Engage a CPA, because taxes are complex!
The tax code is complex and constantly changing. It is important to have someone on your side who knows the law and will ensure you pay the least amount of taxes possible. Many people think their tax situation is simple and attempt to prepare their own tax returns. There are plenty of different do-it-yourself tax software programs to help you accomplish this; however, the programs are only as good as the information you enter. If you enter your data incorrectly, the software will not catch this, but there is a good chance the IRS may. The software programs also will not be able to include deductions you don’t know about.
What information does your CPA actually need?
Keep in mind, your CPA is only as good as the information you give them. One common question we get from clients is “Do you need this?” My answer is usually yes!
A general rule of thumb is – if in doubt send it to your CPA. Most tax professionals would rather have more information than they actually need, than be missing something they didn’t know existed. This will help with making sure that your income and deductions are properly reported.
For example, your child’s preschool or daycare center gives you a form with the amount paid for the prior year. Your initial reaction is to see the total, toss the paper in the shredder and count down the days until they are out of preschool, right? Well, this piece of paper gives your CPA the ability to potentially get you a credit for dependent care expenses. If you do not provide this information with your tax documents, it is possible the deduction could be missed.
Other important information to keep and send in would be charitable contribution receipts (cash and non-cash), auto registration fees, medical expenses, property tax statements, and home refinance statements. Often these potential write-offs may not come to you in an envelope marked “important tax document”.
Ask your CPA if you can still contribute to a Roth IRA or Traditional IRA, even if the tax year is over.
Just because 2019 is over doesn’t mean you missed your chance! One item that is often overlooked is the ability to contribute to an IRA after year-end. You have until 4/15/2020 to make an IRA or Roth IRA contribution for the 2019 tax year. You must have earned income, or your spouse must have earned income to be able to contribute. Both Roth IRAs and traditional IRAs have income limitations, so this will not apply to everyone, but it is worth asking your CPA if you are interested. The traditional IRA will be a tax deduction on your returns. The maximum contribution for 2019 is $6,000 with the extra $1,000 “catch-up” for anyone over the age of 50. If you file an extension, your IRA contributions must be made by 4/15/2020. The extension to file your returns does not extend the time to make your traditional IRA or Roth IRA contributions.
Don’t wait until the last minute and review your returns!
Filing your taxes doesn’t need to be a painful experience. It is important to get your information in as early as possible and communicate with your CPA. Ask questions and let them know of any changes that happened over the prior year. While these changes may seem small to you, they could make a big difference on your tax bill!
Taxes are not something you want to rush through last minute. One final thing to remember is to review your returns before you sign the E-file authorization or mail them. Once your returns are sent, any changes or missed deductions must be corrected through amended returns.