It’s not unheard of for people to want to supplement their income, one way or another. In fact, more and more of us are now looking towards investing or starting up a business for the added financial security. If you fall into this group, you may be wondering why you’d need proactive tax advice on an ongoing basis. After all, is this really a thing if no one’s talking about it?
Well, the answer to this question is simple (at least in theory). With any source of income, there are always tax obligations to consider. If you were to start a business, there would be more expenses tied with operating that business correctly. Are any of those expenses deductible? Are you eligible for credits or financial relief? What about your revenue, how much of it should go to the IRS every year? Knowing how to file your tax return is just the first step in understanding how to manage your business’ finances and maximizing profit.
Professional tax advice that small business owners and individuals should know
It’s important to be able to rely on the services of a trusted tax advisor. Without this, you could end up losing a lot of money in taxes, which is not only unfair but potentially dangerous. You’d be jeopardizing a big portion of the profit you’ve worked so hard to earn. Worst case scenario, you’d be attracting unwanted attention from the IRS.
So how can you avoid this pitfall? With the help of a reputable professional who can steer you in the right direction. You’ll need someone experienced with your industry or circumstances to identify which deductions apply to you specifically.
Finding the right person will take some research. In fact, there are plenty of misconceptions and confusion surrounding terms like tax advisor vs tax attorney vs certified tax specialist. The right professional will know which deductions to take so as to maximize your profits while minimizing what you pay in taxes. The good news is, there is plenty of information available online that can help you invest in the right tax advisor.
The benefits of proactive advice from an experienced tax guide
Ongoing, proactive tax advice is one of the best resources to make sure that you do not miss out on any deductions/aid/etc. that can benefit you or your business. You don’t need to know all about the tax code yourself. However, you should have an advisor who you can reach out to with your questions. This is especially true if you’re self-employed, launching a startup, or you own a small- or medium-sized business. Your tax advisor’s role is to understand the rules and regulations that govern the different tax breaks given to various taxpayers. Tax credits available for things like education expenses or other deductions, for example, can be a boon if you meet specific qualifications.
The most common benefit of proactive tax advice is the potential to save money during tax season. But other advantages include helping you avoid mistakes and missed opportunities throughout the year. After all, every financial decision you make every day of the year can potentially affect the tax deductions you’re entitled to. It also affects any government’s tax help that may be available, and maximum tax benefits and relief at the end of the year. Many tax experts can guide you through the entire process of tax preparation, tax planning, and even IRS negotiation and tax resolution.
The potential drawbacks when it comes to your tax advisor
A downside, and we use this term loosely, to having a tax accountant on hand is that the average taxpayer doesn’t typically seek out their tax advice regularly. This stems from a general lack of communication between the two parties. While this isn’t a “drawback” in the traditional sense, it has the potential to wreak havoc on your finances. This lack of communication and proactivity can lead to mistakes on both parts, causing you financial harm as highlighted previously.
Avoid this altogether by making sure that you meet with (or at least get in touch with) your tax accountant no less than once a year. This way, you can keep them updated on your financial situation and ask them all of your burning questions. You can also work on an action plan for the rest of the year. The right tax accountant will make the time to meet and answer your questions. But even if they don’t, they should at least be willing to refer you to someone who will. And remember, you should hire a professional with expertise in the area of taxes that pertains to you. That’s true regardless of whether this is specific to your industry or the tax services you’re interested in.