Accounting doesn’t have to be confusing or overwhelming. A qualified Certified Public Accountant (CPA) can help you successfully manage your cash flow. However, while an accountant can guide you, you’re in the driver’s seat. Asking the right questions can help steer you or your company to further success.
Seeking the advice of your accountant is a crucial way to ensure your company’s finances stay in order. Here are three vital questions you should ask during tax preparation season and what you should think about throughout the year.
“What information do you need from me?”
As you sit down with your accountant to prepare your taxes, this question should come up before concluding your first meeting. You want to ensure you’re getting your accountant the proper documents and information. Doing this as early as possible will make their job easier, and in turn, benefit you.
For example, let’s say that in addition to working a full-time job, you also had a side hustle that brought in over $600 over the last year. Not only will you need a W-2 from your full-time employer, but you’ll also have to fill out a 1099-K form to record this information.
Additionally, if you want to deduct expenses, you’ll need to provide information proving that you can.
Thus, take the time to discuss your financial activities with your accountant and then ask for straightforward directions on what information they need from you. Doing so will ensure they have all the information they need upfront which makes it easier for them to create an accurate tax return for you.
“What are common-sense business deductions I can make?”
Each year, you might be overpaying in taxes because you’re missing business-related tax deductions that you may qualify for.
For example, if you use your car or phone for your business, you might be able to deduct a percentage of the bills associated with these costs. That workshop you attended to further your skills or software you bought to better serve your clients can also likely lead to a tax deduction.
Also, considering recent expansions in tax credits for individuals at certain income thresholds, it’s possible you could pay fewer — or even zero — tax, depending on your income.
Working with an expert accountant can help you identify deductions you may be missing and identify changes in the tax code that could affect what you can deduct.
Additionally, an experienced tax professional can guide you on keeping accurate records in the future so that these opportunities are easier to find.
“Is there anything else I can do to reduce my tax liability?”
So, what if you don’t have a business or side hustle? There’s good news! There are various ways to lower your tax liability. A CPA may ask if you’ve contributed to a 401(K), put money in a health savings account, or made a charitable donation.
You might even be able to deduct activities like paying interest on your student loans or paying mortgage insurance, reducing your tax liability.
You don’t want to leave any deduction opportunities on the table, so be sure to ask this question after your accountant has had a chance to look at your documents.
The Fricke and Associates team has experienced CPAs ready to add ease to your tax preparation process. Our team is prepared to answer any tax-related questions you have and help you find ways to reduce your tax liability.