Top 4 Reasons People Look for a CPA

The deadline to file your taxes is fast approaching, and you might be thinking that this year you should work with a CPA instead of filing on your own. Maybe you worry that you’re missing important details or potential write-offs. Maybe you’ve had a change in personal or business finances and your taxes are getting too complicated. Or maybe you just want help from someone you trust so you don’t have to deal with the stress.

So how do you decide if hiring a CPA is the right move this year? 

Here are 4 common situations where you’d benefit from working with a CPA.

1. You’re spending too much time on taxes

How much is your time worth? 

Try to estimate how much an hour of your time is worth, then think back to how many hours you spent preparing your taxes last year. This will give you a good sense of how much it actually “cost” you to file your taxes. Now you can make a more informed decision about whether it’s worth it to partner with a professional on your tax prep and filing. 

This is particularly applicable if you’re self-employed or own a small business. Your time might be better spent on business development, building relationships, or billable hours. 

2. You’re worried that you’re not getting it right

Tax laws are complex and they change frequently. This makes it challenging to keep up with them on your own. 

There are two sides to this scenario:

• You worry about getting audited
• You worry that you’re missing deductions and paying more taxes than you need to

Either way, it might be wise to work with a CPA. 

A CPA can organize and prepare your taxes to minimize your audit risk. This isn’t a guarantee that you won’t get audited, but you’ll be better prepared if you do.

Also, a CPA will make sure you take advantage of all the tax benefits, credits, and deductions available to you. You might even learn about changes you can make for the next year to put yourself in a better tax situation.

3. Taxes cause household tension

Filing taxes can be a stressful and complicated undertaking. Finances can cause a lot of tension in a relationship. And if you’re married, filing joint taxes can exacerbate this tension. 

You and your spouse might decide it’s worth the investment to work with a CPA who can guide you through the process and help you get a clear picture of your financial and tax situation. By learning about your tax situation, exploring your financial options with an expert, and becoming more comfortable with your finances, you can improve your financial conversations, plan better for the future, and reduce financial tension.

4. Your tax situation has become more complex

There are many things that can impact your tax situation and make it more complex from year to year. Purchasing a home or rental property, starting a business, a change in your employment, or inheritances can all have significant effects on your taxes. 

These major life changes can make filing your taxes more challenging, especially when the changes are new and you’re still adjusting to the impact they have on your finances and taxes. 

Complex tax returns usually involve one of these situations: 

• Rental income and expenses
• Self-employment income and expenses
• Income from multiple states
• Real estate purchase or changes
• Estate and trust considerations

In these scenarios, partnering with a CPA can help you explore all possible deductions and tax credits, ensure that you’re not missing any important details, and offer confidence that you’re correctly filing your taxes. 

Rethinking the Year-End Bonus

We’re coming up on the holiday season and the end of the calendar year. For many businesses, large and small, that means it’s time to get those holiday bonus checks ready. And many employees have already started dreaming of the ways they’ll spend the money they’ve grown to expect, year after year.

But some have started to question the wisdom of handing out annual year-end bonuses. It’s true that employees enjoy the extra money in their pocket and the bonus handout will temporarily lift morale. But studies have shown time and again that purely monetary incentives fail to provide long-term motivation. And when employees come to expect a large bonus every year, at some point the payout starts to be seen as part of their compensation, rather than a thank you or reward for a job well done. Additionally, if you business has a down year and you can’t afford to give out bonuses, your employees will feel cheated. 

With all that in mind, you might be wondering how you can reward employees if you’re not going to give an annual bonus. Here are some ideas.

Base bonuses on direct performance

One of the biggest demotivators for top-performing employees is seeing everyone receive the exact same compensation or reward, year after year, regardless of performance. This pattern demonstrates to your employees that their individual contributions aren’t noticed or valued, and your best employees will quickly learn that it doesn’t pay to go the extra mile, make full use of their abilities, or contribute their best ideas. They’ll inevitably follow one of two paths:

• They’ll become mediocre employees themselves
• They’ll go somewhere that does appreciate the value they bring

The year-end bonus can easily fall into this trap of overly-equitable compensation. One way to handle this is to tie bonuses to performance. Establishing a performance review plan should be your first priority.

