We would like to remind our friends, family, clients and former clients of the 10 most important times to call your accountant/tax professional/CPA.
Let’s start with the best time NOT to call. Hint — not on April 15. This is the day your accountant will be hyperventilating under the crush of all the other people who are calling in a panic. It is best not to throw your name in that hat.
The best time to call your trusted professional is before an event takes place, when planning can have the most impact, not after the fact, when the only thing that can be done is cleanup, or mitigating losses.
Time and time again, we are called after a transaction is complete or the tax year is over only to find out if we had just done some simple preplanning, quite a few tax saving strategies could have been put into place.
In addition to the below items, it’s always a good time to call your accountant to say thank you for a job well done and to show your appreciation.
- When your teenager gets a paying job — after you say “Hallelujah,” of course. They aren’t off your books just yet, but you can set up an IRA in their name and contribute an amount up to the taxable wages (earned income) they make during the year. It is also a good time to get your teen into the habit of saving. Additionally, you don’t have to wait until the last date, April 15 of the following year, to be able to contribute.
- When you receive a tax notice. The best advice to ease your level of panic is to let your accountant open the letter for you. In my experience, more often than not, the tax authority is wrong and a simple letter of explanation is all that is required. For those times when it is right, it is best to leave it up to the professional who handles these types of things several times a year and knows how to respond in the most tax-efficient way. Who knows — you may even get a refund. And, in the event you do owe additional tax, it is best left to the tax professional to be your advocate.
- When you decide to get married. Obviously, the first phone call shouldn’t be to your tax accountant, but they should be right up there. There can be tax planning involved around filing status — whether you file as two separate single people or as a married couple can result in some wildly different amounts in total. Depending on your particular circumstances, the tax savings for delaying the wedding until January of the following tax year could pay for your honeymoon!
- And, on the flip side — when you are getting a divorce. Your tax filing status is determined on the last day of the year. You will either file as single (or head of household if you have a dependent) if you are divorced as of Dec. 31, or married filing jointly or married filing separately if you are still married on that date. It might be tax beneficial to still file jointly and file the papers after Jan. 1.
- When you are having a baby — it isn’t necessarily the first thing you think of, but believe me, your CPA counts the new addition as a new “tax exemption”! Although the new federal tax law eliminates exemptions for dependents, your state may still have an exemption for each dependent. I always felt sorry for parents who had their baby on Jan. 1 as opposed to Dec. 31 — that definitely wasn’t good tax planning.
- When you get a phone call or email out of the blue saying you owe back taxes or that you need to pay a debt immediately. The IRS never contacts a taxpayer by phone, text messages, social media or email for any reason. Kindly ask the individual for their name and phone number and tell them your CPA will contact them. Then hang up and call your accountant. If you do receive an email, it is best to delete it, or you can report it to the IRS by forwarding it to email@example.com. Be careful not to open the email or click on any attachments or embedded links.
- When you decide to take the plunge and start your own business. Your CPA will know the best form of entity and the steps you need to take should you decide to turn your part-time hobby into a full-time job.
- When you get a large sum of cash, either from a distant relative or from winning the lottery or even the office football pool. Depending on how the cash comes to you, there may be certain reporting requirements, especially if that relative is from a foreign country.
- When you decide to make a cash donation or just need some incentive to clean out your closets and donate your coin collection to a 501(c)(3) organization. Your accountant will tell you what documentation you will need in order to take the appropriate charitable deduction on your return. You must obtain and keep a contemporaneous bank record or a written communication from the donee as a record of the contribution if it is $250 or more.
- When you turn 55 and beyond — congratulations, you are officially a senior citizen and can start enjoying your 10% discount at Perkins Pancake House. Before you take advantage of this savings, why not call your accountant to let them know your thoughts on retirement and collecting Social Security and your pension or 401(k) distributions. There are several tax decisions that can be made before you actually retire that can make your retirement years a bit more comfortable. There are several other milestone years, which we’ll discuss in our next article “Should You Invite Your CPA to Your Next Birthday Party?”
Most importantly, if your accountant doesn’t return your phone call, it is time to get a new accountant.
We here at Mazars USA take pride in our client service. Call one of our tax professionals and we will be happy to discuss these issues or any other question you might have.
Portia Rose, CPA, is a senior manager at Mazars USA LLP. She has over 30 years of experience assisting high net worth individuals and their families to address their tax, trust, estate and wealth planning needs. She specializes in individual tax planning and consulting. Portia can be reached at 212.375.6553 or Portia.Rose@MazarsUSA.com.