The tax filing season starts January 1st to April 15th and all income-generating individuals, employers and financial custodians must provide statements and documentation for tax preparation purposes during this period. The deadline for tax filing and paying this year has been extended until July 15th due to the coronavirus pandemic, due to the additional burden from stress associated with the virus.
At tax time, it’s crucial to be prepared by having a stable account management system to ensure that all tax matters are filed on time and resolved with minimal hassle. In this article, you’ll learn the importance of proper account management during tax time.
Ensure IRS and Legal Compliance
Everybody must comply with the IRS and the law. So, avoid missing important information in your books by implementing proper account management. There are many ways to manage your accounts properly, such as:
- Keeping a record of all purchases
- Using accounting software to keep track of all your finances and accounts
- Studying basic accounting principles to keep abreast of the latest tax laws
- Hiring a certified public accountant
You can combine these methods to ensure proper account management and a stress-free tax season.
Avoid IRS Audits with CPA Services
An IRS audit can be a tedious experience for any tax-paying individual or company. It involves a careful review of accounts and financial data to ensure correct reporting according to tax laws and verification of reported tax amounts.
Some common reasons why the IRS would audit an individual or company include unreported income, data errors, overstating deductions, disproportionately high deductions, incorrect filing status, claiming non-existing dependents and business tax discrepancies
u don’t need to be alone in your tax journey. A critical aspect of account management is knowing what tax services to avail for your convenience and peace of mind. Working with experts like Hakim & Co, who deal with tax returns and accounting CPA services, will ensure full compliance with the tax code.
Accounting professionals can help you avoid IRS audits by providing the following services:
- Personal Tax Services: Avoid putting off taxes, making mistakes and ending up with unfiled tax returns or tax debt. By working with a reputable and experienced certified public accountant, you can maximize your tax returns and itemized tax deductions, ensuring that everything is followed and performed by the books.
- Business Tax Services: Business tax laws are complicated, but delegation can help business owners focus on what they love to do and let accounting professionals handle the complex financials. Business tax services include tax preparation and planning, unfiled tax returns, payroll tax and IRS representation.
- Personal CPA Services: Financial planning should never be a DIY job, unless you have an accounting background. With personal CPA services, you’re relieved from the pressure and stress that comes with finance management and dealing with IRS problems. In this way, your family’s financial future will always be in the best hands.
- Business CPA Services: Avoid messy books and complicated payroll systems by taking advantage of business CPA services, which provide bookkeeping, financial statement preparation, full-service accounting and other accounting services.
Determine and Apply Your Tax Benefits
With proper account management, you’ll be able to identify and apply your tax benefits. In this way, you can lower the amount of taxes you pay and use the money you save to run your business without violating the law. But of course, keep in mind that all tax deductions must be well-documented in case of an IRS audit.
For instance, small business owners can get tax benefits on equipment financing, so that essential purchases are less painful on their bottom line. They can either finance their equipment with equipment loans (interest paid can be written off on tax statements as a tax-deductible) or equipment leasing (entire lease payment is written off as a business expense)—whichever is preferred.
Other tax deductions and benefits that could apply to you are:
- Self-employed Tax Deductions: Some examples of self-employed tax deductions include self-employment tax, home office tax deduction, phone and internet bills, meals, health insurance premiums, vehicle use, travel, subscriptions and publications, rent, business insurance, advertising, startup costs and retirement plan contributions.
- Small Business Tax Deductions: Some examples of small business tax deductions include banking, insurance, retirement plans, shipping, workers, website fees, marketing, travel, repair and improvement, utilities, legal fees, and bad debts and education.
Peace of Mind
The primary benefit of proper account management is peace of mind. Fear is understandable during tax time, particularly for those without knowledge of accounting. A 2004 survey by the American Psychological Association shows that many Americans feel this way, with almost three quarters of Americans listing money as a major source of stress.
For your peace of mind during tax time, check out these account management tips:
- Track Your Expenses: It’s important to keep track of all deductible expenses, build financial statements, prepare tax returns and ensure legitimate tax filings every year.
- Develop a Reliable Bookkeeping System: If you wish to handle your own books, you could use a simple Excel spreadsheet or an accounting software. Alternatively, you could hire a part-time or outsourced bookkeeper. For big businesses, an in-house accountant and bookkeeper may be the best option.
- Develop Sales Tax Procedures: Determine whether your business operates in a destination-based state (sales tax applied on the buyer’s location) or an origin-based state (sales tax is charged based on the state where you’re running your business).
- Know Your Tax Obligations: If you’re running an online store, you need to pay estimated quarterly taxes this year for over $1,000 in taxes.
Proper account management can be stressful—especially during tax time. You must ensure that your tax returns are filed on time to avoid penalties and IRS audits. With proper account management, you can rest assured that you comply with IRS and tax laws, and all your accounts and finances are documented. Developing a reliable bookkeeping system or engaging a professional accountant will give you peace of mind and ensure your tax is always filed correctly.