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tax advice

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  • tax advice

    Based on recent conversations with my partners, I feel like I am paying more taxes than my partners even though pay/deductions are similar.   I currently have a CPA.  What are some options to help me figure out if I am paying too much in taxes?   Can I pay another CPA to look over the last few years of taxes?  Can I buy turbo-tax and run my last few years of taxes to see if it was done correctly?


  • #2
    I believe most people have recall bias and are probably understating/simplifying to some degree.  Some may be telling you the effective federal rate but leaving out self employment taxes.

    I'm sure another CPA would love to make money in an off time of year to review your taxes.  You could also go line by line and just see if everything makes sense to you and starting asking your CPA questions when something is not clear.


    • #3
      Are you doing everything you can to reduce your taxes, including capital gains, etc..?

      If you are comfortable posting some numbers, I'm sure forum members could give you some feedback. If not, you could hire a different CPA as suggested. Make sure you are taking advantage of any tax deferral available.




      • #4
        Yes, you can hire a CPA to give a second opinion of your tax return. Not all CPAs do this and some will provide it for free. Understand that the firms providing the free service have a vested interest in finding problems (which may not be such a bad thing - we do the same ourselves on occasion). However, if you pay for a review, you will (imo) be more likely to receive an independent diagnosis that has useful information you can act upon.

        Just to give you some perspective if and when you are considering this: we provide 2nd opinions for a fee but our minimum is 2 hours at $250/hr. If we find areas that can be improved and you decide to move your business to our firm, you'll probably receive a credit for the amount paid off your first year fee. (Every case is different, of course.) If we can tell at a glance and after a 15-minute conversation that we cannot help, we won't charge. Other firms may have similar policies.

        In other words, you should be prepared to pay for good advice. You may learn that your current firm is doing a fantastic job, in which case you are paying for peace of mind. Or you may find that you are potentially losing tax advantages or risking an audit because your CPA is playing hard and looze with tax code.

        With all due respect to POF (for whom I have huge respect), it is almost impossible to find out if you are "doing everything you can to reduce your taxes". The best you can do is to get an unbiased opinion from a CPA/EA who has years of experience in handling similar situations as yours and then to develop a long-term relationship with the firm. The advice you will receive from various tax professionals is extremely subjective and you must place your trust in a complete stranger in most cases. (It's what we laymen do when trying to find the best doctor! :-) ) Do your due diligence, get referrals, and go into the appointment with a healthy dose of skepticism. I believe WCI is going to post a guest column sometime in October that I have submitted on how to find a good CPA.
        Our passion is protecting clients and others from predatory and ignorant advisors. Fox & Co CPAs, Fox & Co Wealth Mgmt. 270-247-6087


        • #5
          I know I am paying more than some of my partners... I pay what I actually owe (I say this as someone who believes very strongly that you shouldn't pay a penny more than you owe).

          There may be wisdom in getting a second opinion for peace of mind, you may even save a few dollars.

          If you explore what others are doing to pay less taxes you may find that you are not comfortable adopting a similar "strategy" (or that you would be embarrassed if you children ever found out that you did the same thing).  The same way doctors are suckers for bad investments... doctors are suckers for people promising them a smaller tax bill.

          Saving a few dollars of tax is not worth doing anything that would jeopardize your freedom or your good name.