How To Get The Most Out Of Hiring An Accountant
Doing your own taxes is a personal choice. A�It is usually influenced by how many and what kinds of income you earn. A�If you work a traditional job and only invest through retirement accounts, doing your own taxes is fairly straightforward. A�If you have income coming in from multiple sources and qualify for non-standard deductions, then having an accountant prepare your taxes may save you much more than it costs. A�In this article, wea��ll look at how you can get the most value when you hire an accountant.
A Second Opinion
Hiring an accountant does not get you out of thinking about your taxes.A� In a perfect world, your accountant would follow you around, recording and considering all your financial transactions and advising you of the tax implications on the fly.A� Actually, that would be a bit creepy. Fortunately, accountants generally dona��t have the time or desire to stalk their clients 24/7.A� Instead, they depend on you to give them a complete and accurate a summary of your financial year – and preferably do so in an hour or less.
A good accountant can usually draw out the relevant information with some basic questions, but the more effort spent on the basics, the less time you have to get what you actually came for: an informed opinion on how you did with your finances from a tax perspective and advice on how to minimize your taxes going forward.A� So youa��re first step in getting the most out of your accountant is to create an accurate and concise snapshot of your finances.
Organize, Categorize and Summarize
You need to be aware of your tax situation to get the best tax outcome.A� If you are running a small business or contracting, there are common deductions beyond the standard ones for the average taxpayer.A� This includes expenses related to your office, materials and supplies, any wages and benefits paid to employees or subcontractors, and so on.A� When you are preparing for your appointment with the accountant, summarize the expenses you know are deductible and make a note any that do not have a receipt.A� Create a spreadsheet that categorizes relevant transactions under general headings such as a�?Home Office Expensesa�? and a�?Entertainmenta�? so your accountant can easily see the totals youa��re claiming in each deduction category.
If you are feeling keen, you can collate existing receipts to match the deduction summary, but this will only come into play if you are audited and asked to produce proof of your deductions. A�Your deduction summary should give a brief description of each item and the Rand amount. A�a�?Dinner with a client, R150a�? for example, is likely more than enough detail from your accountanta��s perspective. A�That said, your accountant will probably suggest that you keep a detailed record for yourself in case of audit – in the previous example, a receipt and notes of what was discussed with whom.
Go Beyond the Basics
When you are categorizing your expenses, include other expenses that may be relevant, whether or not they fit under specific deductions youa��ve taken in the past.A� You may not be fully aware of all the deductions you qualify for, particularly when it comes to deductions for small business income, investments and so on.A� When you hire an accountant to do your taxes, you are asking him or her to act as the filter and make a judgment on the acceptable level of deductions in each category. A�So giving the accountant more information than is necessary can be useful as long as it is organized in an understandable way.
Your accountant may trim areas where you have more than a reasonable amount of deductions, but he or she can also choose to go forward with deductions even when you dona��t have the receipts to back them up. A�There is no guarantee that a full deduction may be allowed to stand, but it is possible that a taxpayer may be allowed a partial deduction rather than zero following an audit.A� At the end of the day, your accountant will be the first to deal with any audit and has the most experience in deciding what to include and what to trim back.
Schedule a Post-Filing Follow-Up
Good accountants dona��t just file papers; they build better clients through tax planning advice a�� although you may have to take the first step. During your initial meet-up with your accountant, make sure to schedule a follow-up appointment after the seasonal rush is over. A�There are two main questions to ask in the follow-up 1) where can you maximize deductions and 2) how you can improve your summary/information. A�The first question ensures that you are capturing all the right deductions.A� This is the time to ask your accountanta��s opinion on the amounts you are claiming in different categories.A� Although you shouldna��t change your spending plans just to get more of a deduction, it is worth getting an opinion on things like spending a little more on office upgrades, or taking clients out for dinner, or adding a trade subscription to the deductions, or donating more to charity, or investing more in tax effective investments such as Retirement Annuities, or any of the thousand other business/personal decisions with tax implications.
The second question is aimed squarely at improving your relationship with your accountant. A�Like any service business, accountants value long-term relationships with low-stress clients.A� By becoming an ideal client who is organized and proactive, youa��ll see benefits beyond simply having someone else do your paperwork.A� Youa��ll have a true tax professional in your corner to advise you on how to minimize your overall tax burden and keep more of your money in your pocket.
In some cases, your follow-up meeting may be a formality, especially if youa��ve been with the same accountant for years and have a system worked out.A� However, it is still worth having a yearly follow-up because the tax code changes.A� The sooner you are aware of changes, the sooner you can reposition yourself to the best advantage.
The Bottom Line
If you are simply looking for a way to get out of dealing with your taxes, there are lots of tax practitioners and bookkeepers out there who are willing to do a plain vanilla tax filing on your behalf.A� To get the most out of an accountant, you need to be organized so that he or she is able to resolve last yeara��s taxes quickly.A� This will free up time for the more important task of minimizing your taxes going forward.A� When you hire an accountant, getting good tax advice going forward is as valuable as – or perhaps even more valuable than – getting the previous yeara��s taxes filed correctly.