Tax Day is months away, but local accounting firms are already preparing their clients’ tax returns.
For simple returns, “it’s not a problem for people to do it themselves,” Ron Baumann, founder of Baumann & Company in Picayune, said.
However, as taxpayers prepare for retirement, it’s a good idea to consult with a certified public accountant or financial advisor, Baumann said.
When hiring a CPA, Baumann said taxpayers should know who they are dealing with.
Tax returns require a lot of personal information, Baumann said, so hiring someone with a reputation of confidentiality and due diligence is critical.
Though Mississippi residents won’t see many changes in tax codes this year, laws are always changing, Baumann said.
“It’s not what you know, it’s what you know you don’t know,” he said.
For that reason, depending on the complexity of a financial portfolio, a CPA can act as a gatekeeper, Baumann said.
“We do more than just tax returns,” he said.
Oftentimes, he will advise clients when they need to seek the help of an attorney or talk to their bank, he said.
As a year-round service, Baumann said the longer clients stay with a company, the more the CPA can learn the customer’s financial habits and help them plan for the future.
“You’re creating that relationship,” Baumann said.
This relationship enables him to pick up on documents or accounts that were initially left out when he started preparing a tax return.
“People underestimate the importance of preparing tax returns in many respects,” he said.
One of the most common reactions Baumann hears concerns where taxpayers fall into tax brackets, he said.
Some may assume they fall into an average income category when they are actually much higher on the spectrum, Baumann said.
These realizations help on a broad scope, for financial planning, political purposes and guiding them toward retirement, he said.
Establishing a relationship with a CPA or financial planner before retirement can ensure there will be enough savings to reach retirement goals, Baumann said.
He said he often experiences the “unfortunate situation” of telling clients they can’t afford to pursue their after-retirement dreams because they didn’t save enough.
Another common mistake is failing to keep track of finances during the year, Baumann said.
That can result in a loss of deductions, which can be critical for small business owners, he said.
Yet, Baumann said hiring a CPA is a personal choice, depending on the range of a customer’s finances.
“The additional cost is probably not warranted for someone with just a W-2,” he said.
Regardless of whether taxpayers file with a financial firm or through online software, everyone should take a serious look at their yearly report, Baumann said.
Assets, small or large accounts and expenditures should be looked at every year to maintain good financial health, he said.
Should a client ever get an audit notice from the Internal Revenue Service, Baumann said he could represent them over the phone, as well as provide advice about potential scams attempting to gain personal information under the guise of a federal or state agency.