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Book sessionRethinking Your Taxes
Happy New Year,
Welcome to 2020! Like many of us, I’m sure you’ve made a whole host of resolutions for the New Year. I did, too.
Today, though, I wanted to reach out to ask you – were those resolutions specific enough?
Did you fall back on the old “lose weight, be a better friend/spouse/parent, make more money…” routine or did you get crystal clear on what you were going to accomplish?
“I’m going to fit into a size 6.”
“We’re going to buy a house.”
“I’m going to make over $100,000.”
After that, did you think and create a plan to achieve those resolutions?
“I’m going to do an hour of cardio each day and practice intermittent fasting. One day each week – Tuesday – I’ll treat myself to Tacos for lunch from the food truck that comes by the office.”
“My husband and I are going to sell out stock options from work, save $1,000 each month, and buy our dream home by September so we can host the whole family for Thanksgiving this year.”
“I’m going to recreate my pricing structure and create new products for the business which I’ll launch on March 1st, 2020. I’m going to have strict rules on how I spend my time at work to allow me to not lose valuable time getting stuck “doing” email and I will limit my social media time to one hour each evening after I get home and get the kids to bed.”
I guess you can see how all these examples amount to the same goals, but each gets more and more specific.
Who do you think is going to accomplish the most?
You guessed it – the ones that are most specific.
Honestly, it’s not too different from preparing taxes.
Wait – what?
Yeah, I said it. Creating specific, measurable goals isn’t radically different from tax preparation. Let me explain.
Today, there are SOOOO many ways that individuals – especially those who receive W2s for their work – to handle their own tax preparation that many tax specialists and CPAs worry about the potential loss of income from software suites.
Not me.
In fact, I really like the fact that tax preparation has finally gotten “easy” and the software to support it is available.
It makes my job easier. The truth is, with the level of experience that many preparers operate on, it’s not ethical to charge for our skills for those most basic returns and filings.
There are plenty of software applications out there to handle basic returns for people with straightforward taxes. Honestly, I’d rather educate a young person on how to use the software than to charge them for preparing their return.
On the other hand, there are a lot of folks who need professional-level tax preparation. Examples abound, but here are a few examples of folks who MUST have professional-level guidance:
1. If you have over $200,000 in annual income or no income at all.
2. If you make more than $5,000,000 annually.
3. If you are paying Alimony
4. You file a Paper Return
5. The Earned Income Tax Credit
6. If your numbers are TOO perfect
7. Have unreimbursed employee expenses
8. Deduct 100% of a business vehicle
9. Hobby Loss – don’t go there
10. Own - Currency Transactions and Bitcoin
11. If a Third Party calls and gives them an anonymous tip
12. If you have a Sketchy Tax Preparer
If you’re nodding your head as you read this list, then “doing it yourself” is NOT a good idea.
In fact, I’ll go so far as to say your chances of an audit are excellent at some point in the next few years. So even if you are prepared to go and handle your taxes on your own, I’d still like to invite you to come in and discuss what hurdles you’ll need to be prepared for and, if your kids are going to be handling their own taxes for the first time ever, I’d be happy to have a conversation with them to discuss what they need to do right the first time.
All the best and Happy New Year!