02/13/2024
Your friendly neighborhood accountant and tax professional here to give you more great tax advice during this amazing tax season! š
The most common thing I hear during tax season is, I donāt want to pay taxes. As a taxpayer myself and a professional who has prepared taxes for over 15 years, I can definitely understand that statement. Here are a few things to keep in mind when you are filing taxes and donāt want to pay inā¦..
If you own a business: A lot of accountants and tax professionals donāt tell you that whenever you are self-employed and you want to finance a home or a car or make any kind of large purchase your credit is only a small portion of what allows you to finance anything under your name or the business name. Your taxes now become your proof of ability to pay, and are strategically used to prove that you make enough income via NET PROFIT. The last three years is a typical industry standard for financing and current set of books is required. As a business, if you consistently show losses every year, they will laugh you out of the bank. ***tangent alert**** Did you know that you have to show a profit as a single-member LLC or a sole proprietorship once every three years or the IRS will call it a hobby, disallow your previous deductions and audit you?! Fun times!! Another fun fact is that mortgage lenders can add back depreciation and some other items to make you seem profitable but ultimately if you arenāt profitable enough youāll have to go back and amend your tax returns and yea pay inā¦.just to show that you can buy that house or pay for that car. And that my friends is way more expensive than paying the IRS to begin with.
If you are an individual: Remember taxes are a balancing of what you earned versus what you paid in. Now, unless you qualify for certain kinds of credits, typically you should not ever get a refund and potentially could owe strategically because of payroll withholding. I made a post earlier that describes payroll withholding, so check that out if you want more information on how to correct your W-4. At the end of the day, if you donāt qualify for earned income credit, or have any kind of dependents you likely will not get money back, but if as a tax preparer, we are able to get you money back it cannot exceed the amount you actually paid in over the year for federal withholding. So, say you only paid in a few hundred dollars in federal withholding, and the tax preparer was able to get you a refund, they could only get you back the few hundred you actually paid in (outside of any credits you may qualify for). We are unfortunately not magicians, and cannot conjure up money that you have not paid to get you a refund. If you do have dependents the likelihood of you getting money back significantly increases only because of the types of credits you qualify for.
At the end of the day, remember that your tax professional should be able to walk you through tax planning, regardless of your situation. We should be able to look at your previous returns and your current tax situation to give you a better idea of how to plan and keep the IRS off your back. Keep in mind that paying them is not always the worst eitherā¦.I promise.
Lots of love to you all and if you have questions, reach out!!
