Knowledgeable accountant often means huge savings
http://www.bad-credit-advisor.com/2007/06/knowledgeable-accountant-often-means-huge-savings.html
If you are self employed and making substantial amount of money, over $200,000 a year, selecting a sharp, knowledgeable and experienced accountant can make a huge difference. Sometimes tens of thousands of hard earned $$$ will stay in your bank account, instead of going to United States and State treasuries. Among several self-employed clients I have worked over the years, there are two software engineers, both very successful in their profession, and as real estate investors. Having the privilege of working with them on the mortgage end of investing, I couldn't help noticing year after year, the large discrepancy in their respective bottom lines. One has been consistently paying more in income tax, anywhere from $12,000 to $17,000 more each year for the last 6 years. The funny things are how similar are their gross incomes, number of dependants, and other tax related things, but the fellow who is paying less in income tax, pays smaller mortgage interest, his real estate taxes are smaller as well, and he gives much less in charitable, tax deductible donations than the other one. So on the paper he should have and be paying more, yet the opposite is the case.
Curious as someone who used to do his own taxes a long time ago, but for at least 8 years, and just by hand, without Turbo Tax, Quicken and such, I asked the one who pays more to Uncle Sam, what is wrong with his accountant. He said, nothing is wrong, he is the CPA and a very diligent type, He lamented however, that he has been getting more expensive every year. When I ask him what exactly he means by "more expensive", I got the answer I expected, but still couldn't believe - last year I paid $650 for my end-of-the-year tax preparation, plus $100 each quarter, this year it will be $675 and $125 respectively. At this point I ask him if he ever tried to talk to this accountant, why he pays in taxes what he pays each year, after year. Has he ever tried someone else? No he said, this guy is too cautious, but he knows what he is doing, and as much as he hates paying so much, he is very reluctant to leave. Yes, he heard others paying less with comparable incomes, but ... he is staying.
So here we have the classic example of Rich Mentality with Poor Mentality. A very smart, intelligent person is upset that his CPA will cost him $125 more per year, but will not leave for another accountant in spite of overpaying tens of thousands of $$$ over just few years ..., because of what? Fear, inconvenience of switching, lack of common sense? I looked briefly at some of the deductions and told him, that he should ask his CPA if there is a room for more tax write-offs, within the legal limits, of course. I told him that he needs to talk to others. Well, why do I care, he doesn't pay me for this advice.
So if you are self employed, look around a bit. Talk to other accountants, and ask some intelligent questions. See what you are paying and why, in taxes. Have him or her explain you the little things that count quite big in the bottom line. Don't blindly trust your accountant. Learn the basics, it will empower you tremendously. And the last thing, many CPAs today have law degrees, and are very knowledgeable of how IRS works. While I am not trying to say you should be like those wise guys in John Grisham's The Firm, it helps a lot to have a CPA /lawyer as your accountant.
And if you work on W2, and only deduct you mortgage, real estate taxes, dependants, few other things, you shouldn't be paying more $120 for the year-end tax preparation. And the best thing to try is to do it yourself once. That can be quite an eye opener for some.
About Author
Tony runs Bad Credit Advisor. He is professional mortgage broker.
Source: ArticleTrader.com
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