The year is quickly coming to a close, and whether your 2022 was bleak or bright, we’re looking to the future!
With that being said, your annual tax return is coming due and we want to demystify tax preparation – why and when to choose a tax professional…
Because not everybody needs to! If you’re a single person, with one, straightforward income source – you can definitely prepare your own taxes!
When we expand that tax level and enter into the realms of:
or becoming a High Earner in general (a higher tax bracket means estimated tax payments)
These are new areas where you should look to have an experienced eye make sure your taxes are all accounted for.
If your taxes are filed incorrectly – either in the outset, or after the fact – you may require an amendment for errors or trigger an audit.
There are practical reasons to hire a Tax Professional, the same way you would for any support service you hire:
These are all tasks that you could perform yourself, but many choose not to. Why?
time commitment to do so, and professional experience that these servicers possess. You can represent yourself in Court – but do you want to?
Let’s go over some Life Events which have an effect on your taxes:
Having a child…
Having a spouse or dependent pass away…
Inheriting an estate…
Opening a business…
Buying a house…
Receiving unemployment… and things of that nature.
These events will trigger a change in what the IRS expects to see on your return. On their own, it’s not too complicated to prepare the taxes on your own.
But, for example, when one or both partners have new or different income / life events, that’s where it can really grow in complexity.
Or, when certain tax entities are registered, or have probate administered.
The Standard Deduction:
“The standard deduction is a specific dollar amount that reduces the amount of income on which you're taxed."
Your standard deduction consists of the sum of the basic standard deduction and any additional standard deduction amounts for age and/or blindness.
In general, the standard deduction is adjusted each year for inflation and varies according to your filing status, whether you're 65 or older and/or blind, and whether another taxpayer can claim you as a dependent.”
The standard deduction for 2021’s Taxes was $12,550 for single filers, $25,100 for joint filers and $18,800 for heads of household.
If your qualified expenses (particularly for business) do not exceed this amount, you’ll be taking the Standard, and your taxes will be much less complicated. Thus, you could file it on your own.
Self-Employed / Business Owner:
Now, if you’re Self-Employed and/or own a business, you’d definitely know if your expenses are surpassing this amount.
Furthermore, you’re likely expecting to pay both Income and S.E. Tax on of all these business earnings. So standard deduction wouldn’t cut it for you – you need more!
Utilizing a bookkeeper and a tax preparer that’s knowledgeable about legitimate business expenses, credits & deductions, as well as new tax legislation, will help diminish those taxes due on earnings and potentially, and welcome in a REFUND, instead.
Time and Effort:
As mentioned in earlier examples, there is a time commitment and a learning curve involved with preparing your taxes.
Depending on how complicated your income, expenses, and life events are, your taxes will take a certain amount of time to prepare.
Before that, you might be adding the time it takes to review your own receipts, transactions, or old returns. You might even need to remember some things that you haven’t thought about in over a year – or know that it needs to be reported, at all!
It’s administrative work that we all have to do. It boils down to this: do you have the time to do it? Okay sure, then: do you have the time to do it the best that it could be done?
You are the best gauge of knowing how to make tax filing a painless and enjoyable experience.
If you feel like your tax situation’s confusing or time-consuming, that’s the sign you’ve been waiting for.
There are people whose livelihood is to help! If not by preparing the taxes, then explaining and teaching others how to do it correctly.
Cue: Strategic Tax Accountants!
Have questions about YOUR taxes?
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