Expert advice from 2 Certified Public Accountants
Tax season is a stressful time of the year for a lot of people and for a lot of reasons. Because, with documents to dig up, numbers to crunch, and questions to answer that sometimes make you feel like you don’t know your business as well as you thought you did, it’s no surprise that business owners can put off the preparation. Add in an exceptional circumstance like the COVID-19 pandemic (and all the financial challenges, changes, and opportunities for assistance that came with it) and you’ve got the recipe for a tax season like no other. But, don’t fret because we have some expert advice for you today from Certified Public Accountants Amy Northard and Nadia Anderson—and they are here to get you pointed in the right tax-prep direction. Read on for questions to ask as you prepare your taxes, how to vet a tax professional if you are going to bring one on, as well as what you can do now to make future tax seasons go as smoothly as possible.
Advice on how to prepare for the 2021 tax season from Amy Northard, CPA
You likely have lots of questions swirling around your head when it comes to taxes. And, while you should work to get them all answered by a trusted professional, Amy also recommends adding these to your list:
- Should I take the standard deduction or itemize?
- Are there any tax credits from the recently passed legislation that I can take advantage of?
- What is the best business structure for me to be from a tax perspective?
- What common tax deductions am I missing?
And, in the event you are in the process of hiring an accountant for your business, here is her advice on the questions to ask to help you find the best fit:
Who is your target client? This is important to ask because you want to make sure any accountant you hire truly understands your business. The wedding industry, creative and small business space is not one that every CPA is well versed in, so be sure to find out if they are familiar with the nuances of this industry.
Are you a Certified Public Accountant (CPA)? Not everyone who works with money is a Certified Public Accountant and it is important to hire one because the title comes along with a license that must be maintained. It also requires continuing education and is evidence of being a highly trusted professional.
What are your fees? You want to work with someone who is transparent about what it costs to work with them, so if you are interviewing a tax professional who is hesitant to give you a price sheet, keep your search going.
Do you provide any education or training? If one of your goals is to grow as a business owner by becoming more financially literate, you want to work with someone who is going to help you understand things. Ask this question to see if the person is willing and able to support you in this way.
Do you have any references? An obvious question but still very important to ask since you want to make sure they have experience working with small or creative businesses in the wedding industry.
Advice on how to prepare for the 2021 tax season from Nadia Anderson, CPA
When it comes to the 2021 tax season, this is uncharted territory just as a lot of other experiences have been in the last year. So, as you work with a tax professional to file, here is Nadia’s advice to help you navigate what’s new in the tax world:
- A few new tax provisions were introduced in 2020 as a result of the global pandemic. It is important to understand which of those changes will have an impact on you or your business. What changes to tax law will impact my filing for 2020? Will these changes have an impact in 2021 and beyond?
- Some wedding pros received assistance related to weddings being canceled because of the pandemic. It is important to know how those additional funds will be taxed. This information was likely shared at the time the funds were disbursed, but it is a good idea to clarify your understanding of your tax responsibilities regarding these additional funds. Specifically, ask, “Am I responsible for paying income taxes on the __________ that I received?” That blank could be filled in with:
- Grants (federal, state, local, or private industry)
- Paycheck protection program (PPP) loans
- Economic injury disaster loans (EIDL)
- Unemployment funds
3. What things should I look out for so that I can better understand how much I will have to pay in taxes for the current year?
4. So many folks want to talk about taxes in March because the individual income tax deadline is April 15. In my personal and professional opinion, March is too late to begin a conversation with a tax professional (because they’re busy preparing returns) or to begin to understand your tax position (because it is too late to have an impact on the previous year–2020 has ended). I really would like to encourage wedding pros to consider an accountant as a part of their business dream team. I must stress that it is critical for business owners to build a relationship with an accounting professional who you can reach out to during the year while you’re making decisions to understand how those decisions will impact your income taxes, rather than seeking out a tax preparer who files the forms, but can’t help with strategy.
Photo Credit: Novak.elcic/Shutterstock.com