4 Ways You Are Overpaying on Your Taxes, Part Three: Taking Numbers at Face Value
Welcome to part three of our four-part series: Four Ways You Are Paying Too Much in Business Taxes. Over the past couple of weeks, we have discussed some of the common mistakes that photographers make when filing their taxes and what you can do to avoid making them. Visit our blog to catch up on part one and two of the series.
Four Ways You Are Paying Too Much in Business Taxes
At times, professional photographers might feel like they are bleeding money. The rent goes up. That annual conference you attend is on the horizon. Your employees need a raise. The list goes on and on. Of course, increasing revenue is a good way to help with cash flow, but we are also happy when we discover ways that we can save money as well. What I’ve found in working with scores of photographers is that many are overpaying their taxes and not taking advantage of deductions to reduce their tax burden. We previously discussed how charitable donations and mileage can affect your taxes. Today, we will take a look at your numbers.
Does Your preparer just take your numbers at face value?
If you're not reconciling your bank accounts and your credit cards, there's a good chance you're overpaying on your taxes. Even if you are, you still might be overpaying. We recently had a new client who actually did reconcile his accounts but didn't do it the right way. He reconciled every month to get to that nice zero difference, but there were all these old uncleared transactions. As it turned out, he had doubled up on a lot of his income, which is a really common problem. He had reported $20,000 too much in income, which means he paid about $7,000 too much in tax. We identified it as we went through his books, and we are going to amend his return for last year to get that $7,000 back.
If he had stuck with his previous preparer, who didn’t ask the right questions, this would be lost money. She just took the numbers he gave her and used those numbers to prepare his returns. Yes, she charged less than we do, but he was clearly getting what he paid for. Tax preparation based solely and unquestionably on the numbers you provide is common, but it's not how we do it. We ask questions about your charitable contributions to see if they might really be advertising. We ask more questions about your mileage. We ask a lot of other things too!
Want to know more? We would love to talk with you!
Already have a CPA? Here is how we are different.
We're a niche firm, and we operate differently. We only work with photographers, and because of that, we take a different approach to everything we do, including how we prepare tax returns. If you are a photographer and you're tired of getting consumer grade advice and tax preparation instead of photographer grade accounting help, we would love to talk to you.