’ve earned from your employers and other income sources in January or February. If you are a full-time employee, you will receive a Form W-2 detailing your earnings, as well as which taxes were withheld. If you work freelance or on a contract, you may receive a Form 1099-MISC detailing what you earned. You may also receive documents showing dividends or interest earned on investments (Forms 1099-DIV or 1099-INT, for example), or student loan interest you’ve paid (Form 1098-E). If you’re a college student (or you have a dependent who is), you’ll receive a Form 1098-T that shows how much you paid in tuition, as well as any amounts you received from grants or fellowships, to help you figure out deductions and credits related to education expenses.

Getting a sense of which credits and deductions you may be eligible for can help you pull together the proper documentation. Here are a few to consider:

Saver’s credit. If you are not a full-time student and are not being claimed as a dependent, you may be eligible for a tax credit if you contribute to a retirement plan. The amount of the credit depends on your filing status and adjusted gross income. For the 2020 tax year,  If your filing status is single, you may be eligible if your adjusted gross income is $32,500 or less. If you are married and are filing jointly, you may be eligible if your adjusted gross income is $65,000 or less. However, these numbers are subject to change in future tax years.

Student loan interest. You can deduct up to $2,500 in interest payments, depending on your modified adjusted gross income.

Charitable deductions. Donating to your alma mater or a favorite charity? Generally, you can deduct those donations if you itemize your taxes.

Freelance expenses. If you are self-employed, you may be able to claim deductions for work-related expenses such as industry subscriptions and office supplies.

 

What Do You Need To File Taxes?

Every taxpayer’s situation is unique, and thus it is impossible to list all the items one must bring in for a tax appointment for every type of tax situation.  When in doubt, bring the item in question to your tax appointment

Prior Year Tax Return Copies

If you are a new client, please bring copies of your last 3 years federal and state income tax returns.  R&G Brenner will review them for FREE, and we may be able to amend mistakes/omissions getting you back additional refunds

Personal & Dependent Information

Social Security or ITIN Numbers with date of births for anyone who’ll be on your tax return

Childcare payment records with licensed provider’s ID number(s)

Amount of any alimony payments with ex-spouse SSN

Income Statements

Bring any & all W-2, 1098, 1099 & schedule K-1 forms

Purchase date & total investment for any stocks or property sold

List of investment related expenses

Education scholarships or fellowships

If you are planning on itemizing your deductions (Schedule A) please compose a spreadsheet/list summarizing them.  Itemized deductions include:

Mortgage interest, real estate & personal property tax records

Casualty & theft losses

Amounts of state & local income tax paid in prior years

Records of cash donations to religious institutions, schools & other charities

Records on non-cash charitable donations

Unreimbursed job related expenses (travel, tools, cell phone charges, uniform cost/cleaning, luggage, services fees, trade journals, meals & entertainment)

Job search/moving expenses

 

Should You Do Your Own Taxes?

Asking someone to do your taxes can be a little like asking for help with home improvement tasks. Some people enjoy do-it-yourself (DIY) projects—they have the knack, and would rather save money and keep their business to themselves. Meanwhile, others are happy to outsource these time-intensive chores to a professional, who may also do a better job.

It’s the same when it comes to preparing your own tax return. Whether you decide to pay someone depends on your confidence in crunching numbers and a basic understanding of tax rules, plus your willingness to put in the time.

Tax Laws in Effect for 2019

You might want to enlist the help of a professional to prepare your 2019 return, even if you consider yourself to be pretty tax-savvy, because the Tax Cuts and Jobs Act (TCJA) made some sweeping changes to the tax code when it went into effect on Jan. 1, 2018.

Standard deductions more or less doubled after the law went into effect, and this might make itemizing less attractive to some taxpayers who have chosen that route in the past, particularly because changes were made to quite a few itemized deductions as well.

The Cost Factor

One nice thing about preparing your tax return yourself is that it can be free. If you are an expert and choose to do it the old-fashioned way with a paper return and a pen, you will pay nothing. Many people also choose DIY tax preparation software through companies like TurboTax or H&R Block, which have very low fees and sometimes free deals. These services usually offer tax support and advice.

 

The best tax preparation software

Tax preparation software can speed up and simplify the process. But how do you know which product is best for you? NerdWallet, the personal finance website, did a lot of the legwork for you. Evaluations for the Best Tax Software of 2020 were based on features, tools, ease of use, support and price.

Read this before you buy tax prep software

If your adjusted gross income is below $69,000, visit the IRS website and see if you qualify for the Free File Program. Ten major software companies — including TurboTax, H&R Block and TaxAct — are taking part this year.

If you don’t qualify for IRS Free File, then you should look at the free packages available from the tax preparation companies. TurboTax, H&R Block, TaxAct, TaxSlayer and Jackson Hewitt all offer free online preparation and filing for those with simple tax returns.

BEST FOR SIMPLE RETURNS: H&R Block Free Edition

NerdWallet Take: “When it comes to tax prep software that can do simple returns at a reasonable price without sacrificing user-friendliness, we think H&R Block Free stands out from the crowd.”

NerdWallet defines a “simple” return as one that has W-2 wages, limited income from interest or dividends (less than $1,500) and taking the standard deduction.

bookmark_borderChoose The Best Accountant For Your Company

Tips for Finding the Right Tax Accountant for You

Where to Look for a Tax Accountant

Some accountants are jacks-of-all-trades, while others specialize in certain areas. You don’t want to hire someone who has never handled an audit before if you’re being audited, but by the same token, you probably don’t need an audit expert to explore tax-advantaged savings for your new child’s education.

