Four Benefits of Ditching Your Tax Software and Hiring a CPA

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Tax Software vs. CPAs

It’s everybody’s favorite time of the year again: tax season. And while a lot of people are anticipating how they will spend their tax refund checks, plenty of other people are trying to figure out how to avoid owing any money to the IRS.

If you’re one of those people who tends to rely on tax software to do your taxes each year, perhaps it’s time to ditch your tax software and hire a CPA. Using tax software programs can be a good way to do things in certain situations, but in other situations it’s plainly inadequate.

Here are just a few benefits of hiring a CPA vs. using tax software.

A CPA Can Answer Questions on Demand

Sure, your tax software has a FAQ section, but unlike a CPA, your tax software cannot answer questions on demand. Hiring a CPA will allow you to ask questions as they come up, and doing so will also help guide you through the tax preparation process.

A CPA Can Help You Save Money

A CPA can literally walk you through the process of how to save money. Tax software will ask you questions that help you determine how to save money, but a CPA will actually show you how to save money in ways you probably never imagined.

A CPA Can Help You Gather All Your Tax Documents

Not really sure what documents you need in order to file your taxes? In most cases a CPA knows exactly what documentation you need in order to file your taxes and best of all they know how to put all of those documents into one system to get you the best deals on your taxes.

A CPA Can Help You Save Time

We all could use a little bit more time in each of our days, and a CPA can help you find that time by doing your taxes for you. No longer will you have to spend endless amounts of hours trying to determine how to do your taxes.

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Four Reasons Why You Need to Trust Your Accountant

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Trusting Your Accountant

When you first hire your accountant, your primary objectives are to make more money and save more money for your business. In order to realize these objectives, you need to make sure that you trust your accountant. Establishing a level of personal trust with your accountant can be a difficult thing; nevertheless, it is imperative that you develop this type of bond otherwise your financial future could be compromised.

Here are four reasons why it is so important to develop a sense of trust with your accountant:

Your accountant has the key to your financial success

Your accountant literally has the key to your financial success and because of this fact alone you have to trust your accountant. That means you can never keep your financial goals or your expenses to yourself due to lack of trust. If for some reason you don’t trust your accountant it may be a good idea to begin looking elsewhere as your accountant may not be a good fit for your business.

Your accountant is here to help you succeed

Understand that your accountant is not there to see you fail. Your accountant is actually there to help you succeed, and so whatever you can do to help your accountant do his job better, go for it.

Your accountant can take your business to the next level

Do you often dream of being a business that performs at the next level? Your accountant can help you get to that next level, but only if you trust them to take you there. That means you have to trust them when they advise you to cut costs; and you have to trust them when they tell you to invest; and most of all you have to trust them when they simply tell you no.

Your accountant can help you reach financial freedom

Financial freedom is more than just a hash tag or a cool title of a book; it is actually a realistic goal, especially with the help of your accountant. If you’re tired of swimming in debt or tired of not watching your business grow financially, it’s time to take a chance and trust your accountant as you work to reach your goal of financial freedom.

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Four Ways Your Accountant Can Help You Maximize Your Tax Refund

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Maximizing Your Refund

It’s tax season, and believe it or not you may not know everything that’s necessary to be able to maximize your tax refund. Hiring a capable accountant could be the first step toward maximizing your tax refund for this present tax season.

Here are four specific ways how an accountant can help you maximize your refund:

Accountants Know Your Deductions & Tax Exemptions

An exemption is referred to as money you earned but aren’t required to pay taxes on; a deduction, however, lowers your taxable income. Both of these things have the potential to reduce the amount of money you owe each year. Knowing your deductions and tax exemptions when you meet with your accountant will let them know exactly how they can best assist you.

Accountants Can Help You Write Off Business Expenses

If you are a business owner, you have probably heard time and time again that you have the opportunity to write off your business expenses. You may not know everything about writing off expenses during tax season, and your accountant can help you get familiarized with the process. Do you go out to business lunches? Do you have a home office? These are potential business write offs your accountant can help you obtain.

Accountants Can Help You Deduct Medical Costs

Not sure how you can deduct medical costs on your own? Your accountant can work with you to help you get a tax deduction for your medical bills in the last year. These bills could include health insurance premiums, dental and eye care, mental health, driving to the doctor, counseling and other medical appointments.

