After 14 years as a CPA working with self-employed business owners, I have one important takeaway: taxes are emotional. Because of the emotion attached to paying taxes, most who are self-employed fear tax season. The fear and panic over tax season, in my opinion, is a direct result of the unknown surprise. If you remove the unknown surprise, you can prevent the fear as well.
A stereotypical tax season for many taxpayers includes the following somewhat clunky experience. First, diligently collect all tax-related documents, meanwhile questioning how all these silly document names like W2, 1099, 1095 and K-1 became a foreign language they must remember from year-to-year. Next, complete some style of intake with their tax service provider. The style varies depending on the service provider. It could be a face-to-face meeting with their tax pro, a drop-off at the front desk of the tax pro’s office or even more common since COVID – a paperless upload to a secure portal. Then, the waiting game (and build up of fear) begins. As each week, or possibly month, passes the taxpayer’s anxiety builds while awaiting the “bad news.” The question repeats in their head: how bad is it? $10? $10,000? If this sounds too familiar and you're ready for a better way, you should consider fall tax planning.
Being self-employed brings many challenges. Eat what you kill or you don’t eat. Work-life balance. 24-7-365 email. As they say, there’s no rest for the self-employed. And yes, if you are blessed to be profitable in your self-employment, paying taxes.
Paying taxes is not like paying any other bill with self-employment though. For example, you receive many bills from your vendors and suppliers each month. Common examples would be a cell phone bill or utility bill. These bills are received with precise amounts due easily identified. A cell phone bill of $157.50 gets paid for exactly $157.50. Tax bills are different though. There is no monthly tax bill assessment. Tax bills are generally provided at the end of a long year, possibly minus some estimated tax payments along the way. Wouldn’t it be nice if your tax bill came to you in a nicely-packaged, flat-rate monthly billing statement and you could pay as you go throughout the year? However, since this fantasy-land doesn’t exist, you must plan ahead to prevent fear.
In 1913, the federal income tax was legalized. Meaning, for over 100 years, CPAs have been the heroes by just preparing and filing the annual tax returns for clients. After a 100-year history though, it's time for a change to that overall client experience, and I believe there’s a better way to CPA.
Barry Melancon, president of American Institute of CPAs, said, “The next generation won’t say, ‘This person does my tax return,’ they will simply say, ‘This person does my planning,’ and the tax return will be a byproduct of that planning experience.”
Melancon made this statement at a national CPA conference on the future for CPA services. I’ve had this same feeling about the tax experience for clients, but our fearless leader put it into words perfectly.
The fall season is a favorite for many in the Ozarks. Scenic drives, baseball pennant chases and postseason races, pumpkin spice lattes and many more reasons. Fall is also a perfect time for engaging in tax planning. The fall tax planning service prevents the fear of tax season for self-employeds. Imagine going into the end of this 2020 crazy year with a prediction (or projection) of your April tax bill?
Engaging your CPA for fall tax planning allows them to review year-to-date numbers, make end-of-year buying and investment decisions and prepare you for the April tax bill approximately four to six months before its actual due date. A CPA helping you predict (or project) your April tax bill months ahead of time will take the fear out of your stereotypical tax season experience.
Think about it. You have a checkup with your dentist twice a year for cleaning and maintenance to prevent the fear of cavities or more severe cosmetic damage. Your mechanic provides maintenance to your car every 3,000 miles to prevent the fear of breakdown or even more severe engine damage. But you only engage your CPA once a year during their most hectic time?
If you have fear and anxiety when thinking of tax season, contact your CPA about fall tax planning while there is still time to plan. Remember, it's a better way to CPA.
Gary Wood is a partner at Compere Robinette CPAs. He can be reached at firstname.lastname@example.org.
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