💰How to tackle your taxes
A quick breakdown of options and the 10 questions to ask potential CPAs.
👋 Intro
Believe it or not, it’s March. That means the dreaded April 15th tax filing deadline is just around the corner. It’s been a hell-of-a-year, but it doesn’t have to be a hell-of-a-tax-season if you start soon and make a few important choices.
🤓Taxes 101
Gather your paperwork: You can slowly prep for filing by gathering the many docs and pieces of info you’ll need. If you file a 1099, start thinking about what you can consider (especially this year with so much work-from-home) part of your business expenses.Â
Spreadsheets are your friend: Whether you do it yourself or hire an accountant, making a simple spreadsheet with different tabs for income or different types, expenses, donations, etc can be an easy way to keep your data all in one place and share with anyone you file with.Â
Know your complexity: Some professionals recommend that anyone with dependents, investments, personal businesses, charitable contributions, or household incomes of over $200,000 (more likely to be audited) get help from a professional to do their taxes.Â
Consider what you’ll spend: While you can file very simple taxes for free, filing even slightly complicated ones through a software program may cost up to $100. Getting individualized help online could cost up to $200. And depending on where you live, hiring a real, live accountant could cost $150-500+.Â
File electronically and choose direct deposit: This is the simplest, safest, fastest way to get a refund if you’re expecting one. Filing by mail can take twice as long to process.Â
🤔 Your Options:
D.I.Y.: File by hand or using the IRS Free File online system (available if you have an adjusted gross income of $72,000 or less) or FreeFillableForms if you make more. Gather the following paperwork, your calculator, and a cold beverage and settle in for a few hours:
Social Security numbers for yourself, as well as for your spouse and dependents
Property taxes and mortgage interest
State and local taxes you paid
Investment income or interest
Educational expenses
Childcare receipts
Last year’s federal and state tax returns
Low-budget help: H & R Block has a free option for people with very simple taxes, $30 option for people with more complicated finances, and a $70 option where you get the documents together and they put everything in for you. Turbo Tax has even more options for both doing it yourself or having them do it for you. Taxact is simpler and cheaper.Â
Full shebang accountant: If you think you want to work with an accountant, now is the time to contact one. Don’t wait until they’re all booked up for the season, which can happen fast. Ask your friends and colleagues for recommendations or look for online reviews. If you have a special situation (large inheritance this year, small-business) look for someone who specializes in people like you.
10 questions to ask a CPA:Tell me a little bit about your tax prep process ( when do you usually start, how often do you communicate with your customers, do we need a face-to-face meeting, how do you like to receive files- digital ok?)
Tell me a bit about your other clients you work with (look for experience with professionals in similar industries and/or clients with similar personal interests).
Who will file my return? Does your office do all the work in-house or do you outsource some or all it? (You want to know who you’ll be dealing with and make sure they’re communicating effectively.)
Is there any particular tax issue that you specialize in?
How do you work with your clients throughout the year? Are you accessible to call if we are looking for tax advice?
Do you work with your clients to build tax reducing strategies throughout the year? (ex: efficiency of charitable giving, maximize benefits of investments) What things do you look at to help minimize what you owe?
What’s your privacy policy? Will you share my info with third parties? What is their privacy policy? (If you don’t want a bunch of unsolicited marketing emails, make sure they aren’t selling your info to a marketing company. It’s legal for them to do so, but they should explain why and get your permission first.)
Based on my situation, what other things should I try and do this year? Is there anything I can do to optimize my tax return?
Will you review my past tax returns at no charge?
Do you send a list of documents needed or is it better if we start gathering on our own?
🧰 Toolbox
✨ Milo Pro-tips
For Milo users, just triage in all of your tax docs (forward emails, take pics of docs etc to add@joinmilo.com, and save them to Files with category #finances so you can collect everything in one central, secure place.)