We all know that CPAs are incredibly busy during tax season. For the first few months of the year, accountants are flooded with requests from businesses and individuals to prepare their taxes. However, once tax day passes, you may imagine that CPAs can take some well-earned rest and relaxation. While it is true that many CPAs slow down after tax day, they are by no means out of business. CPAs have a variety of skills that keep them working year-round. And if you run any kind of business, or just want to plan for the future, here are some good reasons why you might need a CPA even when it’s not tax season.
Tax Season Extensions
While most people pay their taxes in full by April 15th, there are lots of reasons why you or your business may file an extension. In fact, the IRS doesn’t even need to know the reason. As long as you fill out the right form and get it in by the April 15th deadline, you can get an extension automatically approved. Typically an extension is good for six months.
When we talk about extensions, it is important to know what an extension is and what it isn’t. An extension gives you extra time to file, but not extra time to pay. If you expect a refund, go ahead and file your extension. You’ll get your refund once you actually send in your return, any time within the following six months. But if you expect to owe money, pay what you think you owe when you file your extension. If you overpay, you can always get a refund. But if you underpay or don’t pay at all, you will incur interest and penalties for late payment.
An extension can be helpful in many situations. Typically, businesses and individuals file extensions when they don’t have the time or information necessary to file by the tax day deadline. For example, you may be waiting for corrected forms. If you hold investments with a financial institution, they’ll send you a form 1099 for income from interest, dividends, capital gains, and sale proceeds. But those forms are sometimes corrected, and a new form is sent out with more accurate information. If that’s the case, your financial institution will let you know ahead of time. And if you won’t have your form 1099 in time for tax day, you should file an extension.
Whatever your reason for filing an extension, it just means that you have to do your taxes later than the standard tax deadline. So you’ll likely need the help of a CPA well after tax season is officially over.
You’re Being Audited
It sounds scary, but being audited isn’t the end of the world. It just means that the IRS has picked your returns for a further review to make sure everything is accurate. There are a few things that will make your return stick out and increase your chances of an audit.
- Math errors. It doesn’t matter if it wasn’t intentional. If you make mistakes in your calculations, you could be liable for any amount you underpaid.
- Missing income. If you got a 1099, report that income. The IRS already knows about it, so not reporting it on your tax return is a giant red flag.
- Large charitable donations. It’s great if you want to donate a lot of your money to charitable causes. But if you start claiming hug charitable donations relative to your declared income, you might catch someone’s attention at the IRS.
- Too many business loses. If you are self-employed and file a Schedule C, make sure that any losses you incurred are real and can be backed up by documentation. If you’re losing too much money, the IRS may wonder how you stay in business.
- Too many business expenses. Even if you aren’t claiming an overall loss, if you have a long list of deductions for business expenses, the IRS might wonder just where all that money is going and whether they are all legitimate business expenses.
- Claiming a home office deduction. The rules for claiming a home office deduction are pretty narrow. If you claim part of your home as a business deduction, it must be used “exclusively and regularly for your trade or business.” If you’re using a part of your home for something in addition to business (like putting a treadmill in your office), or if you only work there occasionally, don’t claim it.
- Round numbers. In real life, few expenses are rounded to the nearest $100. If you have an expense, round it to the nearest dollar. If too many of your numbers are too rounded, you could draw the attention of the IRS.
If you are being audited and did nothing wrong on your taxes, it may be stressful, but you aren’t in trouble. If you cut corners on your return, you may be in some hot water. Either way, enlisting the help of a CPA can minimize any penalties and keep you out of trouble.
Tax Advice and Consulting
CPAs don’t just prepare tax returns. They are experts in tax law who can help you plan for taxes, so you make smart decisions that will help minimize your tax burden. If you run a business, or even if you just have some investments, how you use your money and resources can increase or decrease your final tax bill. If you are forming a business, the way you set up your company can have some real tax implications. In all of these cases, it pays to have a CPA look at your business or investments well before tax season. A little planning can make tax season more manageable and keep your tax bill as low as possible.
Accounting and Bookkeeping
There are things you have to do with your money besides pay taxes. If you run a business, you probably move around quite a bit of money. There’s money you receive from clients and customers. Then there are all your expenses. You may have a payroll, which includes tax withholdings for your employees. Businesses also have lots of expenses for goods and services. You may also need to factor in depreciation and other losses.
Each business is different, but unless you have the time and inclination to do your own bookkeeping, bringing in a CPA, either full or part-time, can help your business run smoothly. On the other hand, sloppy bookkeeping can make tax season a nightmare. Showing up to your CPA in March with a stack of receipts is not the most efficient way to prepare your taxes.
Where to Find a Good CPA
If you’re reading this, you probably already know that one of the best ways to find a reliable service provider is through TurstDALE. TrustDALE certified businesses have undergone Dale’s intensive 7-point investigative review process. The result is that Dale only certifies companies that have an excellent track record of competitive pricing, quality work, and exceptional customer service. You can find a TrustDALE certified CPA in your area right here.