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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Hiring an Accountant vs. Finance Intern

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Accountant vs. Intern

When many companies first begin, they often struggle with whether or not they want to hire full-time employees or pursue the alternative route and only hire interns. While interns are a great asset to any and every business, you have to know when to draw the line and know when to hire a full-time employee or an intern.

Below are just a few of the pros of hiring an accountant as opposed to an intern:

More Experience

Let’s face it. I know every business is looking to save money, so instead of hiring a full-time employee, many companies resort to hiring interns. While you may save money, hiring a full-time employee means you’re hiring someone with more experience. The more experienced your team, the more chance you have of avoiding mistakes.

Quality Assurance

Quality assurance is almost guaranteed when hiring a professional accountant. You don’t have to worry about micro managing an accountant like you would an intern, and so you save yourself a considerable amount of time and energy.

Trustworthy 

When you hire a full-time accountant, you should never have to worry about constantly having to look over your shoulder or having to see what your employee is up to; instead, you should have the confidence that the individual you hired can be trusted with their expert knowledge.

Have you found hiring a full-time accountant to be more cost effective than hiring a full-time finance or accounting intern? We want to hear about it. Leave your comments below.

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Do I Need a CPA to Prepare My Taxes?

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When to Hire a CPA

Whether or not you should hire a CPA to prepare your taxes can be a difficult question to answer. In fact, many experts suggest that there can be pros and cons associated with hiring a CPA; weighing these pros and cons is important, but it’s also important to know the time periods and circumstances during which a CPA will be a particularly valuable asset. Here are some good indications that you need to hire a CPA:

When You Own a Business

If you are a business owner of either a small, medium or large business, you may want to consider hiring a CPA to prepare your taxes. Your CPA will help you make sure that you’re not only filing accurately, but that you’re not mixing your personal taxes with your business taxes.

New Home Owner

Are you a new home owner? Your tax filing will probably look much different than it did before you became a home owner. Because of this, you’ll want to make sure if you have a home office you hire someone who knows how to help you get all of your major deductions.

Major Life Changes

Major life changes can be hard to navigate, but they can be even harder to navigate when you’re filing taxes. Major life changes may include, but are not limited to: getting married, losing a job, getting divorced, having a child, getting a new job and a plethora of other things.

Failure to Pay Taxes in the Past

If you have struggled to pay taxes in the past, you may owe lots of back taxes. This cannot be managed alone and you may want to hire a CPA to help you make sure you’re in over your head in IRS debt.

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How an Accountant Can Help You Avoid Payroll Fraud

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Payroll Fraud

We have all heard the nightmare stories of people who have had their identities stolen, their tax refunds taken away, and a host of other stories all surrounding fraudulent activity. While sometimes bad things happen to good people and can’t be avoided, there are ways that hiring an accountant can help you when you’re attempting to avoid fraud.

Here are four ways your accountant can help you avoid payroll fraud:

Schedule Frequent Audits

Having an accountant schedule frequent audits for your business is a great way to make sure you avoid payroll fraud in the future.  The more frequently audits are scheduled through the year, the lower your chances of fraud will be. If you really want to make sure that your audits are helpful, consider having your accountant schedule a few surprise audits as well.

Establish Checks and Balances

It doesn’t matter how big or small your organization may be, checks and balances are always important. That’s why it’s even more important to have one specified accountant readily available to help make sure you are setting up new hires, processing payroll and reconciliation throughout the year.

Train Employees How To Look Out For Fraud

One of your greatest assets is your team of employees. In many cases, extreme fraud may not be easily identifiable if you are out of touch with the day to day operation of your business. An accountant can work with you to make sure you train employees how to look out for fraud and even how to stop engaging in unintentional fraudulent behavior.

Encourage Honest Communication

Another great way that an accountant can help your company is by establishing an honest communication system. Many payroll departments have an accountant who sets up an employee hotline that allows employees to not only report fraud but report it without worrying about possible repercussions and retaliations from other employees in your department.

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Five Tips to Help Organize Your Accounting Process

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Organizing Your Accounting Process

Getting your accounting processes in order can be stressful, especially if you’re not a trained accounting professional. Here are five tips to get your accounting process in order.

Divide Your Business and Personal Expenses

Having your business and personal expenses split into separate accounts will not only prevent you from getting confused, it will also bring clarity on when you may or may not have the necessary funds to be able to spend. This also will help you remain protected during tax time so that you are not penalized for things you may do in your business.

Schedule Time to Keep Your Bookkeeping in Order

Block out time in your schedule to make sure you’re bookkeeping is consistently in order. This means making sure that you keep all your documentation in order. Once you have scheduled this time, make sure you check in weekly and consistently to make sure you maintain the order.

Keep Track of Your Invoices

One common misconception is that just because you send out an invoice you automatically get paid. In reality, this is not necessarily true. Sometimes, you will send out 10 invoices and all 10 of them go unpaid. Because of this, it’s important that you and your CPA keep track of your invoices and ensure that you’re not only getting paid but getting paid on time.

Watch Your Labor Costs

Paying yourself and paying your employees are probably going to be your two largest expenses. Keeping track of labor costs will ensure that you’re compensated fairly and that your employees aren’t being overpaid.

Record Your Deposits

Loans, sales and cash transactions can easily slip past your record books. This is why it’s important for you to have conversations with your accountant about the best ways you can record and keep track of your deposits.

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Five Tax Questions Your Should Ask Your Accountant

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Tax Questions for Your Accountant

Tax season can be a very stressful time for many reasons. In most cases, tax season is stressful for business owners because they lack the resources to pay back the money they owe, or because they don’t have their finances in order. Whatever the case may be, tax season should never have to be a stressful time for you or your business partners.

