‘Tis the Season: Ask the Accountant

The days are getting brighter and longer and the doldrums of winter have a light at the end of the tunnel the closer we get to March and April – at least here in New England! February is a tough weather time for the northern parts of the world, but it also falls smack dab in the middle of a season you may not have defined before: tax season.

20180217 - Tis the Season Ask the Accountant

In our family, tax season is a way of life for my brother Rich Toomey. My favorite (and only) brother, he is a Tax Supervisor with a CPA designation (Certified Public Accountant – the gold standard for being able to practice accounting) for a regional accounting firm in Baltimore, MD. This is his busiest time of year as April 15 looms large on the calendar. He is one person not afraid to dig into tax returns and contact the IRS!

What kind of person loves tax, you wonder? Someone who is a die-hard New England sports fan, with a license plate of logos of the Pats, Bruins, Celtics, and Red Sox to prove it. Though playing baseball was his favorite, Rich is a former Zamboni driver. He is married for over a year to the love of his life Melissa, smart and talented in her own right, going after a PhD at Johns Hopkins. They have a sweet, curious cat and love exploring new restaurants. Rich has accounting degrees from Holy Cross (BA, 2012) and Northeastern (MA, 2013). And he is super willing to talk about what he does, which benefits all of us who are receiving the W-2s and 1099s and reporting self-employed income.

As we all prepare to file forms with all sorts of letters and numbers for names, Rich is happy enough to share some of his expertise to help us understand the basics.

MKD: What does a tax account do?

Rich: Tax accountants provide “compliance” or preparation services to individuals and businesses. In addition to this we act as advisers to our clients and help them plan for tax and non tax issues throughout the year.

MKD: What exactly does compliance mean?

Rich: Compliance as in to provide what is asked by the tax authorities

MKD: What does a tax accountant do outside of January to April 15?

Rich: A lot of people think that tax accountants have nothing to do outside of the typical tax season. This is far from the truth. A lot of clients have their returns extended for six months which can create a second busy season in September and October if you don’t keep busy during the summer. If a tax accountant plans their year correctly they should have a steady flow of work to do from April 16th to October 15th. Between 10/15 and the end of the year we keep ourselves busy with year-end tax planning and fiscal year end clients who have different deadlines than a typical year end client.

MKD: What kind of people or businesses have different deadlines?

Rich: Individuals have a regular deadline of 4/15 and an extended deadline of 10/15. This is not an extension to pay but an extension to file. You can file by 10/15 but all payments must be made by 4/15 or you will face late filing penalties and interest. Businesses have different deadlines depending on their structure. Pass-through entities such as partnerships or S Corporations have a deadline of 3/15 and an extended deadline of 9/15. The idea is that since the income from these entities pass through to individual owners their due date needs to be earlier than individuals. C Corporations pay tax at the entity level and share the same deadlines as individuals.

MKD: Why should someone hire a tax accountant for their taxes instead of doing it themselves?

Rich: For the majority of people filing a tax return should be very simple. A lot of the instructions are very straightforward and easy to understand. However, things can get very complicated very quickly. Maybe you bought a home or purchased a rental property. These can create tax issues that the average person may not know about. Basically the further you get from only having a W-2 and claiming the standard deduction you should consider using a tax preparation service. If it is in your budget I would recommend going to a CPA rather than a big national tax prep shop as they will be able to provide year-round service.

MKD: What are the advantages of using a tax professional year round?

Rich: Using a tax professional year round allows you to be more prepared for significant tax events throughout the year. For example let’s say an individual ends up selling some stock during the year. An average person won’t know what capital gain tax rates are or know that they might need to make estimated payments to cover the tax that will be due on the gain. Using a tax accountant year round will make sure that you are prepared for any event that might come up

MKD: Why did you get into tax accounting?

Rich: I was in my junior year of college and like a lot of accounting students I didn’t know what field of accounting I wanted to have a career in. My first semester I was taking an Auditing course and we had a visiting professor. On the first day of class he says “you probably aren’t going to use anything you learn in the class in the real world”, which was a great way to grab my attention. I knew right then that I probably didn’t want to go into auditing. The next semester I had my first tax course and on the first day we were already applying things that we had learned to real world scenarios. I was hooked. I knew that was what I wanted to do.

MKD: What do tax accountants want us regular people to know during tax season?

Rich: We know that your life is hectic, but please, please, please provide your accountant with all of your tax documents as soon as possible. The sooner we have it, the sooner we can prepare your return and hopefully it will result in you receiving a refund faster. The days leading up to April 15th are always hectic, and the client who waits until the last-minute usually isn’t our favorite client.

Thanks to Rich for sharing your experience! Hopefully this post opened up your eyes to what goes on during tax season and helps you think about the best way to approach your finances, whether personal or for your business.

Do you go confidently into tax season, or terrified to begin? Do you use a professional, software, or go old school with calculators, pencil and paper? Feel free to comment and share your thoughts and this post!

 

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