We aren't going to sugarcoat it: taxes are a pain. Planning for taxes takes a lot of time and can be difficult to understand.
By working with an expert you can ensure the process will go smoothly and be less overwhelming. Your compdesk CPA works to create a plan to protect you from tax blind spots ahead of time.
Below are 5 of the top reasons why you should consider working with an expert:
A tax-advantaged account is a kind of savings plan or financial account, providing you with tax benefits such as tax-deferral or exemption. Tax-advantaged retirement accounts are popular for retirement savings, education expense saving, and saving for healthcare expenses.
Examples of tax-advantaged retirement accounts include 401(k)s, Roth IRAs, Traditional IRAs, and HSAs. By optimizing contributions to these accounts, you can avoid or defer a compounding income tax each year, which can result in hundreds of thousands in additional savings at retirement. Typically these tax-advantaged accounts invest your contributions toward stocks, actively managed funds, high-yield bonds, REITs, and annuities.
There's an annual limit to how much you can invest each year, so it's essential that you get started as soon as possible to allow time for the funds to grow.
Investment Advice: A CPA can provide investment advice and help you determine what investments are best for your situation. They can also help you with tax-advantaged accounts, such as IRAs or 401(k)s, which may be more beneficial than simply paying taxes on your income. They can also help with exercising employee stock options and understanding alternative minimum taxes (AMT).
Tax Loss Harvesting: Tax loss harvesting refers to the practice of selling losing stocks in order to offset gains from other investments, thereby reducing the amount of capital gains taxes owed by an investor. A good accountant will be able to advise on how many losses should be harvested each year and which stocks they should be sold from (or not sold at all).
Retirement Planning: Retirement planning is another area where a CPA's expertise is indispensable. A good accountant will help you find a retirement plan that works best for your goals and situation by considering factors like current income, estimated longevity and future assets. On average a tax advisor can help employees save $1,200,000 throughout their career by maximizing tax savings through tax-advantaged retirement account contributions.
Tax strategies can be used to decrease your overall tax bill, or to increase the amount of money you get back from the IRS. Either way, it's important to implement a personalized plan and understand how they work so you can make an informed decision when it comes time to prepare your tax return.
Tax strategies include things like capitalizing on potential deductions or credits available on your return, taking advantage of retirement savings plans and other financial vehicles, strategically organizing investments (such as IRAs), giving charitable gifts away during the year, deferring income into future years where there might be more favorable rates for certain types of income (for example, unemployment benefits), or taking advantage of certain medical expense deductions or educational credits available only during certain years.
Whether you’re planning for retirement or managing equity grants, it's important to act early and get the advice of a CPA before making any significant financial decisions.
While the beginning of the year may seem like an ideal time to manage your taxes, this is typically the busiest times for CPAs. Waiting until tax season to find a great CPA is not viable, particularly at top-tier firms — many firms focus exclusively on required work for existing clients. If you wait until after this time period then it could be months before your CPA has time to work with you on any tax planning matters.
The amount of money withheld from your paycheck is determined by the information you provide on your W-4 form.
It's important to optimize these withholdings as soon as possible. Doing so can help lower or even eliminate the amount of taxes you owe come tax time. Plus, adjusting withholdings will keep more money in your checking account each month—which means more cash available for other expenses.
Here are a few things you could experience:
At the end of the day, there is no better investment than your own financial security. The tax strategies and advice you get from a CPA could save you thousands of dollars on your tax bill, and the earlier you get started, the better.
