What Your Accountant Needs To Do Your Taxes

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Tax Items

Tax season can be one of the most stressful times for your company. It is stressful for a plethora of reasons, but mainly because suddenly you have to look Uncle Sam neatly in the face and hope that you handled things correctly throughout the year.

For many small businesses, tax season is the only time that hiring an accountant sounds reasonable, and it is only during this limited window that accountants are able to clean up the mess you have created throughout the year. If you be one of those businesses which only hires an accountant during tax season, it’s important that you equip them with the items required to do your taxes. Below are just a few items you’ll need when hiring an accountant to do your taxes:

  • Financial Statements
  • List of Capital Asset Activity
  • Vehicle Log
  • Office Expenses
  • Other Sources of Income

While most accountants may ask for other documentation, the above items are a great place to start, especially if you’ve never hired an accountant before. You will want to make sure that you provide them with more than enough information to ensure that they’re able to help you lessen the stress load which inevitably comes during tax season.

What other items have you found to be helpful when hiring a new accountant? Share those additional items in the comments below and help another business owner have a less stressful tax season.

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Why Your Accountant Uses a Balance Sheet

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Balance Sheets

Once of the most important tools you will ever see your accountant use is a balance sheet. A balance sheet is a financial statement which gives an accountant insight at any given time as to what exactly your business is worth. The overall purpose of the balance sheet is to help the company determine where they stand financially for both tax purposes and also for business purposes.

In a well-conceived balance sheet, you will be able to identify the total number of assets a company has as well as the amount of equity. Unfortunately, balance sheets cannot show everything; however, they do a great job at showing increases and decreases in revenue.

What Does a Balance Sheet Look Like?

A traditional balance sheet generally has two sides which are required to balance each other out. For example, if you have a company and you decide to withdraw a $1 million loan from the bank, your assets would increase to $1 million but your liabilities will also increase because they have to balance each other.

Simple Equation

The formula of the balance sheet is quite simple: assets = liabilities + owner’s equity. The balance sheet literally has the power to provide a snapshot of your company’s accounts at any given time. This sheet, combined with your income and cash flow statements, can be a critical piece of documentation, especially for investors.

Defining Terms

So what exactly are liabilities and assets? Well, it’s quite simple. An asset is property owned by a person or company, regarded as having value and available to satisfy debts, commitments, or legacies. A liability is defined as a company’s financial debt or obligations which arise during the course of its business operations.

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Why an Accountant Should Prepare Your Taxes

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Accountants & Tax Preparation

Filing taxes can be a super stressful process for anyone’s business―but it doesn’t have to be. In fact, hiring an accountant can be a great way to help relieve some of the stress associated with filing taxes. So no matter what sort of reservations you may have about hiring an accountant, you should seriously consider obtaining an accountant’s assistance if you find yourself in one of the following tax scenarios:

You’re Recently Married

Newly married couples should almost always hire an accountant to prepare taxes. This is because, in most cases, you have probably never had to consider someone else’s income, and by filing your taxes as a married couple for the first time you are more prone to make mistakes if you don’t have any guidance.

You’re Recently Divorced

Much like filing as a newlywed, you will also probably need some assistance to file your taxes as a recently divorced person as well. This can get tricky depending on at what point during the year that you divorced. If you divorced mid-year, that may mean you still have to combine your income with your ex. Having an accountant to help you comb through your taxes can contribute toward you avoiding an audit by the IRS.

You’re Employed in Multiple States

Many people now have the ability to be employed in multiple states. While it can be exciting to work for clients in different states, it can get complicated during tax season. An accountant or a CPA who is certified can help you as you navigate filing taxes in different states.

You Have Lots of Foreign Assets

Do you have lots of foreign assets? You’re not alone; however, this too can be a complicating factor when filing taxes. Look for an accountant or a CPA who knows how to help you report your foreign assets correctly. Having someone inexperienced in this area could not only have you owing back taxes but it could also generate legal troubles.

You’re a Small Business Owner

Small business owners often think that they are the only ones who don’t need an accountant to help with their taxes; however, small businesses should want to make sure that they have all their ducks in a row before their small business grows to insurmountable numbers. Plan now for what you want later.

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Four Assumptions about Accountants Which are Incorrect

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False Assumptions about Accountants

When most people think about accountants, the first thing that often comes to mind is the idea that they are smart, brainy or nerds. While this misleading idea is very common, there are several other things that people often mistakenly associate with accountants.

Below are four incorrect assumptions people often make about accountants:

Accountants Are Always Mathematically Gifted

While being an accountant does require a certain level of proficiency in mathematics, it is a misconception that accountants always like math. It is also a mistake to assume that all accountants are necessarily gifted in math. In point of fact, many accountants report that they actually hate math but just love the science behind pulling numbers and formulas together, and this is more about statistics than it is about pure math.

Accountants Are All Rich

While accounting can be a lucrative career, it does not necessarily mean that all accountants are rich. In many cases, accountants struggle to find work just like any other professional. Where accountants do tend to prosper, however, is in the area of job stability: when accountants are hired by a company, they tend to develop customer loyalty until they die (literally). Accountants are those employees that you hire and hope to never have to let go.

Accountants Are Boring

So are doctors, lawyers, analysts and a host of other professionals. This assumption that accountants are boring is not only incorrect, it’s also an unfair box that we so often put accountants in simply because they spend their days crunching numbers.

