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Is hiring a CPA worth it in 2018?

Some individuals will continue to feel comfortable using tax preparation software, but there are circumstances where “you don’t know what you don’t know,” requiring you to call in the help of a CPA. A great CPA can provide much more value than just the peace of mind that comes from knowing that your forms are correct. They can provide planning and tax advisory services, consultation, business and international accounting, forensic accounting, business valuation and more.

Read on to learn four reasons why it’s worth hiring a CPA.

  1. To better understand your big financial picture

There are a variety of questions to determine if a CPA is right for helping you assess your overall financial well-being:

  • Do I have a clear grasp of my financial situation and how the new law will shape it?
  • When will I reach my savings or investment goals? Should I set new ones now?
  • How does tax reform affect decisions such as selling my house, retiring, taking a sabbatical, supporting a favorite charity, or sending my kid (or me) to college or grad school?

Figuring this out on your own is tough. Having a trusted adviser in your corner who knows all about your circumstances and looks at the big picture can make a critical difference. A CPA can help you start thinking about strategic timing and next steps, so you don’t miss out on important opportunities.

  1. To help you save for the big stuff

If saving up for education expenses, a baby or retirement seems daunting, you’re not alone. Some frequently asked questions in this area are:

  • My spouse wants to go to grad school. Can we swing this?
  • What is the best way to contribute to my children’s’/nieces’/nephews’/grandchildren’s college costs?
  • Am I saving enough to retire early? Is that even possible?

A CPA will help you strategize, whether you’re saving for school or saving for retirement. For example, under the new law, 529 funds can be used to pay private school tuition. A CPA can recommend the best way to fund the 529 and how and when to use it. A CPA can also assist in evaluating investment options that would be the most tax efficient to maximize your return in retirement.

  1. To make the most of your retirement

Your ideal retirement might be sipping a cocktail on the beach, or it might be trekking across America in an RV. Either way, there are specific questions to ask yourself in order to make the most of this next life stage, such as:

  • When should I start receiving Social Security benefits? What are the tax implications?
  • What is the best way to draw down retirement funds to minimize taxes and prevent financial problems?
  • Is my estate planning in order?

Knowing how to handle Social Security benefits is critical. In 2017, 50% of married couples and 71% of single people aged 65 and older relied on Social Security for at least half of their income. A CPA can fill you in on what you need to know and work with you to develop an action plan.

Similarly, he or she can work with you and other professionals to create an estate plan that honors your wishes and minimizes taxes for your beneficiaries. Tax reform greatly reduced the number of taxpayers subject to federal estate tax, but only through 2025. If your state taxes estates, you will need to take that into consideration. Thinking about the distribution of your assets can be difficult; however, you can enjoy the peace of mind that comes with knowing everything is in order.

  1. To prepare you for whatever life throws at you

We all know the reality of the Forrest Gump quote – “Life is like a box of chocolates: you never know what you’re going to get.” Here are some important questions to consider before “life happens”:

  • If a natural disaster hits my home or business, do I have a plan for financial recovery?
  • Am I handling my health care expenses correctly to save the most money?
  • If I am injured or become seriously ill, do I know how I can pay the bills?

So, if your particular box of chocolates sticks you with the coconut-filled one you hate, how can a CPA help? Many CPAs are knowledgeable about insurance, such as long-term disability and property, and can advise you on what you need to be prepared. And if they don’t offer this service directly, they most likely partner with an expert in the area so they can oversee your full financial picture. They also know about the tax incentives related to health care that may help you save and pay for medical expenses.

Next step: Making the Decision

If you’re not sure you’re on the right financial path, or what your path should even be, seriously consider contacting a CPA. To quote entrepreneur and business philosopher Jim Rohn, “You cannot change your destination overnight, but you can change your direction overnight.”

Of course, as a CPA, I’m biased. I’m extremely proud of my profession and believe deeply that people will benefit from our expertise. So let me share a more impartial comment from Manny, one of our readers in response to a much earlier blog, Is Hiring a CPA Worth it?: “Hiring a CPA may be a little costly in the beginning but will pay off in the long run. Tax planning and account management can be really confusing. Having a business and personal adviser will help save your time and money.”

For more information on working with a CPA, visit 360finlit.org. And to find one near you, visit cpasdotax.com.

