The U.S. Tax Code in its 15,000-plus pages offers dozens upon dozens of possible deductions for both individuals and businesses. This mere complexity is but one of many reasons why you should have a certified public accounting firm prepare your taxes.
So many things can go wrong if you’re preparing your taxes yourself. After all, 15,000 pages is a lot, and if you’re not a tax expert, how can you expect to know everything you need to know? How do you know you’re getting the most out of your deductions? How do you know you’re not making a mistake that could come back and bite you further down the road?
The truth is, you don’t, and that’s why you should hire a professional to prepare your taxes. But there are many more benefits to getting a CPA in Austin, TX than just quality assurance or maximizing deductions, and those benefits can vary depending on if you’re an individual taxpayer or a business owner.
How a CPA in Austin TX Can Help You as an Individual Taxpayer
The Alternative Minimum Tax (AMT), for example, is a part of the tax code that continues to affect middle income taxpayers. Originally designed to keep wealthy taxpayers from using loopholes to avoid paying their taxes, the AMT was not automatically updated for inflation, and, as a result, more middle-class taxpayers have been getting socked with the tax.
A CPA can determine if you, as an individual taxpayer, fall under guidelines of the AMT and possibly help you find ways to escape its burden. The exemption for single head of household filers for the 2016 tax year was $53,900. For married people filing jointly and for qualifying widows and widowers it was $83,800, and for married people filing separately it was $41,050.
What other ways are there that a CPA firm can help you as an individual taxpayer? For one, a CPA will know that your itemized deductions might be limited. That’s because they know which items on Schedule A, which is the form for itemized deductions, could be subjected to limits that are based on your adjusted gross income. These would be on top of the limits that already are placed on certain deductions within Schedule A.
Those individual taxpayers who work from home also may find that home office deduction options can get a bit thorny. There is a simplified method to figure that deduction, as well as a standard method to calculate it. To discover how you might best benefit from this deduction, you must calculate both methods.
Be mindful that if you try bookkeeping or tax preparation on your own, your mistakes can be costly. If you make an error on your tax return, for example, the IRS will assess penalties and interest on any additional tax that it declares is due. Keep yourself safe from the get go and let a CPA handle your taxes for you, especially if you have a complex tax situation.
How a CPA in Austin TX Can Help You as a Business Filing Taxes
When it comes to the business landscape, the numbers of possible tax deductions can be seemingly endless. A good CPA is fully trained to know and straighten out these deductions and their guidelines for you. These would be in such areas as:
- Accounting, auditing and bookkeeping expenses. These are all deductible business expenses under the tax code. That’s right, just by hiring someone to prepare your taxes for you, there’s a deduction right there. And better yet, if you sign on for an Austin CPA firm’s bookkeeping services, you can get a deduction there, too, on top of peace of mind year-round.
- Capital expenses. Especially if you’re starting a business, these expenses can add up quickly. For the first year that you’re in business, you can deduct up to $5,000 of your start-up costs. Included are any business-related expenses that you incurred before your business actually got going, such as business cards, office supplies and advertising. And spending more than $5,000 that first year can help you later as far as your taxes are concerned; you can deduct the rest of those capital expenses in equal increments over the next 15 years you’re in business.
- New equipment. If you think it’s time to upgrade those 5-year-old Macs you’ve been using in your design business, you can deduct any new equipment you decide to buy on your tax return. However, there are tax-code rules as to how much you can deduct and when you can deduct it. For software, for example, you will need to depreciate the cost over time instead of deducting it all at once.
- Commercial buildings. Did you know that as a business owner who owns a commercial building worth $1 million or more, an accelerated depreciation schedule can help you save on taxes?
- Insurance, Retirement and Social Security Contributions. Are you a small business owner who pays for your own insurance premiums, contributes to your own retirement account and makes your own Social Security tax contributions? Yes, you can deduct all of these costs—expenses that your employer would typically cover for you—on your tax return and save yourself a lot of money.
Throughout the year, it’s wise for your business to keep track of all expenses that you can deduct on your return. That when, if and when you decide to hire a CPA in Austin, TX to handle your taxes for you, they’ll have all the information that they need. Or, you could take it a step further and hire a firm for its bookkeeping, tax preparation or strategic tax planning; then you’ll have expert hands chalking up these expenses for you along the way.
Let West Austin Tax Be Your Year-Round Keeper
President Donald Trump has presented a tax reform plan to Congress and the clock is ticking: Will lawmakers OK the plan in time for next tax season? What changes might lie in store for your tax return, if the plan and its many proposed cuts clear the legislative hurdle?
For those of you living and doing business in the Hill Country, you will want to find a CPA firm in Austin TX that can help you get every tax deduction you’re legally entitled to receive under the new, revised or unchanged plan.
The certified public accountants at the West Austin Tax firm will be at the ready to help you navigate and keep on top of any those changes, making your 2017 tax season stress-free.
*West Austin Tax is not a CPA firm.