Author: Donohoo Accounting Services

What To Bring To Your Accountant When You File Taxes

Although it’s technically possible to file your own tax return by using software, this can leave you exposed to a wide range of issues. If you want to ensure that everything with your tax return is handled by an experienced professional, working with a reputable accountant is an investment that should always pay off by unlocking extra savings and helping you avoid mistakes.

If you’re planning on enlisting an accountant’s help this year and are wondering what to expect during your appointment, here are some helpful tips on what to bring to your accountant when you file taxes:

Social Security Cards

The accountant you work with will want to verify your identity prior to submitting your filing. And if you are claiming any dependents, it’s a good idea to bring their card along as well. Although social security numbers seem like an easy enough thing to manage, SSN mistakes result in 100,000s of tax returns being sent back by the IRS every year. Since that’s guaranteed to increase how long it takes to get your refund, bring along your cards so your accountant will be able to double check the accuracy of these numbers.

Last Year’s Tax Return

Even if your financial situation has changed quite a bit over the last year, it’s still helpful for an accountant to have your previous year’s return as a reference point. This will allow the professional you work with to identify which deductions and credits you previously claimed, then quickly see if you’re eligible for them again.

W-2 and Any Other Income Forms

If you work as a traditional employee at a company, your employer should have already provided you with a W-2 form this year. This document has a lot of important information your accountant will need, so be sure to bring it along. For freelancers, the most common form to receive is a 1099-Misc. And if you have any investments or other activities that produced income, you’ll want to bring all of those forms along for the accountant to review.

Expense Documentation

Did you make some charitable donations over the course of last year? Maybe you do some selling online and drove around a lot to source inventory. Regardless of the specific donation or expense, an accountant is going to want to see documentation before claiming it for you. While it may take some time for you to get organized prior to your appointment, it will be well worth the effort.

If you’re ready to file your tax return and want to work with a great Cincinnati accountant, Donohoo Accounting Services is here to help. Call us today at (513) 528-3982 to schedule an appointment.

How to Save for College

College is an important topic of conversation for many families. While there are lots of exciting things to talk about related to college, there are also some very stressful ones. Money is probably the most stressful. Given how common significant student loan debt has become, paying for an education can seem like a very big obstacle.

 

For many years, getting a college degree seemed like a reliable way to land a great job and get ahead in life. But because plenty of parents are still trying to pay off their own student loan debt, the path no longer seems as clear. Due to this disillusionment, plenty of families get overwhelmed and have no idea where to start as far as saving goes. That’s why only about one-third of low-income and middle-income families are saving at all for college.

 

If you agree that this topic is stressful but want to figure out how to save for your child’s college education, we want to cover the three best options to make that happen this year:

 

  1. 529 College Plan

 

The state of Ohio offers a 529 college savings plan. This plan can also be referred to as a Qualified Tuition Program (QTP). The way a 529 plan works is you invest after-tax money into it. Then when your child reaches college, money can be withdrawn tax-free for qualified expenses like books or tuition. The tax-free status includes gains made by the plan. One of the great things about this plan is you can contribute quite a bit to it each year.

 

  1. Roth IRA

 

When most people think of a Roth IRA, they think of it as a retirement account with a favorable tax status. What isn’t as well known is that this account can be used for college as well. As long as funds have been in the account for at least five years, they can be withdrawn for qualified college expenses without triggering any tax penalties. The biggest appeal of this account is the flexibility to pay for both college and retirement expenses.

 

  1. Coverdell Education Savings Account

 

This option has a lot of similarities to a 529 plan. That includes being viewed as your asset, so it won’t hurt your child’s odds of receiving financial aid. But as you probably guessed, there are some important differences as well.

 

The biggest difference this option provides is it’s not limited to college expenses. Instead, it can be used for any educational expenses ranging from kindergarten through 12th grade and beyond. A common example is private school tuition. The main limitation is how much you can contribute each year.

 

If you’re interested in speaking with a tax planning professional about the best ways to start saving for your child’s college education, get a free consultation by calling Donohoo Accounting at 513-528-3982.

