Why Isn’t There a Hug Your CPA Day?

Some surprises bring great joy – a call from an old friend, a door opened, or an unsolicited “You’re awesome!” But walking into your CPA’s office and saying “Oh, one more thing… Did I tell you about something that happened last year?” is likely to test her or his humor. Two types of CPAs are historians and advisors. The first might say “Yes, you’re hemorrhaging. Here’s your tax bill.” The other offers “Here are some ways to stop the bleeding.”

Use the conversations now as you work on your 2016 tax preparation and get a jump on the year ahead. It benefits both – you may save money, make more money and reduce surprises; and your CPA is engaged, informed and can better employ his or her talents.


Getting organized saves you money. Where do you prefer to have your accountant’s billable time being applied… sorting through a shoe box of receipts and invoices, or confirming your neatly compiled financial information and helping you pay the least amount of taxes legally required? Tax organizers provided by your CPA or enrolled agent are provided for a purpose. And there’s a broad range of tools for organizing – including filing systems (online receipt apps like Expensify and Shoeboxed or organizers like Evernote) and accounting software (QuickBooks, FreshBooks, Zoho, Xero, AccountEdge, Outright.com, etc.).

Compare your information. Ideally, you’re reporting roughly what you forecasted at the beginning of the year. Does it look reasonable? Did you forget something for 2016 you reported in 2015 (e.g. bank account 1099, retirement payment, or charity)? Did you do something different in 2016 (e.g. dog walking business, medical event, new vehicle)?

Patience. Waiting for 1099’s or K-1’s? Should you wait for corrected 1099’s from investment accounts (anxious early tax filers face the possibility of filing amended returns and/or additional tax preparation fees)? And mistakes can happen when you rush.

Common “surprise” areas

Social Security retirement benefits may be taxable – Despite your payment of FICA taxes, a portion of your retirement benefits may be taxable depending on your income. If provisional income (AGI before SS + muni bond income + half of SS) exceeds $32,000 (married, $25,000 if single), then 50% or 85% may be taxable.

A bumper income year for retirees may result in higher Medicare premiums the following year. Part B premiums are based on your modified adjusted gross income, and Part D may have an income adjustment. B premiums generally range $134 to $429 a month, so heads up in case you have a significant gain from selling an asset sale, redeemed an annuity or Series E bonds, etc.

Significant event you didn’t communicate to your CPA. Examples of tax version of “Ripley’s Believe it or Not” are abundant and often result in missed opportunities. These include sales of property; family, job or business change; employee benefit (e.g. stock options), or a tax law change to name a few.

Get a jump on 2017

Update savings and spending plans. Modify withholding and estimated taxes accordingly. Retirement contribution limits remain generally the same as 2016 – IRAs and Roth $5,500, 401k deferrals $18,000, SIMPLE $12,500. However, you may be eligible to make “catch up” contributions that up your limits to $6,500, $24,000 and $15,500, respectively (note: defined contribution plan limit jumps from $54,000 to $60,000).

Plan for 2017 transactions. Is a business acquisition, relocation, or significant life event is on the chalk board, and have you circled at the fire with your advisors? What are the planning opportunities?

Tax reform issues were abundant this past election cycle from Federal down to local levels. Pay attention and be flexible in your planning.

And finally, bring a smile and a cup of cheer to your tax accountant. They’re the ones wrestling with 74,000 pages of the Tax Code and hopefully keeping you from harm’s way. You’re just writing the check.

About Brian Loy

Brian Loy writes insightful and inspiring articles about the ever-changing world of personal finance and the global trends that affect the risk and return on investments and shape the financial- and retirement-planning process.
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