Frequently Asked Questions About Accounting And Accountants
Did you know that accounting is essential to keep your finances in order and ensure you meet your legal obligations and personal goals? However, as many people are unaware of how to maintain their accounts correctly, they struggle with these aspects. If you’re all too familiar with this struggle, there are a ton of questions you may have with no answers to help you out. To arm you with the most accurate information available on accounting, so you can take the right steps when managing your financial information and obligations, Numbers Up, LLC has answered some of the most frequently asked questions about accounting and accountants.
1. Should I use an accounting firm?
The answer to this question largely depends on your needs. If you are a small business owner or entrepreneur, an accounting firm can help you focus on growing your business without worrying about the integrity of your financial records. You’re likely to save time and money by working with an accounting firm instead of wading through complex financial regulations and tax codes on your own.
If you’re an individual who needs help with your taxes, you should ask yourself a couple of questions to help you decide whether or not to use an accounting firm. Some of the questions you can ask yourself are:
a. Am I confident enough in my own ability to complete my returns without making potentially costly errors?
b. Do I have adequate knowledge about tax policies to file my tax returns on my own?
c. Do I want to spend valuable time dealing with my taxes?
If you answered “no,” to these questions, you might want to consider using a tax firm to help you complete your taxes in a stress-free and timely fashion.
2. What is the difference between a CPA and an accountant?
All CPAs (chartered professional accountants) are accountants, but not all accountants are CPAs. Accountants monitor the finances of an individual or a business, issue financial statements, and keep records.
The CPA title demonstrates that the accountant in question has sufficient education and experiences and has passed their Uniform CPA Exam. CPAs are also regulated by the state and have to complete continuing education to keep up with changing accounting trends and developments.
3. I made a mistake on my tax return. What should I do?
Communication is key in resolving tax issues. As a result, you’ll need to review any notification documentation thoroughly and follow up. If you miss the required information, it’s likely that the IRS (Internal Revenue Service) will contact you to request the specific piece of information and indicate the necessary action.
If you made a mistake in your calculations, many small mathematical errors would be discovered as the IRS processes the return. It’s unlikely that you will have to correct inaccuracies of a small caliber. Many times the IRS will simply notify you of the difference and amount due or amount being refunded.
On the other hand, if you missed reporting some of your income or if you forgot to claim a credit or deduction, you will need to file an amended tax return using a 1040X Form. These forms can be found on the IRS website. If you have further questions or concerns about an error on your tax return, or if you need help filing an amended tax return, feel free to contact us at Numbers UP, LLC.
4. How long should I keep my financial records?
The IRS has several different guidelines for keeping financial information, and this varies depending on whether you are an individual or a business.
For individuals, the general rules are to:
a. Keep your bank statements for at least one year
b. Keep your loan documents, credit card statements, and other contacts until fulfilled
c. Keep your annual investment statements until sold
d. Keep tax your records for seven years from filing date
e. Keep your receipts for large purchases like real estate deeds or vehicle titles for as long as you own the property
f. You can generally discard expired warranties, pay stubs, and canceled checks
For small businesses and entrepreneurs, the general rules are to:
a. Keep all items for at least three years
b. Keep your documents for six years, if you have not yet paid taxes on income that you should report
c. Keep records for three years from the date you filed your original return or 2 years from the date you paid the tax, whichever is later if you file a claim for credit or refund after you file your return.
d. Keep your records for seven years if you file a claim for securities or bad debt deduction
e. Keep all employment records for four years from the date that the tax is paid
5. What do I do if I can’t pay the taxes that I owe?
If you can’t pay the full amount due, you should still file your return and pay what you can by your deadline to avoid interest and penalties. Then you should contact the IRS to discuss payment options. In some cases, the IRS can offer a short-term extension to pay, an installment agreement to make your payments, or waive your penalties. Your tax preparer can help facilitate communications with the IRS, or you can contact them directly.
If you have any more questions about accounting, CPAs, or taxes, get in touch with the experts at Numbers Up, LLC. We are an accounting company in Westerville, OH, and we specialize in providing accounting solutions as a member of your team. We work together with you to take your business to the next level, avoid potential issues, and save you from hassles. We’ve been assisting people with their tax preparation and accounting needs for thirty years. Our efforts have been instrumental in helping businesses reach new heights by providing them with the best solutions for their organizations.