10 Reasons Why You Should Hire A CPA
Individual and Business Tax Changes Expecting Parents Should Know About
Some people say, “I’ve got a guy.” Others may tout that they’ve “got people.” But when it comes to your income tax return and dealing with unexpected issues with an income tax authority (the IRS, state department of revenue or taxation, and local income tax collectors), what you really want is someone you can trust. You also want someone who has experience in dealing with these agencies. Let me introduce you to your friendly neighborhood certified public accountant … aka, a CPA.
Do you know the difference between a CPA and someone who simply has a preparer tax identification number (PTIN)? The most striking difference is that pretty much anyone can register to get a PTIN (which the IRS and many states require a person to have if he or she charges you to prepare your tax returns). The IRS states on its own website that it only takes 15 minutes for most people to obtain a PTIN. On the other hand, CPAs in Pennsylvania must have a college degree with specific accounting-related class requirements. CPAs must also take continuing education of at least 80 hours every two years.
With the passage of the Tax Cuts and Jobs Act of 2017 (Tax Act), a plethora of changes will affect nearly every single taxpayer in some way. While not all CPAs specialize in taxes, those that do have been very busy since the passage of the Tax Act. There have been numerous classes related to the changes. These CPAs are primed to ensure that they know the correct way to handle your taxes despite new and unexpected changes in the law.
Here are 10 reasons why hiring a CPA can benefit you.
Your itemized deductions may no longer be allowed.
A CPA knows which items on Schedule A (Itemized Deductions) may still be allowed. This is in addition to existing, and some new, limits placed on certain deductions on this schedule. Don’t get frustrated by trying to figure out what is and what is not allowed: contact a CPA.
The Alternative Minimum Tax (AMT) continues to affect taxpayers.
A CPA can determine if you fall into the AMT trap and help you find ways to avoid it. There is an exemption based on your filing status that the Tax Act has increased. The exemption for single head of household filers is $70,300; for married people filing jointly and for qualifying widows and widowers it is $109,400; and for married people filing separately it is $54,700. These changes will help some people avoid this additional tax, but not everyone.
The Tax Act affects decisions about worker classification for employers.
The Tax Act created a special deduction for pass-through entities. CPAs know how to apply the IRS guidelines and may be able to help you reduce your taxes. The pass-through deduction is determined in part by the amount of payroll a company has in a given year. A CPA can show employers how to properly classify workers as either employees or independent contractors to potentially help reduce taxes with this new deduction.
Long-term capital gains still has a top rate of 20 percent, but …
They can be lower – as low as 0 percent for taxpayers in the 10 percent or 12 percent tax bracket for ordinary income. CPAs know what investments fall under the long-term capital gains rules, as well as the different rates for gains from certain assets such as collectibles.
The net investment income tax with its multiple variables still applies.
An additional 3.8 percent tax on certain investment income is levied when adjusted gross income exceeds certain thresholds. CPAs know when and how this additional tax may apply to you. The net investment income tax has multiple variables.
Make sure your new business entity will be the most tax efficient for you.
Do you want to take advantage of the pass-through entity deduction, or will the new, lower corporate tax rates provide the best tax advantages? There are different deductions that certain corporations can take compared with owners of partnerships or disregarded single-member LLCs. Talk to a CPA today to find out which tax differences will mean the most to you.
Contribution cap levels for traditional and Roth IRAs affect retirement plans.
For 2017 tax returns, the maximum contribution is $5,500 if you are under 50 years old. If you are older than 50, you may be eligible for an additional $1,000 catch-up contribution. Your contributions to traditional IRAs are usually deductible, but they are phased out at higher levels of adjusted gross income. CPAs understand how to analyze whether a traditional or Roth IRA contribution works best for you.
Your mistakes can be costly.
If you make an error on your return, the IRS will assess penalties and interest on any additional tax it believes is due. A CPA can help you determine if the IRS is correct, and may be able to get the penalty reduced. If you get a notice of an IRS audit, a CPA can help you get ready for it and even represent you so you don’t need to put yourself in that stressful situation.
Your tax return is more than a form that computes your refund or taxes due.
CPAs can show you how your tax return provides a roadmap to your finances and how you can use this information to devise a plan to reach your financial goals.
CPAs have a large network at your disposal.
The PICPA, with more than 22,000 members, advocates for a strong accounting profession that serves the public interest. PICPA members develop and maintain a sophisticated level of knowledge and professional connections that you can use to help you achieve your goals.
William L. Stunkel, CPA, is director of small business services with Holsinger PC in Wexford, Pa. Stunkel is a PICPA member who serves on the CPA Image Enhancement Committee.
Article permission provided by the Pennsylvania Institute of Certified Public Accountants, www.picpa.org