The 5 Smartest Options for Using Your Tax Refund

Many people treat their tax refund like a bonus they weren’t expecting. Others act as if they randomly hit a small lottery jackpot. These attitudes result in people spending their refunds almost as quickly as they get them. Although it may not seem like that big of a deal, a tax refund of any size can be a great opportunity to make real progress with different financial goals.

 

If you want to use your tax refund in a way that will continue benefiting you instead of quickly fading away, here are the five best options:

 

  1. Knock Out High-Interest Debt

 

Debt like credit cards, payday loans or other high interest loans makes it nearly impossible to get ahead financially. Using your refund to reduce or eliminate these types of debts can take a major strain off your finances. If you’re free of those forms of debt, you can also look at putting some of your refund towards paying down student, car or home improvement loans, as well as a second mortgage if you have one.

 

  1. Start or Build Up an Emergency Fund

 

Although personal finance experts may differ on some topics, one issue that’s pretty universal is the importance of having an emergency fund. This fund can keep you on track even if something comes up out of the blue. One thing to keep in mind is you want your emergency funds to be accessible, so don’t worry if the interest you earn on this specific amount is minimal.

 

  1. Pay Down Your Mortgage

 

When you look at average families across the US, what they pay in mortgage interest is often their second biggest lifelong expense. It’s not uncommon for interest to add up to 3/4 of the principal amount of a mortgage. Given that huge expense, paying down your mortgage sooner is very smart. Using a lump sum like your tax refund will definitely make a big difference over the long-term.

 

  1. Get a Jump on Reducing the Taxes You’ll Owe

 

Give yourself a pat on the back if you’ve taken care of the first three options prior to receiving your refund. Since you’re in a position to be a little more strategic, really good options include taking steps like increasing IRA or 401k contributions to minimize your tax burden next year.

 

  1. Improve the Value of Your Home

 

Just like what we discussed above, being financially healthy provides a lot of freedom in regards to making good use of your tax refund. A great area to consider is using what you get to make improvements that will add value to your home.

 

If you want professional help doing your taxes this year, call us today at 513-528-3982

The Small Business Guide to the Updated Revenue Recognition Standards

On December 15th of last year, new revenue recognition accounting standards went into effect for public companies. On December 15th of this year, non-public entities with fiscal years beginning after this date will be subject to these updated revenue recognition standards as well. Since these standards are considered to be the largest shift accounting has seen in recent years, we want to go over exactly what they are, as well as what they mean for small businesses.

Understanding the Updated Revenue Recognition Standards

The new standard requires companies to recognize revenue when transferring goods or services to customers in an amount to which the company expects to be entitled. Given the complexity of that statement, it’s helpful to think in terms of a five-step process. Those steps are identifying the contract, spelling outperformance obligations, determining the transaction price, allocating the transaction price and recognizing revenue by performance obligation.

Given the challenges that have always been associated with accounting for revenue, it’s not surprising that many businesses have found that in addition to needing to modify existing financial reporting systems, these changes are being felt beyond the accounting department and affecting things like debt covenants, contracts, taxes, IT and sales departments.

How These Updated Standards Will Affect Small Businesses

All companies that report using U.S. GAAP are required to adapt to the new standard. Non-public companies typically have a choice of using GAAP or another reporting method. A recent survey shows that 78% of larger businesses have at least started to analyze the impact of the new standards, but many have not completed the assessment or taken steps toward implementation.

As far as adopting the standards for your own business, there are a few things to keep in mind. The first is choosing a transition method. Your business can opt to use either a full retrospective transition method or a modified retrospective transition method under the new standard. You’ll also want to take a look at the projected implementation costs for this entire process.

Finally, if your business needs expert help dealing with these updated revenue recognition standards or any other aspects of your accounting, Donohoo Accounting Services can help. We have over 20 years of experience helping clients handle a wide variety of financial challenges. Get a free consultation by contacting us online or by calling 513-528-3982.