Five Things You Should Know to Cut Taxes

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Use a CPA

You need a tax professional on your side.  Most tax return preparers are not actually CPAs.  CPAs are tested and certified by the State of Texas to be proficient in various areas of accounting, finance, and taxation.  They often have attained master’s degrees from accredited universities that focus on accounting or finance.  They are bound to a strict code of ethics.  They aren’t selling you other products so they are impartial and they are your best friend when it comes to saving taxes.  Tax laws are forever changing and becoming more complex and CPAs must meet annual continuing education requirements to keep up to speed.  Are CPA fees expensive?  They charge for the time they spend consulting you and preparing your taxes but in many cases their fees are very competitive with preparers that just shuffle some forms for you.  On many occasions, a CPA will more than offset their fees with the tax savings received by their clients.  Finally, they look beyond taxes alone and can advise you on a multitude of other financial and business issues.

Plan ahead to minimize taxes

People who fail to plan, plan to fail. Counting on luck is a poor tax strategy.  Decisions during the year should be made with tax implications in mind.  The income tax world is a complex world.  The calculations and changing laws will always be an issue so you need your CPA to run the numbers for you before year end so there are no surprises.

Maximize retirement options

Congress has provided incentives for taxpayers to save for retirement and many employers also have matching programs that are very generous.  Not seizing these opportunities can be a huge financial and tax blunder.  CPAs look at the broader financial picture for you because they are interested in maximizing your wealth, not just complying with the IRS rules.

Timing of income and deductions

Evading taxes is illegal but avoiding taxes or deferring taxes is the centerpiece of all tax saving strategies.  Tax implications result from decisions we make.  Taxpayers have many choices to make throughout the year that can affect when or if taxes will result.  A CPA can help you identify and understand the impact of taxes and steer you towards wise financial decisions.   

Keep excellent records

Your CPA, like any professional, charges fees for their time.  You don’t want to pay them to organize your poor records and you don’t want them to miss a vital piece of information that you lost.  These things happen all the time with taxpayers and result in incorrect tax returns, missed refunds, IRS notices, extra fees for reworking tax returns, and sometimes IRS audits.  Corporations, partnerships, and sole proprietors need to keep accurate and timely accounting records on a computerized accounting software package such as Quickbooks.  If you have a business in the Rockwall or Rowlett, TX area be sure to check out Cantrell Pearson PLLC for your accounting and bookkeeping needs.  We are Quickbooks Pro Advisors so we know how to walk you through the bookkeeping struggles.  On the subject of IRS audits, no taxpayer wants to increase their likelihood of getting audited and no CPA can guarantee you won’t get audited.  However, taxpayers with excellent, organized records who have a CPA handle their IRS audit will have little to fear.  IRS auditors don’t want to invest a mountain of time examining your Form 1040.  They want to review it and move on and they are usually more lenient and kind towards taxpayers with organized records.  Don’t poke the sleeping bear by having inadequate or missing documents.