Benefits of having a Tax Professional

The IRS announced the start of the 2021 tax year last January 24, 2022. When the IRS sounded the horn that signals the beginning of the tax filing season, most taxpayers are faced with the question of whether they should do their taxes at home or if they should hire a tax professional to do it for them. Some might say that they can do their taxes themselves without the need for any professional to help them. But is the US tax code really that simple that you don’t need to have a tax professional do your taxes for you?

Turns out the answer is not so simple!

DIY Tax Preparation

Taxpayers who choose to do their own taxes think that filing their taxes simply means that they have to answer the questions included in whatever form they think is applicable to them. They are partially correct; however, the US tax code is not as simple as they think it is. The US tax code is getting more and more complicated as the years go by.

Drake Software is a Professional Tax Software company that conducted a survey and they found out that around 46% of paid tax preparers did not have any professional designation. Compare that to the 29% of taxes filed by CPAs and 26% filed by Enrolled Agents.

Having someone with no professional designation to file your taxes for you is as dangerous as filing your taxes yourself without even flipping through the first page of the US tax code. Professional designations are provided to Accountants and Enrolled Agents because they have shown a high level of competency when it comes to dealing with the ever-evolving landscape of tax rules and policies. Going through the maze of taxes without the proper knowledge, continuing professional education and experience can have you facing hefty interest and penalties.

Tax Professionals

If the US tax code is as complicated as it ever was, going to a tax professional to do my taxes is the right move, right? The answer to that is also not as simple as it seems. Tax professionals are given the designation because they have shown a high level of competency in dealing with the tax code when they were tried and tested. However, not all tax professionals are created equal.

For example, out of all the registered tax professionals in the country, only 41% have finished their Continuing Professional Education coursework, the other 48% are yet to finish their CPE coursework. Meanwhile, only 47% of tax professionals say that they have studied the latest changes in the tax law that will affect the upcoming filing season, the other 53% say that they haven’t gotten to studying the changes yet according to the survey conducted by Drake Software.

Competency

Competency is not the only criteria to becoming a trusted and effective tax professional. Since tax professionals are dealing with sensitive financial information, you must choose someone that takes good care of them and makes every effort to keep your sensitive financial information away from prying eyes. According to the survey conducted by Drake Software, only 39% of tax professionals use secure online portals to accept and store their client’s sensitive financial documents. 35% of tax professionals haven’t gotten to using a secure online portal and the other 22% don’t intend to use a secure online portal to properly handle their clients’ sensitive financial information.

The bottom line is that the benefit of having a tax professional to do your taxes for you is not the same across the board. Some tax professionals are more competent and experienced when it comes to dealing with the US tax code and some tax professionals conduct their services in a more secure manner protecting you from the prying eyes of no good-doers. If you are to choose a tax professional to do your taxes for you this tax filing season, make sure that you ask them the right questions for you to know if they can give you the peace of mind that your taxes are done the right way according to the latest IRS guidelines and if they can handle and store your sensitive financial information in a secure and safe manner.

Bottomline

Doing your taxes to save you some money from hiring a tax professional might seem like a good idea but hiring a tax professional gives you the benefit of knowing that your taxes are done the right way helping you steer clear of the IRS’ bad side which can lead to an audit and then lead to hefty fines and penalties. However, if you are going to choose a tax professional to do your taxes for you, make sure that they can give you the benefit of peace of mind that they are well versed in the latest updates in the tax regulations and that they can handle your sensitive financial information in a safe and secure manner.

The benefit of having a tax professional is not the same across the board. If you want an experienced tax professional to do your taxes for you with the utmost regard for your sensitive financial information then look no further. We are here to help you have the peace of mind that your unique tax situation is handled accordingly to the latest tax code changes and that your sensitive financial information is handled in a safe and secure manner that keeps it away from prying eyes.

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Top 5 New Year Tax Resolution

Every year we make a list of resolutions that we promise ourselves that we will do or not do to better ourselves. But not everyone knows that you should also make a new year tax resolution list so that your life gets easier come Tax Day!

Here are the top 5 new year tax resolutions that you can do to make your life easier when Tax Day arrives:

1. Update your bookkeeping practices

From a business point of view, bookkeeping helps you know whether you’re making money and provides key information to help you take action–such as adjusting prices, cutting expenses, or raising money.

To ensure that your business receives all the deductions and tax credits to which it’s entitled in 2021, you’ll need to keep good records. Often business owners fail to pay attention to this detail until it’s too late and the IRS is questioning deductions claimed on a return.

To meet tax law requirements and ensure compliance with related laws, you should establish and follow a bookkeeping system. You can use software that can help you with bookkeeping, such as those for tracking business travel and entertainment expenses.

2. Take note of your odometer

You can deduct the cost of business driving only if you have the records to back this up. That means noting your odometer reading at the start of the year, and then tracking your business trips regularly.

Consider using an app for tracking mileage. Some are free, and others cost a modest amount.

3. Spend Wisely

To save money on the tax bill this year, consider spending money you’ve saved for other things on dependent care or medical expenses, which can in turn reduce your tax bill. Many employers offer this benefit.

Flexible spending plans allow you to use pre-tax dollars for dependent care, medical expenses, and health insurance. Employers deduct pre-determined amounts from paychecks and place the funds in an administered account that releases the funds when the expenses are incurred. And since contributing to a flexible spending account lowers your gross income, it keeps more money in your wallet.

4. Pay Close attention to Crypto transactions

For the past few years, buying, holding, and selling crypto didn’t need to come with a bunch of paperwork and documentation. However, the IRS started cracking down on unreported crypto transactions that result in profits or losses. It would be best if you are able to properly document the necessary details every time you buy or sell crypto by using software developed for the main purpose of recording crypto transactions for tax reporting purposes.

5. Work closely with your tax professional

Many prefer to do their taxes themselves, but these people only work on their taxes once a year. Compare that to tax professionals that are certified and experienced to do taxes for everyone, every year. Work closely with your tax professional to get yourself the latest news and updates related to your specific tax situation.

Your tax professional is here to help you make sure that your tax reporting is fully compliant with the ever-changing rules and policies surrounding taxes.

Bottomline

Taxes are here to stay and everyone must do it every year. It is up to you if you prefer to sprint at the last minute to get everything done for your tax reporting or if you prefer to have your peace of mind when Tax Day comes. These new year’s tax resolutions can go a long way if you start at it while the year is just getting started. If you are not sure that these new year tax resolutions will fit your special tax situation, you can always get in touch with our experienced Enrolled Agent to help you with your tax planning for this year!

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