For Americans, now is the season when you have to deal with an unavoidable unpleasantry…filing your annual income tax return(s). Federal individual tax returns are due in less than a month, with state and city returns usually not far behind. During the 2019 calendar year, almost 156 million individual tax returns were filed, one-third of those being self-prepared. Over 111 million refunds were processed, for a total dollar amount of almost $321 million! The average refund amount was around $2,800. Refunds are great, but I’ve written before on why getting a large tax refund isn’t necessarily a good thing. A good financial coach helps you analyze your tax situation, specifically withholding , to make sure you’re getting as much as you can out of each paycheck – without having to pay in at the end of the year.
Your Tax Return Status
What does your tax return situation look like? Do you usually get a large refund every year, or do you sometimes owe? For my coaching clients, if they have historically received a large refund (>$1,000), I work with them to estimate their current year taxes, and adjust their withholding accordingly. Better to have that money during the year and put it to work for them. The IRS definitely does not pay interest!
Working with a Professional Matters
Every situation is different. Most self-employed individuals do not expect a tax refund. Often, it’s the opposite. Business owners owe money because they are not used to paying estimated taxes (versus withholding through a paycheck). This is why working with a tax professional can be crucial! Whether you’re an entrepreneur or a regular W-2 employee, a tax pro can help you identify deductions and credits that you may not know to take. They can help you avoid red flags that could trigger an automatic notice or even audit from the IRS. They also make sure you have the information necessary to pay quarterly estimated taxes, avoiding penalties at the end of the year. Yes, you could save money by doing your own taxes, but what are you leaving on the table by not enlisting the help of a professional?
A Financial Coach that Can Do Both
As a CPA and a financial coach, I can guide my clients in both areas. Make sure you are doing everything you can to reduce your tax burden. You also have to make sure you’re filing your taxes correctly. Want to bounce your situation off of someone that has knowledge in both areas? Get on my calendar today and take advantage of my complimentary session!