Connect with us

Hi, what are you looking for?

Finance

15 Things You Must Never Hide To Your Tax Accountant

15 Things You Must Never Hide To Your Tax Accountant
Concept of business accounting, in his office, a businessman is using a laptop computer, a budget, and loan paper. (Photo: shutterstock.com)

If you hire a tax accountant to prepare your tax return, you anticipate receiving the most significant refund possible.

However, if you provide all the necessary information, your tax accountant will be able to complete the task.

Dave Du Val, a chief customer advocacy officer at TaxAudit.com, compared keeping secrets from your tax accountant to keeping secrets from your doctor.

While maintaining a secret from your tax accountant typically won’t result in death, it can have serious consequences depending on what the secret is.

15 Things You Must Never Hide To Your Tax Accountant

Tax Accountant Advisor Man Keeping Track of Sales Invoices. (Photo: shutterstock.com)

1. You didn’t submit your taxes for previous years.

Admitting that you have yet to submit your taxes in previous years can be embarrassing.

According to Tiffany Couch, proprietor of Acuity Forensics in Vancouver, Washington, “I once had a client who had not filed tax returns in more than 12 years.” He had a CPA at first, but he went out of business and was too busy that year to find a replacement.

The client didn’t bring up the issue as the years passed. He “found himself doing nothing to address the issue because he was overwhelmed with guilt and shame,” Couch said.

Such indecision is a grave error. The more issues you might encounter, the longer you wait to file.

Up until you file, interest and penalties continue to accrue. To avoid incurring further expenses, your tax accountant can assist you with filing previous returns.

2. You Had a Personal Injury Case Involved

Disclosing certain personal injury situations to your tax accountant might be awkward. However, if you withhold information, your tax accountant might not correctly file your taxes.

The founder and CEO of CWSEAPA, an accounting and financial services company with locations in Delaware, Florida, and Nevada, Craig Smalley, an enrolled agent based in Orlando, Florida, said: “One secret that a client didn’t share with me was that they were part of a personal injury lawsuit.”

Although settlement money from lawsuits is typically not taxable, Smalley pointed out that tax is due if the funds are linked to lost wages, as was the case with his client.

3. The status of your marriage has changed

Be truthful with your tax accountant about your marital status, even though the reasons you get married or divorced may remain private.

Owner of Jeffrey Beebe CPA in Boise, Idaho, Jeffrey Beebe said, “I had had clients tell me they were married several times when they were actually divorced but remained together.”

One couple in this scenario, for instance, filed tax returns jointly. Then, because the “husband” was wealthy, the wife’s son’s application for financial aid for college was turned down.

According to Beebe, there would have been a lot of financial assistance if they had been truthful and not filed jointly.

4. You used business funds to pay personal expenses

You might be tempted to keep a tax accountant in the dark if you use your company as a personal piggy bank. Some people choose not to disclose this information because they feel humiliated by financial woes.

Some people might not say anything out of fear that their tax accountant will rule that the expenses are not tax deductible.

Culinary Accountants’ president Matthew Hetrick, who is based in Annapolis, Maryland, said that these decisions frequently put you in a position to fail.

The IRS and state tax agencies raise audit red flags when these expenses are incurred improperly.

Taxpayers may unintentionally accrue significant tax liabilities by making unauthorized payments they fail to report.

5. You Possess Foreign Bank Accounts

You might believe that keeping money in a bank account abroad is of no concern, especially if you are certain you won’t use the money for illicit activities. However, you must disclose this information to the IRS.

By discussing these specifics with your accountant, you can ensure that they are accurately reported on your tax return, helping you avoid additional fines or penalties and IRS audits.

According to Abby Eisenkraft, enrolled agent and CEO of Choice Tax Solutions with a New York base, “U.S. people — citizens, residents, green card holders, etc. — must report any non-U.S. account regardless of the balance, regardless of where they are living.”

The consequences for failing to report are severe, and you could easily face a $10,000 minimum fine in addition to civil and criminal charges.

6. You Possess Additional Foreign Assets

You must report all of your foreign assets, not just bank accounts. All assets, including real estate like a vacation home, must be declared.

Even though it doesn’t seem exotic to you, the IRS considers it a foreign asset that needs to be reported.

If you don’t properly disclose this information on your taxes, you risk paying hefty penalties or being charged with a crime.

