Avoid These Costly Traps at Tax Preparation Time
March 16, 2017 at midnight
Few people enjoy thinking about tax preparation. It often involves a mad scramble for eligible receipts and details before the filing deadline and, in many cases, trying to take advantage of perceived loopholes to reduce a tax liability. Sometimes, tax software solutions seem like the easiest and quickest option, but if you’ve used them in the past, you'll know they have flaws.
Having a qualified CPA at your disposal during tax season not only eliminates some of the gray areas that do-it- yourselfers encounter, but it helps you avoid these three common and potentially costly traps:
1. Lack of Awareness of Tax Code Changes
The West Virginia Board of Accountancy states that, as a CPA, continuing education (CPE), programs should contribute directly to the professional competence of the CPA. For a tax accountant, their CPE programs will be tax-focused, meaning your CPA is always up to date on the latest passed, as well as pending, changes to the tax code. Although the code changes annually, there are no CPE-equivalent requirements for tax software.
2. Not Knowing How the IRS Operates
When the IRS receives a tax filing, there are several “red flags” that trigger a potential audit. And while the audit rate is roughly 0.7% (or 1 in 143) of all tax filings, a CPA works with the IRS on behalf of their clients on a regular basis. That type of relationship allows your CPA to understand the latest trends in tax fraud and how you, as an honest taxpayer, can reduce your chances of triggering an audit.
3. Not Understanding the Difference Between a Tax Deduction and a Tax Credit
A CPA understands that taxation isn’t an isolated event. Rather, it is a process that involves long-term, individualized planning. Depending on your short-, mid-, and long-term objectives, a CPA will work with you to ensure proper tax planning is in place for years. That’s because only a CPA can weigh the benefits of taking advantage of a tax deduction today in order to enjoy tax credits (or vice versa!) down the road when it might be more advantageous.
As your CPA accountant, it is our mission to empower you to pursue your dreams and live with purpose. That begins with a proper tax strategy, something a $50 tax software package cannot deliver.