Local Professionals Talk Tips For Tax Season

During tax season, an accountant is a man’s best friend — especially for the small business owner. 

“In the perfect world, you work with your CPA every month throughout the year to have good, up-to-date numbers so you can plan a little better,” said Mike Mauldin, a co-owner of MauldinVaught CPAs in Fayetteville.

When an accountant is aware of business performance during the year, he or she can better plan equipment purchases, help budget and adjust how much is made in terms of estimated payments based on financial gains or losses in the year. 

Those who are the most organized, navigate best through tax season 

“The biggest thing is getting organized, having a system and making sure statements get in the proper folder so you can pull them out and give them to your accountant to save you time and money,” said Lisa Langenfeld, professional organizer and owner of The Organized Edge in Bentonville, a company that specializes in home and office organization. 

“The starting point is to have a logical place to keep your items, whether it is a banker’s box or files, and to not wait until the last minute scrambling to get tax items together,” Langenfield said.

If choosing to use a filing system, Langenfeld said subcategories are highly recommended. 

“If the category is taxes, subcategories could be charity receipts, business receipts or property documentation, depending on what the client is involved in,” she said. Make it personalized so it satisfies both home and business needs. “A broad category would be insurance, and subtitles would be insurance-auto, insurance-home, insurance-umbrella or insurance-life.”

By putting papers in the appropriate file, it will no longer be necessary to dig for things. It’s a good idea to visit the filing system each day, or at least once a week. 

Some people like to take matters into their own hands and use accounting software such as QuickBooks. In those cases, an accountant can review the documents, make adjustments and see that everything has been done correctly afterward. 

The more information provided to the accountant, the better, so consider bringing equipment purchase invoices and credit card statements when meeting with a CPA.

“Whenever we pick up a new client, we will review the past year or two and see what has been done on the taxes and see if there is anything to revise, amend or correct, like not reporting or [not] taking advantage of deductions they might be eligible for,” Mauldin said. 

 

What to Keep

Know what can, versus cannot, be discarded. 

“An individual needs to keep documents three years past the filing deadline, so we round it up to four years for W2s, charitable contribution receipts and everything you use to prepare taxes, and you should keep business documents for six years, which we round to seven,” Mauldin said. 

Some people like to save everything, which can actually get in the way of making progress with taxes. 

“Paper starts at the mailbox, whether electronically or in paper form, but if you open it up even in an email, you can create file folders on your [Google] mail account that mimic your paper file system,” Langenfeld said. “Often, people bring mail in from outside and it goes into a pile and does not get sorted. Have your recycling bin in your garage and put your junk mail in there so it does not even get into your house.” 

Those who opt to make charitable contributions should document what was given. 

“It is up to the taxpayer to make the list and value those donations themselves, so you should always get a receipt and behind that, staple or attach the list of items donated and the value,” Mauldin said. 

In addition to being organized, if you have an understanding of how the system works, it is possible to get ahead financially.

For example, making oneself more marketable in the workforce can help save on taxes. Even a few dress shirts or other apparel items can make a marked difference.

 

Health Care Considerations

Also, figure out the entitlements that apply to the situation at hand. 

“The Affordable Care Act and Obamacare spread a lot of questions, but we are increasingly concerned about small business owners if they reimburse an employee’s health insurance premium, because there is a big penalty of $100 a day,” Mauldin said. “Consider that if someone tells their employee that they will not buy a group plan but will reimburse $200 a month for him to buy his own policy that there is a big penalty on taxes.

“There are some small business owners still being taxed as what we call a sole proprietorship, and if they make a good living at it, it might be an opportunity to restructure and become an S corporation to save on social security and Medicare tax,” Mauldin said. 

Do not forget the small stuff, he added. 

“One of the biggest deductions that a small business owner has is the automobile fees and expenses, so you need a mileage log to show the five Ws we learned in high school English, which are the who, what, where, when and why, to support the deduction,” Mauldin said.

 

Planning for Future

Mauldin said taxpayers should also plan for the future by considering options that include taking advantage of a company savings matching system, contributing the maximum to a workplace savings plan and having an IRA. If someone has a 401(k), for example, his or her workplace may match 50 cents for every dollar that they contribute. 

If certain income eligibility requirements are met, the accountant may be able to help obtain a tax deduction through a traditional IRA. It is beneficial to figure out short- and long-term savings goals for family and business so steps can be taken toward meeting them. 

For anyone who does not have a CPA that they like and trust, now is the time to find one. Oftentimes, people come to the CPA in January or February and share that they have bought a car or another property, whereas if they talked to the CPA as they did it they may have been advised to do things differently. 

“One of the mistakes people make is only talking to a tax specialist once a year,” Mauldin said. “People need to talk to us any time, especially making major purchases, starting new businesses or as other events happen throughout the year so we can add value, help them plan and be a guide for taxes.”