It’s that dreaded time of year again, April 17, the date that our income taxes are due, looming large on the horizon. We have asked VisionAware’s peer advisors to comment on their strategies for managing their income taxes. We have also updated our tax guide with additional links and resources, thanks to peer advisor Elizabeth Sammons.
Managing Income Tax as a Small Business Owner
As a small business owner, I trust an accountant to do my tax preparation. Before vision loss, and before my husband and I owned a small shop, I did my own taxes because I took accounting classes in college.
I actually work with the accountant throughout the year whenever I get forms in the mail or have questions regarding the many tax issues we face.
Starting in January, I prepare for the mid-April deadline. January is when the forms start coming in, so I label each with a thick black marker and begin my new file (really a box!) for the accountant.
Although my accountant actually does the year-end filing, I am always at work maintaining proper records and keeping payments current. My filing system for expenses, divided into categories such as Advertising Expense, Insurance Expense, etc., eases the end-of-the-year totaling process. I present my numbers to the accountant, and we go back and forth making sure everything is covered.
Of course, it costs more to go the professional route, but the benefits are multiple. The biggest plus for me is peace of mind that things are being done correctly. Additionally, I trust the accountant to keep current with the ever-changing tax codes. I trust him to figure depreciation. I trust him to know about tax credits that I otherwise would be clueless about.
Let’s face it—reams of small print can make a visually impaired person nervous. I say spend a little bit and invest in peace of mind.
Keeping Your Financial Information Organized Keeps Professional Costs Low
By Lynda Jones
I have never had the confidence nor, truthfully, the desire to do my own taxes, and not only because I’m visually impaired. More importantly, I know virtually nothing about accounting and even less about tax codes. In addition, I’ve always believed in going to the experts with the important things in my life.
For years, a friend who was retired from the IRS prepared my income tax forms. Obviously, she knew the IRS well, but she also kept up with the changes in the tax code and maintained her license through continuing education. When I decided to form an LLC, I knew I would need assistance from an expert. I took the recommendation of a friend but also did some research on the firm the accountant worked for. That was five years ago, and it was one of the best decisions I’ve ever made!
Matt helped me with the documentation for filing the LLC, which he still handles annually. He prepared a schedule for paying my quarterly taxes and recommended that I set aside a monthly percentage in a separate account for any tax surprises that might occur. He provided a very helpful list of tax credits available through the LLC. Thanks to Matt’s expertise, since the first year, I’ve never paid any extra taxes.
I’ve created my own electronic template for keeping track of my annual income and deductible expenses. (The online form provided by Matt’s firm is not easy to navigate with vision loss.) Some categories on my template I itemize and record monthly. Others, such as income from investment, Social Security and state retirement, and deductibles like property taxes and insurance, are recorded once a year or when they are paid. I maintain a hard copy file for each category on the template. Keeping track of many of the deductibles throughout the year limits my end of the year preparation to a couple of hours. When I meet with my accountant, I give him a six- or seven-page document listing everything including my total income and total expenses along with copies of the necessary documentation. Providing Matt with this level of information keeps the cost of professional services to a minimum. An additional benefit to using my own template is having electronic access to five years of income and expense information at my fingertips.
As Beckie stated, if you can, "spend a little bit and invest in peace of mind." If there is a problem with the IRS, the accountant is your representative. If you cannot afford a CPA, at least find someone with lots of knowledge like my friend. FYI, Matt’s fee is a line item in the deductible column through tax year 2017!
Using a Financial Manager
For many years, before my sight loss, my husband Bob and I have engaged a financial manager to handle our finances. This was the best thing we ever did, for when I lost almost all my sight in 2007, I already had this support system in place.
Our financial manager sends all of our financial reports directly to our accountant via e-mail, at our request. This way, we only have to keep records of the expenses and incomes that are required for a couple of the aspects of tax reporting. I personally manage my own income/expense records for my art and writing business. I made a Word Document—one for expenses and one for income. In those files, I record all of the necessary figures, and when I record an item, I immediately file it in a paper folder for my files, which I will have ready to take to the accountant when the time comes. I put every item on the computer and into a paper file—chronologically. I keep the paper files in order as I record them—using a paper clip to keep them neatly in their place. I record an item as soon as I pay a bill or make an income. I never let it get ahead of me—not for a single day. By being vigilant in this way, I have no problems when it is time to take my records to the accountant.
In addition to my own business files, I also keep our donation files in the same way. Bob has only to do some other files, which he puts together at least weekly.
Our files combined with the financial manager’s files, which are already at the accountants, make the work so easy. The other good point is that if there is any problem or question, the professionals know what to do.
Getting Help from a Friend or Volunteer
By Mary Hiland
Editor’s note: For those who are interested in obtaining help with taxes but don’t have an accountant, Mary suggests another route.
I have a friend who volunteers as a tax preparer for AARP. There is no charge. I wish I had known this years ago, as I paid over $200 to get my taxes done and another $200 to get my mother’s done when she was in assisted living. I still keep all receipts for medical expenses, just in case. Right now, I don’t make enough from Social Security to even file a tax return every year, another fact I wish I had known. But I think I have to file every three years anyway.
Do you have suggestions? Please comment below.