5 Tips for Getting to the Finish Line and Getting a Larger Return
It’s that dreaded time of year again when we are all thinking about taxes. We know: Nobody likes thinking about tax time, but as the old saying goes, there are only two certainties in life — death and taxes. So, at least this option is the lesser of two evils.
The good news is there are a few things you can do to make the season less painful — and maybe even earn a larger refund.
Start earlier, and file as soon as you can.
Yes, we know it’s not early now, but keep this in mind for next time around. Obviously, the sooner you file your income tax return, the sooner you will get a refund, if you have one coming. If taxes are due, you will have more time to plan for payment. Additionally, when working with a seasoned CPA, the earlier you get your work in, the more opportunity for planning to look forward to 2018 or to do some things that may still help 2017’s tax bill. Also, it greatly helps your CPA when your information comes in early.
Additionally, the IRS has stated many times that the best protection against tax fraud is to file early. If you suspect your account has been subject to tax fraud, let your CPA know as soon as possible, and file your return sooner rather than later.
Make your retirement plan contributions for 2017 (it’s not too late!).
Generally, the only opportunity available to lower your tax bill for 2017 at this point is to make retirement plan contributions. Depending on your specific tax situation and age, there are many different limits and deadlines to making a contribution. But, for those who have earned income (wages/self-employment earnings), the simplest way to make a contribution is through an Individual Retirement Account (IRA). There are several types of IRAs, and your CPA can advise you on the right one for you. For self-employed individuals, there is a potential to make larger contributions through other types of plans. This is an area that is oftentimes overlooked by taxpayers and could have a material savings on your current tax while increasing your savings for retirement. It is not often that you get a win-win situation while doing taxes.
Don’t ignore the IRS.
You wouldn’t think this would be a problem, but many taxpayers receive notices from the IRS and either ignore them or don’t let their CPA know about the change. If you receive a notice from the IRS, before doing anything, be sure to check with your CPA to make sure the change makes sense. It also allows us to update our records.
But, you should ignore anybody who calls you and claims to be the IRS and states that you will get in trouble if you do not respond.
Pick the right CPA for you.
CPAs come in all shapes and sizes. As you are putting together your information and realize you need professional assistance, make sure you work with a CPA who meets your needs; you are comfortable with; and will serve your interests, not their own. A CPA can be a very positive influence on your financial future, and it is important that the CPA you pick is looking to assist you with both the immediate tax filing requirements, as well as the long-term growth of your personal financial and business needs.
A good CPA for you will ask you about what happened during 2017 that might affect your tax return, will look for opportunities to save you tax dollars, and will be thinking about what could decrease your tax bill for next year (or the year after). If you do not feel like your CPA is right for you, it may be time to find a new one.
Be sure to file your return in a timely manner.
This year, calendar-year tax returns were originally due on March 15 for partnerships and S Corporations and April 17 for individuals, trusts, and corporations. Yes, the IRS gave us a few extra days this year. If you cannot file your return by the above dates, you must file an extension by those dates, even if you cannot pay your estimated tax due. There is potential for significant penalties by not extending your return by the above dates, as well as a chance you could miss out on the ability to make various elections that must be filed in time.
A common myth we hear is that you are more likely to get audited if you extend your return. In our experience, there is no increased likelihood of audit by extending your return. And, actually, by extending your return if you cannot complete it by the deadline, it will help take some of the deadline stress off you and your CPA to make sure it is a complete and accurate return.
Jeff Piha provides tax- and business-planning services to closely held businesses and their owners, high net worth individuals, and international businesses and individuals. He has been with Sweeney Conrad since 2001. In his spare time, Jeff likes to support the Huskies and spend time with his family (especially coaching his son’s basketball team and his daughter’s softball team).