This is something I hear frequently. Usually it’s a comment on an internet discussion about using software or going into a tax office. To an extent, it’s true. When a client gives me their tax documents I’ll enter it into my tax software, but that’s where the similarities end. And it’s definitely not “all” I do.
Here are some of the main differences between working with a tax professional instead of software:
No guessing. When someone decides to use software that they purchase themselves what you’re basically doing is entering you’re information into a calculator and hoping for the best. Unless you’re familiar with each deduction and credit you have no way of knowing if your return is actually correct or not. Before I enter in the first number I already know what your completed return will look like and can review it to make sure that you get every deduction and credit that you’re eligible for.
Support: If you’re doing your own taxes then your software is not going to be there to help you if you get a letter from the IRS. We’re open year round and can help you understand what that IRS letter is asking for and explain your options. I also stand behind every return that I prepare. If there are any problems, I’m here to help. Your software will just tell you that the error was your fault and wish you good luck.
Tax Planning: Wondering how the Obamacare penalty is going to affect you as you change jobs? Need to know how your taxes are going to change after you retire? Is your current withholding still going to be enough now that you got that rise? There are countless things that can affect your taxes each year. Its always best to come up with a plan as early as possible. All of my clients are eligible for a free tax planning session each year so that we can be proactive about the changes in your life.
Call or email today to schedule your appointment at our office in Windsor Locks
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It’s a phrase I hear several times a year once I mention Self Employment Tax. Unfortunately there are only one of two categories that you can fall in to for earned income on your taxes. Either you’re an employee or you are a business owner. Though there are actually lots of people who get a 1099 that are improperly classified as independent contractors when they should be employees, but that’s a much longer discussion.
If you work and you get a 1099 at the end of the year, you are considered a business owner and subject to Self Employment tax. Unfortunately there’s no way around this. Self Employment tax is misunderstood by a lot of people though. I’ve worked with people who’ve assumed it was punitive. It’s not, but if you’re not prepared for it, it can definitely feel like it is. A lot of small business owners, and independent contractors, actually wind up paying more in Self Employment tax each year than their actual income tax. It winds up being approximately 15.3% of the profit from your business. If that’s something you’re not prepared for it can be a big hit, but what is it?
As an employee of a company you pay 6.2% of your income to Social Security and another 1.45% to Medicare. You may see these combined and listed as FICA. In addition to that your employer also has to match. So, if you combine the two you get 15.3%. Self Employment tax is not an extra tax you have to pay for being self-employed, it’s you paying in to Social Security and Medicare. Now as an employee you only had to pay half of that amount. Unfortunately being an INDEPENDENT Contractor means there’s no one else to pay the other half for you. Seeing as how the good people at the IRS are so generous they do at least let you take a deduction for half of what your SE tax is.
If you need help planning for your upcoming tax bill call or email us today to schedule a free tax planning session.
Vector Tax & Accounting
73 Old County Rd
Windsor Locks, CT 06096
This time of year everyone is very aware of the impact that taxes have on their lives. It’s hard to turn on a TV or radio or drive past a billboard without seeing an ad for a tax service. Each year hundreds of thousands of seasonal tax preparers report to their office, many for their first year. From January through April they’ll meet with the approximately eighty million tax payers who work with paid preparers.
But then what happens? After April 15th most of these places close up shop. The army of preparers go back to being college kids, retirees, stay at home moms, etc. While you may only think about your taxes once per year, the IRS is open all year round. So where do you turn when it’s the middle of the summer and you have questions or you get a letter from the IRS?
A local tax or accounting practice, that’s active in your community year round, is always going to be your best choice. Unlike seasonal offices, year round offices are generally run by a CPA or EA. People with either of these designations are professionals who are committed to their field. They’ve taken a series of certification exams and have yearly continuing education requirements. While a CPA’s test and education requirements can cover any number of a broad range of accounting related topics, all of requirements for EAs are strictly tax related.
During tax season our office is open 7 days a week. After tax season is over we scale back to regular office hours 5 days a week. Night and weekend times are still available by appointment. Free tax planning sessions are available for individuals over the summer. We’re more than happy to meet with you, answer any questions you may have, and explain your tax situation to you in terms that someone who isn’t an accountant can understand.
Vector Tax & Accounting
73 Old County Rd
Windsor Locks CT 06096