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Most frequently asked questions when starting a tax prep business
20 February 2022
It's wonderful if you regularly seek the assistance of a tax advisor to file your taxes. However, there's a significant probability that you're not making the most of their abundance of knowledge and experience.
According to Chad M., an Endorsed Local Provider, "those that rely on us throughout the year—whether it be by email, phone, or meeting in person, depending on the depth of their questions—will create an opportunity to position themselves better for the current year as well as subsequent years" (ELP).
You might wish to ask your tax expert the following queries both during tax season and after.
1. What Is the Structure of Your Tax Preparation Process?
Here, you and your tax advisor can agree on the best channels of communication for the duration of the tax filing procedure. Do you feel more at ease scheduling a few meetings and conducting everything in person, or would you prefer to connect only via email? Perhaps scheduling phone calls is a solution for the two of you.
It's crucial to establish your expectations for the tax preparation process up front and locate a professional that will accommodate your schedule and preferences.
2. How Can You Assist Me With My Tax Objectives?
Do you want to avoid an IRS visit by making sure your taxes are done correctly? Do you want to decide whether to itemize your deductions or accept the standard deduction?
Ask your tax expert how they intend to guide you through the tax filing process and discuss your goals and tax concerns with them. Your deepest, darkest worries regarding tax season may be banished if you are aware of how your tax professional operates and have them explain it to you.
3. What details would you require from me in order to file my taxes?
Giving your tax advisor a complete picture of your financial situation will enable them to prepare your tax return accurately and find cost-saving opportunities for you more rapidly. You should be prepared to provide the following information to your tax advisor when they need it from you:
· Information about you and your dependents, including identification. For anybody who will appear on your tax return, you must have their Social Security or Individual Taxpayer Identification Numbers (ITIN) along with their dates of birth. This way, the IRS won't reject a tax return because the numbers don't match, and your tax counselor can confirm your identity (it happens a lot).
· Your most current tax return, in copy form. Even though circumstances can vary from year to year, having a copy of the previous year's return on hand will help your tax advisor determine the tax breaks and credits you are entitled to, saving you both time in the process.
· Tax documents and income statements. Your tax advisor will require copies of these tax forms in order to submit your taxes once you have collected your W-2 from your employer or all those 1099 papers (if you are a freelancer or independent contractor).
· Evidence of spending. You must have proof of your expenses on hand if you decide to itemize your deductions this year rather than take the standard deduction. I hope your receipts were saved!
4. What can I change to make my tax situation better?
If your tax return were a target, $0 would be the desired outcome. A hefty tax statement indicates that not enough money was deducted from your salary for taxes, something you don't want to happen. And that substantial tax refund? That is your money, which you have been lending the government an excessive amount of all year; it is not free money (with no interest, by the way). The best tax preparers won't merely assist you in filing your taxes, take their money, and then go. After you file, they'll be present to address any inquiries you may have regarding your tax situation.
Additionally, this extends beyond your withholdings! Your tax advisor may advise making certain adjustments to various aspects of your financial situation. They can help you understand how taxes are applied to your investments, the tax ramifications of purchasing or selling a property, or the best moment to turn your side business into a small business.
5. What other initiatives should I try this year, given my circumstances?
Life comes at you quickly, as Ferris Bueller once quipped. Additionally, if you don't occasionally take a moment to check around, you can lose out on significant tax savings or modifications that you need to make for a certain tax year.
In the last 12 months, did you get married, have a child, or purchase a home? Only a handful of these significant life changes can have an impact on your tax situation, and your tax professional can help you understand what these changes imply for you personally. Beyond taxes, your tax expert might advise you to take actions to safeguard your assets or advance your financial goals for the remainder of the year. Once you're married, you might need to set up a trust to safeguard your estate or purchase term life insurance. Your tax expert may be able to offer some quite helpful advice in those areas!
6. I want to call you for tax advice all year long.
Which would you prefer to work with—some Joe Schmo who simply files tax returns during tax season and then disappears for the rest of the year—or a tax expert who will actually return your call in September if you have a question about a choice that could affect your taxes for the year?
That is a fairly simple decision!
"I firmly believe that from April 16 to December 31 tax consultants are significantly more helpful than we ever will be from January 1 to April 15, says Chad. "The reason for that is that a tax return is old. After the ball drops on New Year's, taxpayers have extremely limited options for making changes to the previous year."
7. Which Tax Effects Will My Side Business Have?
Whether you took Dave's advice and started delivering pizzas to reduce your debt more quickly or you turned your hobby into a successful small business, it's extremely likely that your side hustle will make filing your taxes more difficult.
If you're one of the many millions of independent contractors, freelancers, or small business owners in the nation, you probably have to deal with tax forms that are different from those used by regular employees. Additionally, any money you receive from your side business may be subject to self-employment tax and quarterly taxes.
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Shatonya Thomas
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