Accountants are always good at taxes… false!
Most accountants do not deal with taxes. Accounting is a broad field and includes many different types of jobs. Mostly auditing and business decision support. This may come as a shock to many people. I am often asked questions about personal income taxes. It’s true in my case I actually do some studying about personal income taxes for my sake but I do not claim to know how to help anyone else. But as an accountant I have learned some common personal tax questions just because so many people ask. So I think it’s important to review the basics.
- The 1040EZ. Most people fall under the category of the 1040EZ. Anyone can fill out this form. These people do not need an expert or an accountant or anyone to help them. It’s very simple to read the instructions and fill in the information. All they need is the W2 that their employers will send then and sign their name at the bottom.
- Tax software. I like to use tax software to help me do my taxes. I think it’s very useful. Taxes are kind like the news. You have to continually be keeping up with changes otherwise you will not know how to proceed. Tax software can solve that issue for you and help you keep up with the current events. Generally the software will tell you what information to keep and how to fill out the forms. Sometimes the software will fill out the form for you and even file it for you.
- Self Employed. If someone is self-employed and asking you for tax advice then just refer them to a specialist. Self-employment income taxes are quite a bit complicated and most importantly you can really do some tax savings and tax planning when you have a company. So it is important that you refer these people to a tax specialist that can hopefully save them a lot more money than they charge them.
- Deductions and Credits. A deduction will reduce the amount of income that you pay taxes on and a credit will reduce your tax liability directly. Sometimes a credit can reduce your tax liability to the point that you can receive money. There are 2 main types of deductions. The page 1 deductions and the itemized deductions. Page 1 deductions will reduce your adjusted gross income. This number is used to calculate several factors and other benefits. These are a bit better than the itemized deductions. The itemized deductions will generally be subject to a limit. That limit is often calculated based on the adjusted gross income.
- April 15. I just recently found out that the April 15th deadline is really only for people that owe taxes to the government. I guess it makes sense that if the government owes you money then they don’t care when you request it from them. But if you owe them money, then they Do care when you pay them. So just keep in mind that if you believe that the government will owe you money for last year’s taxes then really you can send that in anytime.
- Errors. I have done my own taxes for a while and almost always make a mistake. Usually my mistakes are not that big and do not carry a penalty. But the IRS usually will let me know when I have made a mistake and send me the correcting paperwork. So don’t sweat it too much if you are not 100 percent sure about what you’re doing.
So that’s just a few points to keep in mind when helping others with their taxes. It can be a profitable side business if you are up for doing some paperwork. Just be sure to keep good records so that you can answer questions in the future.