Why Do I Need to Hire a CPA?
Filing your taxes was easy when you only had one job and no dependents, right? The good news is that paying the fee and spending the time doing it right may help you save money and headache down the road. As life advances and gets more complicated, there are many reasons why you might consider hiring professional help.
Receiving an audit notice from the IRS could feel like a nightmare come true. If you’ve been using an accountant to file taxes, you could already be a step ahead. If not, you might consider consulting with one now.
Chances are, a CPA already has experience working with the IRS, and can speak with them directly on your behalf. Your accountant generally knows what documentation the IRS needs and can help you prepare in advance by making sure everything adds up.
An experienced accountant could help you appear organized, and that may make an excellent first impression. If the audit addresses delicate issues, like improper expense or income declaration, an accountant can often advise you on the best way to proceed.
Filing Back Taxes
Owing back taxes can mean serious consequences. The IRS can collect a portion of your income and even file criminal charges for repeated delays. Your accountant can advise you about options like extensions and payment plans that can help you manage your current situation and get back ahead of the game.
You will need to gather paperwork, and sometimes years-old filings can become lost. Your accountant can tell you exactly what documents the IRS will request and can tell you where you might get copies of missing items.
Running a Business
If you’re running your own business, organizations such as the UCPAA often recommend that you find an accountant that is a licensed CPA and has experience with business finance. Keep in mind that an accountant and a bookkeeper are two different job descriptions, and you will likely need the financial advice a CPA can provide before you need a bookkeeper to help you track daily expenditures.
During the startup phase of your business, your accountant can help you determine the legal classification of your enterprise. Structuring your company as an LLC, partnership, or corporation can have future tax and organizational ramifications if you don’t make the correct decision at the outset.
Your company will need to comply with various tax laws and regulations, and this is often an accountant’s expertise. Your CPA can help you start on the right foot to avoid messy complications down the road.
Once you have your business plan, your accountant could give you a financial analysis and provide some insight that you may not have considered.
Business in Operation:
After your business is in operation, you will have to file annual corporate tax returns, and your CPA can help you prepare the paperwork and take advantage of any benefits to which you are entitled. Depending on your industry, there may be taxes that are due throughout the year, and your accountant can help you estimate the payments.
An accountant can help you prepare and interpret your monthly financial statements so you might get a better picture of how your venture is performing. If you need advice with your business budget, an accountant might have some ideas on how you can be more fiscally efficient. Your CPA might be able to provide valuable guidance if you ever decide to sell your company.
Major Life Events
Arguably, life changes might have the most significant effect on your finances and tax considerations. Consulting with a CPA for any of these situations could minimize unnecessary expenses and avoid future headaches with the IRS.
Finding and marrying the love of your life can have a profound impact on your wealth and how you manage your money. Merging assets could open you to tax liabilities, and structuring your finances to your best advantage is something your accountant could help you do. If there is considerable wealth on one or both sides of the marriage, couples are often inclined to a prenuptial agreement, and a CPA can help you work through the details so that it makes financial sense.
Real estate is a considerable expense, and likely one of the most important financial decisions you will make. There are considerations such as mortgage interest, rents, or capital gains, which can all have an impact on your tax return. An accountant can help lead you through your specific situation so that you can make the right investment.
When a baby is due, you can also expect a reorganization of your finances to accommodate all of the new expenses a child brings. Your CPA can help you restructure your current situation and explain all of the new tax breaks to which you are entitled. After you set up a fund for the baby’s college and future, your accountant can help ensure that you are getting as much money back from your return as possible so that funds can grow.
Speaking of college funds, government plans can help you save tax-free money for your child’s education. Your accountant might advise you on the best ways to take advantage of those plans and wealth transfers.
If your marriage doesn’t work out, your CPA could be invaluable in helping you with financial advice going forward. Issues such as child support, alimony, and asset division might make an impact on not only your current financial situation but your future tax liabilities. Before you move ahead on irreversible court decisions, make sure you understand how your income and savings will be affected.
The death of a loved one brings enough heartache, and navigating the financial ramifications alone will likely only compound the stress. If you lose your spouse and are not the primary earner or head of the household, you might be a prime candidate for your CPA’s advice. Your accountant can be of crucial help by addressing estate and income taxes, along with the transfer and management of investments and retirement savings.
Unfortunately, you will likely witness the passing of one or both of your parents. Regardless of how diligent they were about their finances and end-of-life planning, a CPA can help you navigate the waters of tax returns, capital gains, and inheritance concerns. Distributing assets such as real estate and retirement plans can incur tax liabilities, and your accountant can work with your specific circumstances to try and make the transfer as beneficial and smooth as possible.
In reality, there don’t seem to be many adults who wouldn’t benefit from the advice of an accountant. If you are doubtful about taxes or finances or go through any of the above experiences, you may undoubtedly profit from the expertise of a CPA.