April Walker, CPA, CGMA, Lead Manager Tax Practice & Ethics, Association of International Certified Professional Accountants

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12 Tax Deductions for Realtors

Tax season is difficult for everyone. For those working as independent real estate agents, things can be even messier. If realtors are aware of these 12 tax deductions, their lives will be much easier when tax time comes around. Take a look at a few tax deductions that will help to save some money.

Vehicle Mileage
Much of a realtor’s time is spent driving clients to and from properties. Realtors in the United States alone drive billions of miles each year. Vehicle mileage is deductible as long as date, time, distance, and purpose of the trip are logged. The IRS determined the 2018 mileage rates to be 54.5 cents for every mile of business travel driven. By multiplying the total miles driven by the mileage rate, one can determine the deduction.

Home Office Deduction
If you have a designated office in your home, you can deduct up to 300 square feet in taxes. The prescribed rate of $5.00 must be multiplied by the square footage of the office. Writing off a home office also takes rent, mortgage, furniture, and other expenses into account. See more on simplifying home office deductions here.

Entertainment, Meals and Gifts for Clients
Taking clients out for lunch to discuss business and dining out on business trips are both acceptable to write off up to 50% if business was the proven highlight of the meal. Keeping track of receipts and other information is crucial, so don’t forget to log your business expenses!

Marketing Materials/Advertising
Traditional forms of advertising such as business cards, yard signs, flyers, and letterhead, as well as digital forms of advertising are all tax deductible.

Uber/Taxi/Lyft Fees
Showings in the city can be a hindrance if you are driving and parking your own vehicle. To save time and money, realtors often use other means of transportation to get their clients to and from different properties.

Office Supplies
Realtors can write off office supply purchases that range from decorations to paper clips.

Desk Fees
The payment agreement between a realtor and his or her broker is deductible. Keep in mind that either the desk fee or the home office fee can be deducted, not both.

Legal or Professional Services
Realtors can deduct any professional service that they hire to make their lives easier, whether it be a law firm, marketing agency, or an accounting firm.

Philadelphia Wage Tax Reduced Beginning July 1

The City of Philadelphia will reduce its Wage Tax rate starting July 1, 2018. The rate change has an immediate impact on all businesses that operate in the city, or that hire Philadelphia residents. The new rates are:

  • 3.8809% (.038809) for residents of Philadelphia
  • 3.4567% (.034567) for non-residents

All paychecks issued by businesses with a pay date after June 30, 2018 must have Philadelphia City Wage Tax withheld at the new rates.

Likewise, the City has lowered its Earnings Tax rate starting to July 1, 2018. The new Earnings Tax rates are 3.8809% (.038809) for residents and 3.4567% (.034567) for non-residents.

The Earnings Tax is essentially the same as the Wage Tax. The main difference is how the tax is collected and paid to the City of Philadelphia. The Wage Tax is collected from an employee’s paycheck and paid to the City by an employer. When your employer does not collect the Wage Tax on your behalf, you pay Earnings Tax directly to the City.

Philadelphia’s Net Profits Tax (NPT) and School Income Tax (SIT), which mirror the Wage Tax, will also decrease.  For Tax Year 2018, the new NPT rates are 3.8809% (.038809) for residents and 3.4567% (.034567) for non-residents. For Tax Year 2018, the new SIT rate for residents is 3.8809% (.038809). Only residents of Philadelphia are liable for SIT.

Supreme Court Decides Further Taxing on Internet Sales

Last week in Wayfair vs. South Dakota, the Supreme Court decided that states may charge sales tax to online retailers, even if they do not have a physical presence in that state. This 5-4 decision reverses the decision made in 1992 in the Quill Corp vs. North Dakota case.

This new tax system will affect online retailers, consumers, and local businesses. Online retailers have changed the way American people shop, as e-commerce has become a huge part of the nation’s economy. By previously avoiding tax, consumers were drawn to purchasing goods online. The Supreme Court decision may now persuade consumers to make purchases in a physical store since the sales tax rate will be the same for online and other purchases.

Larger retailers like Amazon and Wayfair will be impacted more so than smaller, online retailers like Etsy. The ruling gives local businesses a chance to make a comeback against online moguls. Consumers just need to be mindful that they will have to start paying slightly more for their convenient online purchases.