As your financial life becomes more complicated, the more you will benefit from a proactive accountant who can not only ensure your taxes are filed properly, but also help legally keep more of the money you earn over time. A good proactive accountant for taxes will take the time to understand the unique factors in your financial life – and will ultimately become an important mentor for all your personal or small business financial needs.
This year particularly, here are some topics your accountant should be talking to you about:
If you received stimulus checks due to COVID-19, then you should remember receiving the third round of these Economic Impact Payments (EIPs) throughout 2021. These stimulus payments were recognized as a tax credit, meaning they were not taxable income, and you won’t owe any taxes on them like you would your normal income. Some people may not know this and include the EIP amounts into their total income, which can cause inaccuracies in your taxes. Since stimulus checks were a new concept to many this past tax season, your accountant should know to ask you about yours and explain how they must be a part of the filing process but don’t affect your overall refund or payments.
Child Tax Credits
The Child Tax Credit is where families can qualify to receive a tax credit based on their number of children, which ultimately reduces the amount of taxes the individual or family owes and can possibly lead to a refund. If you have older children, you most likely will be aware of this tax credit, but for new parents, this may be something that gets overlooked. Your accountant should go over the details of the child tax credit to see if you qualify and how it will impact your final taxes. They should also make you aware that for the tax year of 2021, the IRS increased the monetary credit amount you receive per child, which can have a significant impact on how much you owe or the refund you may get.
Did you know that you can apply for numerous tax deductions if you made a large purchase in the previous tax year, such as buying a house or vehicle? Large investments may hit you hard financially, but if you have a proactive accountant for taxes, they should inform you of all the deductions and credits you may be eligible for depending on the type of purchase that was made. While it can make the tax process a bit more tedious, always make sure to tell your accountant of any large purchases, even if you aren’t sure if they will qualify, to ensure that you are receiving the largest refund possible.
Standard vs. Itemized Deductions
You have the option every year to select whether you want to use the standard deduction or itemize deductions to calculate your tax liability. When you itemize deductions, you individually list out all the itemizable expenses you qualify for, such as medical expenses and mortgage interest, to receive a larger deduction. If you have a good proactive accountant for taxes, they will be able to thoroughly assess your situation and advise you whether it is financially savvy to itemize, or if it would take up your time without any benefit.
Self-Employment/Small Business Ownership
If you are self-employed or own a small business, tax filing time for you is a bit more complicated than most. Rather than trying to figure it all out on your own, get the assistance of an accountant to guide you through the extra steps necessary for your business filing. These types of filings aren’t as simple as an individual or joint return; there is a lot to consider, as being self-employed means that you must pay both self-employment and income tax, or that there is a different filing method for each small business depending on what type it is. If it is your first time filing as a business owner or self-employed, it’s best to work with an accountant to get familiar with the process.
Hiring an accountant to help you file your taxes is a financially smart decision, as they can give you the inside scoop of how taxes work and lay out the most effective ways for you to get the largest refund. They are also there to answer any questions you may have along the way, as it’s important for people to understand the tax filing process and how it affects their finances.
Disclaimer: These are general guidelines, not set guidance or advice. Each business and personal situation is different and may require customized assistance based on their circumstances. Please consult Emerald Financial Partners about your specific needs.