Welcome to Cosey Tax Blog! We are excited about this upcoming tax season and hope to meet and help as many businesses and individuals as we can.
Cosey Tax
Your solutions start and end with Cosey Tax
File with us now!
Check us out on Facebook or Yelp! https://www.facebook.com/coseytax – https://www.yelp.com/biz/cosey-tax-krugerville-3
Cosey Tax Blog
2 responses to “Cosey Tax Blog”
Hello, this is Cosey Tax Blog. Please tune in to this blog for tax updates, issues, and other news.
The filing season is coming to an end for some people or entities. January 1st will start a new year for calendar year filers.
Tax returns have become more complex in the last 8 years than in the entire time before then. The reason is the constant changes to the tax code, forms, and requirements. Each political party is making so many drastic changes that many tax professionals are challenged with keeping up with the new laws and requirements.
To add to the issue is the incoming flux of AI that is trying to replace humans and automate many different tasks. The downfall is the firms that are pushing the narrative that anyone can be a tax professional, bookkeeper, tax service, or company with software that may not be accepted or officially listed to operate for taxes in the state.
It is a great thing when you can save time by automating things but ideally, a person has to look into the data to explain why a choice is the best one to make and a person not trained cannot possibly do that. Also, in the event of an audit or notice that person without credentials cannot practice in front of the IRS on your behalf.
Other challenges for the upcoming season will be disclosures. There are many disclosure requirements coming into existence for the 2024 tax season. Some things that didn’t use to be a reporting requirement will now be mandated. Other issues for the upcoming tax season will have to do with the impending changes to the TJCA and energy credits.
Tax planning is not an evasion of taxes. It is reducing the tax liability or avoiding paying the maximum liability.
Tax planning is more than just choosing a different business structure based on a generalized principle. Sure, you can pay yourself with a corporation, S-corporation, or LLC but savings will depend on your company. Some things may depend on your state as well. Some states charge a higher fee for entities. Some states may also require more reporting. Is it worth it? You will need to do more than suggest one positive thing about tax savings from a generalized perspective because the negatives may outweigh the good.
Tax planning should be tailored to your specific entity. Your tax planning is one aspect of your plan. You have retirement planning, marketing, and your company’s overall strategic planning. Your business should have a strategic plan in place for the business and your tax planning should align with it.
Tax planning is not educational planning or retirement planning. It is not marketing planning or human capital planning. It is not risk-planning. It is not operational planning. It is a plan to help the financial goals of the business. Many other plans may affect this plan but overall, the strategic plan should be put in place first. That is not a tax planning function. Tax planning is closer to a tax advisor or financial advising. These two functions require some accounting and financial knowledge plus tax literacy.
Your growth, risk exposure, industry, markets, personnel, experience, costs, pros, cons, state of residency, profits, loss, expense, deductions, involvement, credits, tax liability, and structure are many things that will be a part of your planning and an inexperienced person with software cannot explain or prepare your company for how these things can work to your advantage. In other words, you still need someone to decide on the data and explain it to you so you can make an informed decision.
Tax planning is not quick money. It is a year-long process that saves the client money.
You develop a client base and the extent they stay will depend on the service and quality of your organization. Taking on too many clients or too complex of a task will reflect on the business and reputation.
Tax planning should not be a hurried last-minute process. Waiting until the end of the tax season to find resolutions is not going to be as effective as having a projection at the beginning and planning in place. If the season has ended it will be even more limited in what things you can do to mitigate and lower your tax liability.
Tax preparers of all levels try to give the best service based on their expertise, your situation, and the tools they have available. It is also the taxpayer’s responsibility to work within the plan in a timely way.
You are ultimately responsible for your company’s bottom line or individual taxes. The tax preparer bears some responsibility as well. Make sure you know what your tax preparer is doing and which positions, especially if they are uncommon, they are taking on your returns.
If the return is taking uncommon positions make sure the person who suggested it can represent the claim in front of the IRS.
In the tax world, there are many positions and levels of tax preparers, and they are not all the same nor have the same abilities.
Some people don’t really know what an Enrolled Agent is for tax purposes. Some may not know the difference between a Tax Preparer, Master Tax Advisor, Enrolled Agent, CPA, or Tax Attorney. Some do not know that a person who does bookkeeping is not necessarily a tax professional. A person who does payroll is not a tax preparer. There are accountants who also may not be tax specialists. Taxes are an entire field by itself and there are subcategories.
A bookkeeper’s main duties usually include keeping up with revenue, expenses, and the books of the business. They prepare the books for the tax preparer. Some CPAs and other tax professionals may offer this as well.
A payroll person usually handles the payments to the workers, contractors, and officers’ salaries. They may handle vacation pay, sick pay, worker compensation, also do benefit payments, and garnishment. They take care of the state and local taxes owed as well. They may do some bookkeeping as well but normally provide the data to the bookkeeper to finish the financial statements for the tax preparer.
A basic tax preparer is someone who may do basic to complex tax returns, and experienced ones may do some tax planning. They cannot usually practice before the IRS. They may have to take continuing education courses if agree.
A master tax advisor may do everything a basic tax preparer does has more experience and may have business and complex tax return abilities. Some may hold credentials for advanced tax preparation and knowledge within their firms or just experience. They must take a set amount of CE credits per year.
An Enrolled Agent can represent a client in all 50 states and do basic, complex, notices and Offers in Compromise plus abatements and maybe tax planning. Enrolled agents must take a proctored test to get credentials to practice before the IRS. They then must keep a certain amount of continuing education credits each year to keep their credentials.
A CPA is only allowed to practice in the state of their license. They can do basic, complex, OIC, abatements, tax planning, and a host of other things. They can perform audits and attestation. They can do internal and external accounting. They can also represent a client in front of the IRS.
A tax lawyer can do many of the same things a CPA does but many focus on litigation and legal issues with the IRS, State or Local, and sometimes business-to-business or individual-to-business. They may offer investment advice or plans. The Lawyer like the CPA can only practice in the state of their license.
A certified retirement professional handles retirement and investments for the client. They may set up trusts and help with wills. They may help with education planning for the children and other strategies that may be beneficial after work. They may do tax planning and taxes as well. Many times, they only specialize in post-tax and post-worker assets.
The tax code has grown to so many pages in the last 10 years alone. This has caused some to exit and some to enter seeing a need.
The fact of the matter is taxes are a lot more complex and challenging. The IRS is effectively changing the requirements for tax preparation.
Now they are proposing anyone that who does more than 10 returns must e-file. The threshold is currently 250.
There are PTIN requirements for paid tax preparers.
There are education credits a tax preparer is suggested to take each year and agree to circular 230. There is a security plan that needs to be in place for taxpayer information.
Outside of these requirements, without E/O insurance and protection of an LLC, a tax- preparer can be liable and get sued if they make a mistake. The IRS can sanction or ban a person from doing taxes, fine, and penalize a tax preparer.
You should protect yourself and your client. Protection for a tax preparer is insurance and a system to prevent mistakes, breaches of data, or wrong positions on tax law. It is also vetting the client to make sure they are who they say they are and have the correct documents for the deductions, credits, and claims on the return. Some of the protections of the tax preparer undoubtedly protect the client as well.
Overall, taxes are an important part of finances and being compliant with the tax enforcement agencies. The choice you make with your decision to go with a certain tax-preparer should align with your needs.
https://www.irs.gov/tax-professionals/understanding-tax-return-preparer-credentials-and-qualifications
https://www.taxpayeradvocate.irs.gov/reports/2022-annual-report-to-congress/most-serious-problems/