Get Your Money's Worth from Your Tax Professional This Filing Season

It's officially Tax Season! This time of year, individuals and businesses turn to tax professionals for assistance. Most people don't realize that all tax professionals are not equal. Among tax professionals, there are varying degrees of expertise. Anyone with $19 can obtain a Preparer Tax ID Number (PTIN) from the IRS. This number allows that individual to prepare and file tax returns and use the designation 'tax professional.' No certification, training, or specialized knowledge is required. Certified Public Accountants (CPAs) have the highest level of credentialing and are required to take annual professional education courses to stay current with federal and state tax law. These experts can help you navigate the complex world of taxes, ensuring that you maximize your deductions and credits while minimizing your tax liability. Here are some key strategies to get the most from your tax professional.

Understanding Deductions

Deductions reduce your taxable income, which can significantly lower the amount of tax you owe. Here are some common deductions to discuss with your tax professional:

• Standard vs. Itemized Deductions: Determine whether the standard deduction or itemizing your deductions is more beneficial for your situation. Even if you don't have enough deductions to itemize your federal return, your state may have a lower threshold, so be sure to tell your preparer about all of your out of pocket medical, state and local taxes, real estate and investment interest paid, and cash and non-cash charitable contributions.

• Business Expenses: If you are self-employed, ensure you are claiming all eligible business expenses, such as home office costs, mileage, retirement plan contributions, supplies, health insurance, and equipment purchases.

• One Big Beautiful Bill deductions: Ask about qualifying tips, qualified overtime pay, new car loan interest, and the senior citizen deduction available for tax years 2025-2028.

• Student Loan Interest: Tell your tax preparer if you are paying back student loans. The interest you pay is deductible whether you itemize or take the standard deduction.

• State Specific Deductions: If you receive dividends from a managed account, you may have some US obligation income that is exempt from state tax. Many states also offer exemption from income for Social Security, income from some types of retirement accounts, and contributions to an education savings plan.

Exploring Tax Credits

Tax credits directly reduce the amount of tax you owe, making them more valuable than deductions. Here are some credits to consider:

• Child Tax Credit: Families with dependent children may be eligible for this credit, which can provide substantial savings.

• Dependent Care Credit: If you pay for childcare so you can work, you may be eligible for a tax credit for a portion of your costs.

• Education Credits: Explore credits like the American Opportunity Credit and the Lifetime Learning Credit if you or your dependents are pursuing higher education. Your adult child may be eligible to receive the education credit if your income is too high.

• Foreign Tax Credits: If you paid tax to a foreign government, the IRS allows you a credit up to the amount of tax you would pay on the same income in the US.

  
  

Effective Tax Planning

Tax planning is an ongoing process that can help you make informed financial decisions throughout the year. To optimize your tax situation, consider the following:

• Year-Round Record Keeping: Keep organized records of income, expenses, and relevant documents to simplify tax preparation. Scan documents with your phone and upload them to a cloud storage provider like iCloud, Google Drive, or OneDrive.

• Retirement Contributions: Maximize contributions to retirement accounts, such as IRAs and 401(k)s, which can reduce your taxable income. If you own a business, and you don't have a retirement plan, it's always a good time to start one.

• Tax-Loss Harvesting: If you have investments, discuss strategies for offsetting gains with losses to minimize taxes.

• Adjust Withholding: Review your paycheck withholding to ensure you are not overpaying or underpaying your taxes throughout the year.

Seeking Professional Advice

Your tax professional can provide valuable advice tailored to your specific financial situation. Here are some areas where their expertise can be particularly beneficial:

• Life Changes: Inform your tax professional about any major life changes, such as moving to a new state, starting a business, marriage, divorce, or the birth or adoption of a child, as these can impact your tax situation.

• Tax Planning: Consult with a professional to plan for the tax impact of major tax events. Find out how new and proposed tax law changes will impact you. Take the surprise out of April 15th.

• Business Structure: If you own a business, seek advice on the best tax structure (Partnership, C-Corp, S-Corp, etc.) to optimize your tax benefits.

• Compliance: If you have a business, there are a lot of things to keep track of. A tax professional can help you get organized and stay up to date with all of your compliance requirements.

Conclusion

Maximizing your experience with a tax professional involves understanding the various deductions and credits available, engaging in effective tax planning, and seeking tailored advice. Most importantly, it means having a tax professional whose expertise you can trust. By actively participating in the process and maintaining open communication with your tax expert, you can ensure that you are making the most of your tax situation and potentially saving money in the long run. Email jessica@fpgtax.com or give us a call at (816) 941-2900 to find out what it's like to work with a real tax professional.