Accountants Can Help You Write Off Charitable Donations

Have you ever cleaned out your closets and donated to the local Goodwill? Donated your used car to an auction? Making these charitable donations can help trim your tax liability with the help of your accountant.

There are several ways your accountant can help you maximize your tax refund but you have to be willing to be open and honest about your financial transactions from the beginning with your accountant. Transparency is how you can best help your accountant maximize your tax refund for your business.

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Why Freelancers Should Hire CPA

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Freelancers & CPAs

Freelancers (or “independent contractors” as they are also referred to) are involved in practically every business in one capacity or another. A freelancer is an employee who you contract with but is considered self-employed from a tax standpoint and who has the ability to take on multiple clients at any time at any rate they choose.

While these workers are self-employed and are technically their own “bosses,” it is still vital that these employees take their accounting responsibilities seriously. At the end of each year, freelancers are tasked with filing their own taxes, and if they’re not careful it could be easy for any freelancer to slip up and end up owing way too much money than they had anticipated.

A good CPA will not only help a freelancer file their taxes but will also keep an eye on their income throughout the year and help them accomplish their financial goals; he or she will also hold them accountable when they are coming close to the red.

So why hire a CPA as a freelancer? The answer is simple. So you don’t have to stress about money issues you don’t even know you have. Many freelancers ― even full time employees ― don’t often worry about their finances until red flags appear, and at that point it is usually too late. Hiring a CPA will help you identify problems before they become problems and will also help you fix issues before it is too late to recover.

While being your own boss can be exciting, keep in mind that as a freelancer you’re only as successful as the people you are willing to put on your team.

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Why Filing Early Can Be the Best Tax Decision You Make

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Filing Early

It’s that time of year again: it’s time to file your annual taxes, and depending on your particular situation, this could either be the most exciting time of the year (because you know you’ll receive a tax refund) or the most dreary time of the year. Whatever the case may be, accounting professionals all agree on one basic piece of advice: file early.

Filing early is not only important if you want to get it out the way, it is also important for several other reasons. Here are a few of these reasons:

Filing Early Can Help Stop Identity Fraud

One common identity theft crime which often happens during tax season is the wrongful use of the personal information of an individual to file a fraudulent tax form. This is often done early during tax season, and when the actual taxpayer files they’re notified that there is already a duplicate form on file.

Filing Early Can Eliminate Stress

Yes, filing early can eliminate stress, especially if you are someone who usually waits until the last minute of the tax deadline to file their taxes. The earlier you file, the less worry you will have.

You’ll Get Your Refund Faster

If you are one of those people who are fortunate to receive a refund you should be exceptionally motivated and inspired to file your taxes early. This is because filing early guarantees you’ll get your refund that much faster.

You Might Be Eligible For Special Discounts

Several tax softwares offer a special discount if you choose to file early. There are even some restaurants who offer special discounts if you can prove that you filed your taxes early.

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

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CPAs

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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Obamacare and Your Tax Liability

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Healthcare

The Affordable Healthcare Act is benevolent in its intent: it seeks to make health insurance affordable, and prevents healthcare companies from denying coverage for preexisting conditions. However, it has also proven to be incredibly confusing to many taxpayers and has caused some to forego buying insurance on the Healthcare Marketplace. We’ve compiled a sort of 101 to help you understand how the Affordable Care Act can impact your 2017 tax return.

You qualify for a discount to help offset your insurance premiums if your total household income is between one to four times the Federal Poverty Level. You can choose to apply these credits to your insurance costs to lower your monthly bill, or apply them to your tax return the next year.

If you’re on Medicare or have insurance through your employer, Obamacare doesn’t apply to you. Here’s two important points for individuals:

Individual Mandate: Americans who can afford to obtain health coverage must do so for the majority of the year (more on that later) unless they qualify for an exemption. Filers who do not obtain insurance will be assessed a monthly fee.

Advanced Premium Tax Credits: Low-to-middle income Americans are eligible for tax credits, which can reduce the upfront cost of premiums on health insurance purchased through their State’s Health Insurance Marketplace.

Who is Exempt?

Some Americans are exempt, meaning that do not have to pay a penalty if they are not insured.

Such scenarios include:

  • Filers whose income is so low that they aren’t required to file a tax return.
  • Anyone who would have to pay more than 8% of their income for insurance
  • Members of religious groups whose beliefs prohibit health insurance benefits
  • Incarcerated individuals
  • Members of Native American tribes
  • Undocumented immigrants

Tax Penalties for the Uninsured 

You can be charged a tax penalty if a) you do not have health coverage and b) don’t qualify for an exemption. But how are penalties calculated? It depends on the following: your household income, how many people in your household were not covered by health insurance, and how long they were without coverage.

