31 Jan Tax and How to Know You Need To Hire a Pro
Taxes are soon due. And you must make a decision: Will you hire a pro to calculate your tax? Or will you decide to stick with a do-it-yourself approach? In other words, will you or won’t you use popular software?
To Go Pro or not to Go Pro
In a very informal survey here at Gavrilov & Co, we discovered a mixed bag of passionate answers. On the one hand, some people would never allow another person to figure their taxes. On the other hand, others are just as adamant about their loyalty to a tax professional. They swear by their favorite CPA for support and validation as well as the mechanics of research and data entry.
The Most Cringe-Worthy Reason for Choosing Software Instead of Professional Tax Help
Still, other businesses would like to hire a professional to file their taxes, but they feel they can’t afford it.
In fact, a budget is the main reason business owners say they invest in do-it-yourself software instead of hiring a tax professional.
Gavrilov & Co find such reasoning to be positively cringe-worthy in most business situations. Let’s Unbox your taxes preparation software. Now, look at four things you need in tax season. But you won’t find them in that colorful box.
1. No tiny tax pro in there:
If you buy a box of software, you will have no one to stand with you if you are audited.
However, when you hire a professional to do your taxes, he or she will stand beside you if the IRS audits you.
2. There’s no AI in that box—at least not yet, so…
Even with the help of the finest software, you might overlook several important business deductions.
It’s typically unlikely that a trained tax pro will miss critical deductions you could claim.
3. And you won’t find a magic pill in that box, to help you study:
Thus, you will spend hours in study, research, calculations and data entry. You must master the intricacies of whatever computer platform you choose before you can even begin to master the tax code. And, we promise you that will take a significant amount of work.
4. You don’t get automatic updates and reminders of various taxes deadlines. Without the help of a tax professional, you could miss a state or local tax due date.
In that bright green or orange box, you don’t get automatic updates and reminders of various taxes. Given the over-scheduling of your calendar, it would be easy to miss a deadline. Then you will have to field calls and pay fines and penalties.
5. However, you get this item free! What you will get in your shiny software box, free of charge, is some stress.
With multiple due dates, computer program learning curves, and regular business leadership duties, if you have a business you are on the express train to at least a small amount of stress.
Caution, Time is Money
Gavrilov & Co warns you that your time will only stretch so far before it triggers undue anxiety within you.
However, wouldn’t your time be better spent leading your business? There is an old saying that might cover this concept; penny wise and pound foolish.
The bottom line is that figuring your own tax, to say nothing of next year’s tax strategy, “subtracts time away from actually making the money you’re desperately trying to track.”
And did you know that some of the software companies bring in extra fees for every little service or feature that doesn’t fit their cookie-cutter image of you.
A Tax Case Study Where the Software Shines–Really
In spite of the above five items, we are not totally negative about tax software. It offers a nice solution in some very simple taxes planning scenarios. For example, let’s presume you are Mr. X. You are a college student with a fairly good job, who shares rent with a roommate.
Mr. X does not own a business or give large amounts of money to charity. He’s not married and you he does not claim any deductions. If Mr. X files with appropriate software, we in the tax business call the accomplishment of his filing, “a compliance function.” Compliance is very important. And we also concede that computers “are really very good at this type of preparation and filing.” As you compile data, taxes prep software can help minimize the risk by checking your math.
Likewise, “Most software has the functionality to import and compile your tax documents (like W-2s and 1099s) too, so you don’t even need to key in the data.”
But seriously, how many taxpayers can have such simple requirements for taxes as Mr. X?
Taxes Planning and a Different Type and Our Case Study Grows Up
Compliance is only one half of the function needed by a business owner in the process of tax payment. The other half of the tax story is tax planning.
This part of the business taxes story cannot be handled by computers alone. To help you envision the future, you need a CPA or an EA.
Either type of professional can help you create goals for taxes and objectives for the future. Such as Taxation Planning. And it far outstrips the bonds of simple, computer-led Tax Compliance.
Only an educated, experienced tax professional can see the Big Picture and help you prepare your company for a successful future.
At 25, all Mr. X needed was compliance. That’s why software fit the bill. But how many cases are really as simplistic as Mr. X’s case study? Maybe they begin that way, but life gets complicated–and taxes do too.
At 27, he married, had children and bought a home. His fiscal life became more complex. He needed to establish a plan for personal success.
Then, when he left his good job to establish his own business at 33, the complexity of his life deepened. Software could access his past. But it could not keep up with his plans for the future. At 53, with over 25 people on the staff of his business and two operating locations, tax planning with a CPA or an EA became a necessity, not a luxury.
What is the Goal of Planning Taxes?
“Yes, tax prep software can give you an answer into how a certain decision might impact your taxes. (will choice A or choice B result in more tax?) But it’s black and white.” If you want to see all the colors and the 50 shades of gray in your options on taxes, you’ll need an expert, like those at Gavrilov & Co.
Over the years, a CPA or an EA can help you see the tax decisions. And they can make plans to help you keep as much of the money you make as possible.
At Gavrilov & Co, we do so much more than file your taxes. With Gavrilov’s Planning your taxes, you look at your tax situation with an eye to the future, not just the past. We analyze your financial situation from the perspective of what and how you pay your taxes, not just this year but next year too. (And beyond.)
1. The Purpose of Planning Your Taxes: We want to make sure you achieve tax efficiency.
2. We coordinate the elements of your overall financial plan works to gain that efficiency.
3. We want to reduce your personal and business liability.
4. At the same time, we hope to maximize your eligibility to contribute to your retirement plan. Planning taxes is an important part of a financial plan. It’s as important as reducing liability for taxes and maximizing eligibility to contribute to retirement plans are both crucial for success.
What Professional Planning Can Do for Your Taxes
Investopedia advises you, “Choosing the best tax-efficient investment can be a daunting task for those with little knowledge of the different types of products available. The best decision may be to contact a financial professional to determine if there is a way for you to make your investments more tax efficient.”
At Gavrilov & Company, we consider many fiscal and life events in Tax Planning. We look at how to time your income, your purchases and your expenditures. We take you through the most tax breaks for small business, many of which are often overlooked.(Watch this blog because we will soon share a few of them with you.
Likewise, if you are self-employed, we can educate you about special tax considerations. There is a world of options that will surprise and delight you. And you won’t find them in any software, only in the minds, experience, and hearts of ethical, human tax professionals like the tax squad at Gavrilov&Co.
What we sincerely hope for at Gavrilov & Co is to meet you, “Mr. or Ms. X,” at the beginning of your vision, when your first begin your public and professional life. Don’t wait until you’re 53. We want to help you grow your business, one strategic tax decision at a time. Computers and software can’t do that. They can’t give you the Big Picture or customize your strategy. Those are human skills, and we’re here to help.