Beware of Red Flags

Be wary of an accountant who promises you a giant refund right from the start before even analyzing your personal financial situation. The same goes for someone who says that you can deduct an excessive number of expenses before really talking to you.

Those Retail Franchises

Retail tax franchises such as H&R Block, Jackson Hewitt, and Liberty Tax Service offer competent help if you just want to file a relatively straightforward tax return. Sometimes you can even find certified public accountants (CPAs) and enrolled agents (EAs) working in these offices.

Different Types of Tax Professionals: Enrolled Agents

EAs are the elite, at least as far as IRS credentials are concerned. They’ve passed rigorous testing and background checks administered by the IRS. The testing involves three parts.

Certified Public Accountants

CPAs have passed the rigorous Uniform CPA Examination and they’re licensed by the board of accountancy in the state where they work. They have accounting degrees from a university or college, and continued licensing requirements involve meeting certain character and experience thresholds.

 

How to Find a Good Accountant for Your Small Business

Referrals – ask other business people about their accountants.

Find out who other business people use and how satisfied they are with the services their accountant provides. If you don’t or can’t get any worthy referrals using this method, use the internet or yellow pages and choose several accounting firms.

Call the four or five accountants you’ve selected and ask to discuss their services.

Ask him or her about his education (such as whether he’s a CA or CGA) and about his experience with your industry. You can also check with their professional association to see if their stated qualifications are valid and there are no outstanding disciplinary issues.

Prepare a short list of questions you want to ask prospective accountants.

Don’t be shy about asking about billing. Ask about billing rates and how these are determined. Often you may have a quick question that can be answered via a short phone call or email – how do they bill phone or email advice?

Meet with the prospective accountant(s) you’ve chosen, and ask your questions.

There’s nothing like a face-to-face meeting for gauging how well you might work with another person. Besides assessing the accountant’s knowledge, see how comfortable you are with him or her and how well the two of you communicate with each other. When you choose an accountant for your business you’re going to be establishing a long term relationship, so feeling comfortable with them is important.

 

How to Find the Best C.P.A. or Tax Accountant Near You

Why you need to be careful when choosing a C.P.A.

Each year, the I.R.S. compiles a “Dirty Dozen” list of tax scams. Although the scams are wide-ranging, many of them include actions taken by shady tax preparers, such as promising inflated refunds, falsely claiming deductions and credits, or encouraging clients to avoid their tax obligations.

Compile a list of potential C.P.A.s and tax accountants

Like with most service providers, a great way to find a C.P.A. or accountant is to ask for a referral. But don’t just go with the first name you get — compile a list of three or four potential accountants.

Search the I.R.S. directory.

The one qualification every paid tax preparer must have is a preparer tax identification number, or P.T.I.N. Anyone can apply for a P.T.I.N. online for free, so a P.T.I.N. alone isn’t indicative of the person’s skill or experience.

Check with your state or national associations.

Many state boards of accountancy and state C.P.A. societies maintain online directories of members or can provide a list of tax pros in your area when asked. Not every C.P.A. prepares taxes, so you may need to do some research online or call to see if the people on your list provide the type of tax services you need.

Consider free tax-preparation resources.

If you make less than $56,000 per year or are age 60 and older, you may want to look into having your tax return prepared through the Volunteer Income Tax Assistance (VITA) or Tax Counseling for the Elderly (T.C.E.) programs.

 

TIPS TO FINDING THE BEST ACCOUNTANT FOR MY BUSINESS

Additional Services

What issues are most important to you? Where do you see your business going? If you anticipate some major growth for your business you may want to have an accountant who is familiar with business and strategic planning, budgeting, cash flow management, and estate planning.

Has Worked With the IRS

Having to face an audit is stressful enough. Having to rely on an inexperienced accountant who has never faced the IRS only adds to the grueling experience.

They Are Active in the Local Community

This was touched upon earlier, but accountants should be members of the American Institute of Certified Public Accountants (AICPA), state societies of CPAs, and other professional groups to help them stay current on accounting and tax changes. They should also be active members of the local community so that you can see what they value.

Firm is Right Size For Your Business

A smaller accounting would work best with a small business. It just wouldn’t make sense for an accountant who works with enterprises to work for a company that only has three employees.

Available When Needed

If you have an emergency, will the accountant make the time to take your call and handle the crisis when needed?

 

How to Hire an Accountant

Business advisory services. Since an accountant should be knowledgeable about your business environment, your tax situation and your financial statements, it makes sense to ask them to pull all the pieces together and help you come up with a business plan and personal financial plan. Accountants can offer advice on everything from insurance (do you really need business interruption insurance or is it cheaper to lease a second site?) to expansion (how will additional capacity affect operating costs?). Accountants can bring a new level of insight, simply by virtue of their perspective.

Accounting and record-keeping. These are perhaps the most basic of accounting disciplines. While it makes sense for many business owners to manage their day-to-day records, an accountant can help set up bookkeeping and accounting systems and show you how to use them. A good system allows you to evaluate profitability and modify prices. It also lets you monitor expenses, track a budget, spot trends and reduce accounting fees required to produce financial statements and tax returns.

Tax advice. Accountants that provide assistance with tax-related issues usually can do so in two areas: tax compliance and tax planning. Planning refers to reducing your overall tax burden. Compliance refers to obeying the tax laws.

Auditing. These services are most commonly required by banks as a condition of a loan. There are many levels of auditing, ranging from simply preparing financial statements to an actual audit, where the accountant or other third party provides assurance that a company’s financial information is accurate.