In 2016 the rates stood at 2.5% of income, or $695 per uninsured adult. Starting in 2017, annual rates will be adjusted for inflation. Note that if you are uninsured for only part of the year, the penalty is prorated to cover only the months for which you were uninsured. You will not be assessed a penalty for a gap in coverage less than three months long–which is called a “short gap.” However you are only allowed one short gap per year.

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Two Tax Maneuvers You Should Make

No matter what time it is during the tax year, you can make changes to your withholdings and create new accounts to ease your tax burden. It is important to speak with a financial adviser to make sure you are making the right move for your situation. Some of the smartest moves to make, even late in the tax year, are discussed here.

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Open a Health Savings Account

Health Savings Plans (HSAs) are ideal for individuals and families with high-deductible health insurance plans. Using pre-tax money to fund your own HSA reduces your tax liability. The benefit is that the funds can be used for healthcare purposes tax-free. After age 65, these funds are able to be withdrawn for any reason, paying typical income taxes on withdrawals.

Start a 529 Plan

A 529 plan is designed to set funding aside for college. These accounts are tax-free. Any distributions from these funds which go directly for educational expenses are not taxed. The benefit of these plans is that there is a large contribution threshold, so many families with virtually unlimited income can essentially put hundreds of thousands of dollars into these accounts.

Closing Thoughts

Opening these types of accounts helps you reserve funds for later years, and help your children/grandchildren to attend college. Health savings plans are smart choices because the costs of healthcare are steadily increasing. Take a look at your overall tax profile before moving forward with any of these plans as they do affect your short-term financial situation.

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Four Fun Ways to Spend Your Tax Refund

Using your tax refund to pay toward big bills like a mortgage or car loan is a fantastic way to spend your refund. On the other hand, using your refund to have fun is also a great path to take. If you can’t spend your entire refund on having fun, however, set a portion of your refund aside so that you can detach from the stresses of life for a bit. It is okay to have a little fun once-in-a-while.taxrefundcloseup

Exotic Vacation

If you have wanted to visit an exotic destination, such as Figi or Anguilla as examples, use your tax refund to do so. You will need a passport, so your refund could assist in paying for passports and necessary travel documents too.

Speed Adventure

If you have a need for speed, there are events across the U.S. which allow you to ride in fast cars, drive fast cars, and take classes to become a racecar driver. These thrill vacations can become a popular adventure idea for you.

Visit Your Favorite Sports Stadiums in the U.S.

Sports fans may enjoy seeing all of the stadiums in which their favorite teams play throughout the country. Make it a point to use some of your tax refund to visit every stadium for your favorite sport in the U.S.

Closing Thoughts

Try to make it a tradition to do something fun with your tax refund each year. You can make it a game with yourself to use the funds to complete your personal bucket list. There are once-in-a-lifetime opportunities and your tax refund is a great way to capitalize on those opportunities.

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Three Money Saving Tax Tips for Parents

Most parents are aware of the Earned Income Tax Credit, Child Tax Credit, and Additional Child Tax Credit. What many parents fail to realize is that there are additional deductions and credits which can be claimed. The IRS has worksheets available on the IRS.gov website to help you determine credit or deduction eligibility.piggybanksaving

Child and Dependent Care Credit

If you have paid out-of-pocket for childcare expenses, or a physically dependent adult, you may be able to claim a portion of it on your taxes as a deduction. Expenses for children under age 13 can be deducted. The childcare has to allow you to work or find employment.

Higher Education Tax Credits

Two types of tax credits exist for parents with qualifying children still in college. You can qualify for and claim one of the following – The American Opportunity Tax Credit or The Lifetime Learning Credit. A four-year claim limit is in place with the American Opportunity Tax Credit.

Student Loan Interest Deductions

If you are a parent with student loan debt, you may be able to deduct the interest on your student loan payments. The stipulation to this deduction is that the debt must be from a qualified lending institution. It cannot be a branch of, relative of, or in association with a financial institution.

Closing Thoughts

Tax credits and deductions change, and new options are made available frequently. It is important to review the available tax credits annually to uncover additional credits or deductions that your family can take to save on taxes and receive a bigger refund.

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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.