Between collecting all of your tax forms and trying to figure out all of these new tax laws and wondering if you've recorded your taxes correctly, it's no wonder most people are stressed out during the season.
This is probably why over 80 million tax returns were filed with the help of a tax specialist during the 2019 tax period.
If you have a tax advisor who is handy every year to help you file your taxes, this is fantastic! However, there is a good chance that you will not take advantage of a large amount of knowledge and experience of your advisor.
Those who contact their advisors throughout the year, by email, by phone or face to face, depending on the depth of their questions, will create an opportunity to position themselves better this year and in the years to come when it comes to tax matters.
Here are some questions you can ask your tax professional during tax season and beyond.
How does the tax preparation process work?
This is where you and your tax specialist get on the same page on how you want to communicate with each other during the tax return process. Do you feel more comfortable organizing a meeting or two and do it in person, or do you prefer to communicate completely by email? Maybe the connection setup will work for both.
Whatever the process of preparing tax returns, it is important to define these expectations in advance and find a consultant who will work with your program and preferences.
How can you help me achieve my tax goals?
Do you want to make sure your taxes are done properly so that the IRS doesn't knock on your door? Do you want to know whether or not you make the standard deduction or itemize the deductions?
Share your tax goals and concerns with your tax advisor and ask them how they plan to guide you through the tax filing process. Knowing how the taxi advisor works and letting him/her share the process with you can help you get rid of some of your deepest and darkest fears regarding the tax season.
What information do you need to register my taxes?
Giving your tax advisor an explicit picture of your finances will help him/her file your tax return accurately and quickly identify ways to save money.
Your tax advisor will ask you to be ready to share the following information:
A copy of the last tax return Although things can change from year to year, a copy of last year's statement can give your tax advisor an idea of the tax deductions and credits you are entitled to and save you time in the process.
Identify the information for you and your dependent family members: This means that you have Social Security numbers or Individual Tax Identification Numbers (ITINs) with the dates of birth of anyone who appears on the tax return. That way, your tax advisor can verify who you are, and the IRS won't send you a tax return because the numbers do not match (a lot is going on).
Income statement and tax forms Once you have obtained W-2 from your employer or all 1099 forms (whether you are an independent contractor or a freelancer), your tax advisor will need copies of these tax forms to record your taxes.
Proof of expenses: If you plan to specify deductions for this year instead of making the standard deduction, you will need practical documents to prove these expenses. I hope you have kept your receipts!
What can I do differently to fix my tax situation?
If the tax return were a goal, the goal would be $0. You don't want a giant tax bill, which means you haven't withdrawn enough money from your salary. It's not free money; it's your money, which gives a lot to the government throughout the year.
Excellent tax professionals will not only help you file but also collect their fees and let you be. They will be there after your return to answer your questions about the tax situation. Plus, they can show you how to adjust your tax deductions and get you closer to that spot where you pay almost exactly what you owe Uncle Sam, no more, no less.
Your tax advisor can suggest that you make changes in different areas of your finances. He/she can guide you on how your investments are taxed, the tax implications of buying or selling a home, or when it's time to incorporate enthusiasm into your finances.
Depending on my situation, what else should I do this year?
Sometimes, life comes at you quickly, and if you don't stop and observe things around you from time to time, you may miss some tax incentives or adjustments you need to make during a tax year.
Did you buy a house, got married, or had a baby last year? These are just some of the major life changes that can change your tax situation, and your tax advisor can help you understand what these changes mean to you.
In addition to taxes, your tax advisor will also suggest that you take steps to protect your assets or advance your financial goals for the rest of the year. You may need to purchase term life insurance as soon as you are agitated or set up a trust to protect your assets. Your tax specialist can provide you with really valuable information in these areas!
Can I call you year-round for tax advice?
Do you prefer to work with advisors who file tax returns only during tax season and then disappears into thin air for the rest of the year, or with a tax specialist who will be there to answer your call in September, when you have a question about a decision that could affect taxes for the year?
What will my tax bracket be in 2020?
A tax bracket is a rate at which the last dollar of income will be taxed. Knowing your tax bracket allows you to calculate the tax efficiency of various investments or financial planning proposals.
A change in salary is just one factor, so don't make any immediate assumptions: tax brackets can change for several reasons, including changes in tax laws and the state of the tax filing. The status of the filing depends on whether the client is married or single and whether there are employees who file an income tax return or not. An increase in interest and dividends, or a change in income or even gambling or lottery winnings, can also modify the tax support.
Can you help me estimate my income for 2020?
Go beyond salary. Investment income, independent allowances, bonds, maintenance income, and much more play a role. And it's not enough to know gross earnings. It is also important to have an estimate of adjusted gross profit, changes in adjusted gross profit, and taxable profit. Each of these types of income depends on various deductions or credits that must be estimated to get projections for the new year.
Am I eligible for a Roth conversion? Is it recommended?
A Roth IRA conversion allows workers to convert traditional IRA resources to Roth to avoid taking the minimum distributions required at retirement and to avoid paying taxes on distributions made. A Roth conversion also includes paying taxes on the converted assets, as contributions to traditional IRAs are deferred through taxes. A tax advisor can estimate the tax that would be due for a Roth IRA conversion.
As a client, you should also ask for an estimate of your tax owed during a partial Roth conversion, such as the one that can bring you to the top of your current tax assistance. The advisor estimate of the "bracket-completion" amount is probably the most accurate estimate of the tax you could pay for this type of partial conversion.
Tax advisors may likely have an opinion as to whether a Roth conversion is a good idea or not. It is strongly encouraged that you discuss the option with your tax advisor and discuss it before making a decision. Any conversion will result in investment and withdrawal, as well as tax consequences.
What other services do you offer?
Believe it or not, your tax professional can help you do much more than just filing your tax returns.
For example, if your tax advisor is a Chartered Accountant (CPA), he can provide a wide range of services. From accountants to payroll administrators, CPA's can wear tons of different hats on your behalf, especially if you are a small business owner.
There are other certificates and letters that you can see behind the name of your tax advisor (such as "EA" as an enrolled agent or "CFP" for certified financial planner). So ask your advisor what their credentials are and what services they can offer during and after the tax season.
