The 6 Questions You Should Ask Your CPA During Tax TimeSubmitted by JMB Financial Managers on September 18th, 2019
Taxes are confusing enough for individuals, but when it comes to being an independent contractor, another layer of complexity is added. To make things a little easier come tax time, we’ve but together a list of the six questions you should ask your CPA.
1. Will I be subject to the alternative tax this year?
For some, the answer will be a clear “Yes.” Barring a major change in your personal finances, anyone subject to the AMT last year will likely be subject to it this year.
If it is unclear if you will be subject to the AMT this year, you should ask your tax advisor how to deal with this uncertainty. When contemplating the tax on the next dollar of income, should you assume the AMT maximum rate of 28% of one of the regular tax rates? Should you defy any major tax decisions until the AMT picture clears us? Let your CPA make the call on this, and we’ll plan your investment and financial planning strategies accordingly.
2. What will my tax bracket be this year?
The taxable income you end up reporting on your next return might put you into a different tax bracket than the one suggested by last year’s taxable income. Take a few minutes to review last year’s taxes and discuss with your CPA about what will be different this year. Your CPA can give you a more accurate estimate of your taxable income and tell you more precisely what bracket you will be in.
3. Can you help me estimate my income?
As we know, there are many forms of income. Gross income may compromise salary, bonuses, investment income, the taxable portion of Social Security benefits, alimony, and more.
It’s also important to have an estimate of adjusted gross income, modifications to adjusted gross income, and taxable income. Each of these types of income is dependent on various deductions and/or credits that need to be estimated in order to come up with your projections for this year. In order to estimate the various forms of income, your tax advisor will need to know about your situation and plans for the rest of the year. For example, do you plan to make charitable contributions? Or if you reported a one-off event, such as an asset sale, on last year’s return, your CPA will need to adjust this year’s income estimate.
4. Do you have an remaining loss carryforwards?
This can be determined by looking at your last tax return but it’s good to question your CPA to better understand how investment activity affects your tax situation. Tax loss harvesting is usually a year-end activity, but it really should take place throughout the year as investment opportunities present themselves.
5. Do you have any recommendations for reducing my taxes this year and beyond?
The tax preparation appointment is the perfect time to explore different strategies.
6. Is there anything my financial advisor can do to help my tax situation?
A meeting or phone conference between your CPA and your financial planner could result in additional strategies to reduce your tax liability in the years to come.
If you’re ready to talk to a financial planner about reducing your tax bill, set up your free consultation today.