7. You paid individuals “under the table.”

By paying employees “under the table,” you might believe you’re getting a quick one on the IRS by avoiding having to pay payroll taxes or withhold taxes on their behalf.

However, Hetrick noted that you are harming both yourself and your staff.

By making unauthorized payments that they fail to report, taxpayers “can inadvertently accrue enormous tax liabilities,” he said.

“A good CPA is a partner and an advisor; you should have open and honest discussions about how to achieve your goals, not conceal expenses so your CPA can’t help you”

8. You Make Money from Gambling

If you’re a gambler, you might be tempted to keep your gambling habits a secret from your tax accountant out of concern that they won’t like it or that your spouse will find out how much you’ve bet when it’s reported on your joint tax return.

However, the IRS considers gambling winnings to be fully taxable income.

Your tax accountant won’t be able to properly prepare a return if you withhold the information because your entire income won’t be disclosed.

Although no one likes to admit defeat, you might be able to use some or all of your losses from gambling to reduce the amount of tax you owe by offsetting them against your winnings for the year.

9. You’ve made money from a side hustle

Even if your side business is little more than extra spending money, Couch advised reporting it. So make sure to share this income with your tax advisor.

Those who paid you should send a Form 1099-MISC to show your earnings if you make more than $600. However, you are still required by law to report all income even if you don’t get a form or make less than $600.

According to the IRS, it is a common misconception that if you do not receive a tax form attesting to your income, you are not required to report it.

10. Your tax bill is too expensive for you to pay.

Couch advised you not to keep your tax accountant in the dark if you won’t be able to pay the taxes you anticipate owing.

With the IRS, your tax accountant can assist in setting up a payment plan. For instance, you might be given 120 days to pay, but interest and other fees will still accrue until your account is fully paid.

11. You Must Pay Debts

You might feel awkward informing your tax accountant of your outstanding debt. Perhaps you are embarrassed that you haven’t paid off your debts or are concerned that you will appear less wealthy.

But by keeping your debts a secret from your tax accountant, you might miss out on several income tax deductions.

For instance, the interest on your student loans or mortgage may be deductible, lowering your tax bill.

12. You Received Tips.

Don’t withhold tips from your accountant or the IRS if you receive them. Because suggestions don’t appear on your W-2, you might assume they are not taxable.

However, the IRS mandates that you maintain a daily tip log, notify your employer of all tips, and include all directions on your income tax return.

You also need to factor in any tips you get in kind. For instance, you must include the cost of your plane ticket in your taxable income if a kind diner pays for it. Ensure your accountant is aware of your tip income to prevent the IRS from pursuing you.

13. You Missed the Estimated Payment Deadline

Even if it’s paying estimated taxes, no one likes to admit to forgetting to do something. But according to Couch, that’s not a secret you should keep from your accountant.

If you fail to make a required payment, you might be eligible for a penalty waiver due to a catastrophe or another exceptional circumstance. You can learn that from your accountant. Additionally, run a seasonal business.

Your accountant might be able to use a particular form to determine when you owed money based on when you earned the income to lessen or even eliminate the penalty.

14. Welcome new relatives

Most likely, your tax accountant isn’t on your list of recipients for newborn baby pictures. When you see your accountant, your child may be almost a year old if born in May or June.

Your baby is still a significant event, though, and she may help you qualify for more tax credits or increase your deductions.

The situation involved a client who had a baby but failed to inform Steven J. Weil, an enrolled agent and the president of RMS Accounting in Fort Lauderdale, Florida.

According to Weil, the couple responded that the child was born in June when asked why the newborn was never mentioned. \

Because of this, she was not considered to be a “new” child in March of the following year. Due to the client’s failure to inform Weil of the birth, some deductions were lost.

15. You Make Money from Rentals

More people are renting out their homes due to services like Airbnb becoming more and more popular. Sharing your activities with a tax accountant will help you accurately report your income.

Additionally, you’ll be more likely to learn about all the possible tax benefits of renting, such as writing off a portion of your utility costs and depreciating your home.

Read More:

$15 Billion Property Tax Relief Package, What are the Plans of Texas Lawmakers?

Burn It Where You Buy It, As Per the New Texas Firewood Law

Tax 101: Federal Inheritance tax

Copyright © 2022 Pro Claimers. Theme by MVP Themes, powered by The Santa Clarita Valley.