Taxes are complicated: Let a CPA be your tax season guardian
Changes in tax regulations may affect your 2013 tax return. Consider these reasons for hiring a CPA.
• Missing available deductions can be more costly this season. Taxes in the top brackets increased to 39.6 percent from 35 percent of income. A CPA can identify all of the deductions you can use to cut your tax bill.
• The alternative minimum tax continues to affect middle-income taxpayers. The exemption for single head of household filers is $51,900; for married people filing jointly and for qualifying widows and widowers, it is $80,800; and for married people filing separately, it is $40,400. These changes will help some people avoid this additional tax. A CPA can determine if you are affected by the AMT and help you find ways to avoid it.
• For business owners, the Affordable Care Act expanded the definition of "independent contractor," which may affect your Social Security and Medicare tax responsibility as well as additional reporting requirements. CPAs know how to apply the IRS guidelines and may be able to help you reduce the additional tax. A CPA can show employers how to properly classify independent contractors used in their business to avoid the Social Security and Medicare tax altogether.
• Long-term capital gains have a top tax rate of 20 percent, but can be as low as zero percent for taxpayers in the 10 percent or 15 percent tax bracket for ordinary income. CPAs know which investments fall under the long-term capital gains rules and the different rates for gains from certain assets, like collectibles.
• The new net investment income tax levies an additional 3.8 percent tax on certain net investment income when adjusted gross income exceeds certain thresholds. CPAs know when and how this additional tax may apply to you.
• Business tax incentives applicable to the purchase of property and equipment for your business were extended in 2013. A CPA knows the rules that allow you to immediately write off these purchases or alternatively take a 50 percent bonus depreciation deduction.
• Maximum contribution levels to a traditional or Roth IRA went up to $5,500 in 2013. Contributions to traditional IRAs are usually deductible but are phased out at higher levels of adjusted gross income. CPAs can analyze whether a traditional or Roth IRA contribution works best for you.
• If you make a mistake on your return, the IRS will likely assess interest and penalties on any additional tax due. A CPA can help you determine if the IRS is correct and may be able to get the penalty reduced. If you get notice of an IRS audit, a CPA can help you get ready for the audit and even represent you so you don't need to put yourself in that stressful situation.
• CPAs understand your tax return is more than a form that computes taxes due. Your CPA can show you how your tax return provides a financial roadmap that you can use to devise a plan for reaching your goals.
• CPAs have a large network of professionals they can tap into for the benefit of their clients. Each CPA also develops and maintains a sophisticated level of knowledge that you can use to help achieve your goals.
If none of these points apply to you, you are probably a good candidate to do your own return. The IRS offers free online services at www.irs.gov.
If these reasons have convinced you that you may need a qualified professional, don't wait until April to look for help. Start organizing your records soon and make an appointment to get started on this task. If you need help finding a CPA, visit www.ineedacpa.org/tax.
For more information about Pennsylvania Institute of Certified Public Accountants (PICPA), visit www.ineedacpa.org.