Here are five questions you should ask your accountant so that your stress can be minimized when tax time rolls around:

What Information Should I Hold?

Your accountant will need you to have all of your paperwork and receipts in order to be able to help you fill out your tax information. Making sure you hold on to all pertinent paperwork will ensure that you receive all of the deductions you qualify for.

What Expenses Can I Deduct?

Knowing what expenses you are able to deduct can help you with planning for tax filing every year. In most scenarios, you can deduct money that your business uses on services, office space, professional equipment and so much more.

How Do I Increase My Savings?

Believe it or not, buying certain items can help you save money. Working with your accountant can help you determine what these purchases are and how you can document them to ensure you get the savings you are eligible for.

What is the Difference between Employees & Independent Contractors?

It’s always important to know the difference between an employee and an independent contractor. This is important because it will help you to know not only how to fill out your business tax forms but it will help you when sending out end of year tax forms to either your employees or independent contractors.

How Do I Deduct Household Expenses?

If you are a work from home employee this will be a question which applies to you and your company. Knowing how to deduct household bills plays a key role in helping you save money during tax season. For example, do you have an office inside of your home that is exclusively used for working? That means you can deduct your electricity bill. Little tricks like these are what can save businesses hundreds or even thousands of dollars each year.

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Four Red Flags Your Accountant Can Help You Identify

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Red Flags

Fixing a bad financial situation is something which happens gradually, it doesn’t happen overnight. And the same is true for how bad financial situations get created: every good accountant knows that financial downfalls occur over a period of time, and that there are typically signs which point to the downfall along the way.  This is why it’s important to have an accountant on your team to help you stay alert and take notice of any red flags which my show up within your business accounts.

Here are four red flags your accountant can help you identify:

Bad Spending Habits

When you have lots of money in the bank account it can be easy for you to adopt bad spending habits and not know it. You may spend a few dollars here and a few dollars there and eventually those few dollars can turn into a few hundred or even a few thousands. According to financial experts, most people’s bank accounts are impacted more by small multiple purchases as opposed to one large purchase. Your accountant can play a crucial role in helping you identify those purchases.

Decreasing Funds

If you haven’t grown accustomed to checking your business bank account on a consistent basis you may not immediately realize how quickly your finances can decrease. Having someone responsible for checking your account consistently will not only save you money but help you as you attempt to make more money as well.

Disappearing Money

When you’re first starting a new business it can become easy to have too many hands in the pot. Meaning you have lots of people who have access to your bank accounts, whether it be other employees or co-founders. In order to keep a handle on this, most accountants recommend simply getting rid of your debit cards, and once you do your accountant can more closely watch to make sure your money isn’t disappearing out of your bank account.

Fraudulent Activity

Thanks to modern day technology, fraudulent activity is on the rise and hiring an accountant who is up to speed on fraudulent activities and trends can easily help you identify fraudulent behavior when it occurs or can even stop it before it happens.

What red flags has your accountant helped you recognize? Leave your comments below.

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How Much Should You Pay For a CPA?

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Paying Your CPA

Finding a CPA is one challenge, determining how much you should pay for a CPA is an entirely different story. Paying for a CPA is an issue which can only be settled by considering several variables; here are a few of the most important things you need to think about:

Hourly Rate

The hourly rate of an accountant could range from less than $100 per hour to more than $500 an hour. Sometimes hourly rates can be good, especially when the prices are significantly lower than other CPAs in the market. Beware that just because a CPA charges lower wages doesn’t necessarily mean better services. In fact, higher wages don’t necessarily equate to better services, and that’s why it’s important that you focus less on the cost and more on the service that is being offered.

Proposal Based

Many accountants are kind enough to offer their clients an estimate of what their total cost could be before even doing any services at all. This often helps many businesses because instead of clients being blindsided by fees they weren’t expecting they begin their relationships with their CPAs with a sense of how much they will incur.

Fixed-Fee Structure

For several tasks that are ongoing, such as balancing books, payroll or posting transactions, many CPAs offer their services on a fixed fee structure. Instead of having to pay a large amount of money for these services at one time, you as the business owner are given an opportunity to pay a monthly fee in order to ensure your bookkeeping is properly maintained.

What payment structures have worked for you? Which way do you prefer? Leave your comments below.

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How to Get the Most Bang for Your Buck When Hiring a CPA

Finding a good CPA is probably one of the biggest investments your company will ever make. It may be a huge pill to swallow initially, but it will pay off in the long run, especially if you end up hiring a CPA who is super financially savvy.

Even though hiring a capable CPA imposes a burden on companies, there are still ways you can make sure you are getting your money’s worth when hiring a CPA:

Relationship Building is Key

Whether you realize it or not, relationship building is everything, especially in business. Hiring the same CPA each and every year saves you not only from having to stress about who to hire but it also ensures that the person you have working on your behalf is familiar with your situation and is able to spot problems almost immediately.

Organization

Many CPAs today charge by the hour, and the more organized you are, the better prepared you are when it’s time for you to meet with your accountant. Being organized not only saves time because you’re able to focus better, it also saves money because you won’t spend hours fumbling in an attempt to find documents.

If You Don’t Know―Ask

Business owners often make many incorrect financial decisions not because they are irresponsible but because they don’t know what they are doing. If you don’t know if you should or shouldn’t do something, ask your accountant. Again, asking will save you money in the long run.

Be Transparent

You don’t have to lie to your CPA; in fact, it’s better for you to be transparent with your CPA. The more transparent you are, the more your CPA can help you.

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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
    425-483-6600

    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.