Accountants Can Make Your Company Rich

While it may be exciting to believe that all accountants can make your company rich, this is not something which will occur 100% of the time. In fact, an accountant’s ability to make you rich has little to do with them and everything to do with your business model.

What common or uncommon misconceptions have you heard about accountants? Leave your comments below.

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Three Misconceptions People Have About CPAs

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Three CPA Misconceptions

Business owners love to brag about certain team members whom they have on their team. The CPA is one such team member. CPA stands for “certified public accountant,” and believe it or not, when your team has a CPA, many individuals view that as a stamp of approval that your business is legitimate.

While having a CPA on your team is important, there are often several misconceptions surrounding CPAs, and a few of those misconceptions include:

CPAs Are Mathematicians

While CPAs must be comfortable with certain levels of mathematics, the idea that CPAs are mathematicians is simply false. In fact, many CPAs will admit that they don’t even like math. Surprisingly, accounting has little to do with math, and more to do with categorizing. It is also more about making sure you know how to track and report finances as they come in and out of your account.

CPAs Are One Size Fits All

Did your friend recently refer an amazing CPA that you are interested in trying out for yourself? While the CPA may work out for your friend’s business, be reminded that CPAs do not necessarily work well for any given person’s situation. Just because a CPA works for one business entity does not guarantee that they will work with all business entities the exact same way.

CPAs Cannot Save You From Financial Distress

One common mistake many people make when working with a CPA is hiring them in hopes that they can save you from financial distress. While it may be ideal to have a new hire save you from your financial problems, that’s not what a CPA is there for. A CPA can, however, help you make sure you make better financial decisions in the future.

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CPAs 101: What’s a CPA and What Can One Do for You?

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From crunching numbers, to maximizing your tax return or providing business advice, we’ve waxed poetic about the benefits of hiring a CPA in the past. But what exactly is a CPA, and what specific services do they provide? Let’s tackle these questions so you can see precisely how hiring a CPA can benefit you.

What’s a CPA?

A CPA is a certified public accountant. They differ from accountants in that CPA certification requires additional education and training: in other words all CPAs are accountants, but not all accountants are CPAs. Unlike basic accounting, a CPA can provide strategic business advice and consultation ranging from tax advice, to forensic services, to purchase planning.

What services do CPAs provide?

CPAs not only track financial records, but they also interpret financial data to help guide business decisions. CPAs also provide forensic accounting services, assurance services, tax services, financial planning guidance, and general financial and business consultation.

Why should I hire a CPA?

An accounting specialist is a must for any business. However a CPA has additional qualifications that can make them particularly helpful, whether the business is an international corporation looking to grow its business or simply a freelancer looking for help with tax deductions.

What should I look for in a CPA?

Ask colleagues or fellow professionals for a recommendation. Before you meet with a CPA, generate a list of objectives and goals so you can arrive with specific questions. Speaking of questions, don’t be afraid to ask the CPA about their practice: make sure the CPA is licensed to practice in your state; ask if they belong to any professional organizations; ask them about any additional training or education. You should be clear about your goals, and ask enough questions to know exactly what kind of service and accessibility you’ll be receiving from your CPA.

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Two of the Most Common Client Tax Concerns

Many of the top concerns which some tax preparer’s clients have may be some of the same that you have. The content here is designed to help you understand some of these common concerns and how to avoid penalties and audits. When you think that you are in over your head doing your own taxes, hire a professional.taxdeductionsigns

Itemizing Deductions

Itemizing deductions stumps millions of taxpayers every year. Allowable deductions often change, so it is important to review the current deductions allowed before completing each year’s tax return. Taking too many deductions can exceed adjusted gross income thresholds allowable for personal exemptions. If you do not itemize and you should, you could be cheating yourself out of thousands of dollars.

Even if you are not a business owner, are not self-employed, or have less income than others have, you can still itemize certain deductions such as those for out-of-pocket medical expenses and mortgage interest payments.

Estate Taxes

There are thresholds in regards to how much money can be inherited by a person before it is taxed. For the 2016 tax year, estate taxes are at a rate of 40 percent. The estate exemption amount in 2016, for wealthier estates, is $5.45 million. An $8 million estate would be reduced by $5.45 million to make only $2.55 million as taxable at the 40 percent rate.

Closing Thoughts

Some of these tax issues may not be something you are equipped to handle yourself. You can read all of the IRS publications under the sun and still not understand what the IRS is talking about. If you have to file a complicated return, it is best to work with a tax preparation professional to avoid mistakes.

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  • Huddleston Tax Accountants / Huddleston Tax CPAs – Redmond, WA
    Certified Public Accountants Focused on Small Business
    8201 164th Ave NE Suite 200 / Redmond WA 98052

    Huddleston Tax CPAs & accountants provide tax preparation, tax planning, business coaching,
    QuickBooks consulting, bookkeeping, payroll, offer in compromise debt relief, and business valuation services for small business.

    We serve Tukwila, Auburn, Federal Way. We have a few meeting locations. If you are looking for a Redmond CPA firm, get in touch with us! Call to meet John C. Huddleston, J.D., LL.M., CPA, Lance Hulbert, CPA, Grace Lee-Choi, CPA, Jennifer Zhou, CPA, or Jessica Chisholm, CPA. Member WSCPA.