By basing bonuses on performance, you’ll motivate your employees to fully utilize their skills and work to become valuable contributors for your business. 

Reward your employees throughout the year

A bonus or reward will be much more meaningful to the employee and have a better long-term impact on your business if it’s tied to a tangible achievement or success, and when it’s given at the time of the achievement. 

One of the most motivational things you can do for your employees is letting them know their work is making a difference. So you could consider setting up a bonus program based on well-defined metrics that are tied to your business objectives, and reward your employees throughout the year when they do something (individually or as a team) to meet those metrics and advance your business. The reward could be bonus checks, lunch or dinner celebrations, vacations, or anything that makes sense for your business.

Find a reward that isn’t a check

That brings us to another idea for year-end bonuses. It’s become the norm that the year-end bonus is cold hard cash. And who doesn’t love money? 

But there are many ways to reward employees, or give gifts to employees, that aren’t monetary. These gifts can be meaningful expressions of gratitude and can be great alternatives when your business doesn’t have a lot of money in the savings account to give out at the end of the year. 

Consider offering employees extra vacation days, surprise days off during the holiday season, trips as incentives for meeting goals, or fun events throughout the year (like employee barbeques). And around the holidays, even a bottle of wine and a note from the owner can go a long ways towards making employees feel appreciated.

Consider bonuses that don’t cost anything

The reality of business is there will be up years and there will be down years. There will be years when your business can’t afford to give out monetary bonuses at the end of the year (or at any point throughout the year). 

How can you show your employees that you value them? 

There are many ways to reward your employees that don’t cost a cent. One large software company lets their salespeople work from home one day a week when they meet their sales goals. 

This demonstrates one of the best bonuses you can offer your employees—flexibility. Your employees are real people with a lot going on in their lives. Rewarding them with opportunities to work from home on certain days can be a huge gift that goes a long way towards making them feel valued. 

Everyone has times of the day when they feel energized and times when they feel drained. Letting your employees work flexible hours so they can make maximum use of those high-energy times will boost productivity and make your employees feel trusted. 

Different people work better in different environments. Having flexible work spaces will help your employees feel comfortable in their workplace (where they spend a lot of their time). Things like windows that can be opened, standing or moveable workstations, and opportunities to express personality will allow your employees to create a space where they want to be. 

These are just some ideas to reward your employees in ways that will motivate them and show them you value their contributions. That said, if your business has had a great year, it’s highly likely that your employees are a big part of your success. So don’t be afraid to give them that holiday bonus to celebrate. Or if you’re selling your business, you may want to share the profit with the people who helped you build it (your employees). 

Just remember, especially during this time of year, that the year-end bonus check isn’t your only option.

Can I Write Off My New Car?

This time of year, we get a lot of questions about tax deductions for vehicle purchases. Can I write off my new car? The full amount? Does it make sense to purchase a vehicle now before the end of the year? 

Like any areas of tax law, vehicle write offs can unfortunately be a little complex. Here, we'll provide a quick run through to explain when new vehicles qualify for deductions and how much you can expect to expense. 

When I can deduct my new vehicle as a business expense?

You can deduct your vehicle (or part of your vehicle) as a business expense if it’s used mostly for your business. Seems pretty simple, but exactly how much you can write off varies depending on the type of vehicle and its use. So let’s dig a little deeper.

How much I can deduct?

If you purchase a business vehicle that by its nature is not suited for personal travel (ambulance, hearse, cargo vehicles without seats, taxis, vehicles with seats for over nine passengers), you can generally write off the whole thing. This doesn’t mean you can purchase a hearse, claim the full expense, and then use it as your personal vehicle. Personal use will still trump the kind of vehicle you purchase.

If you have a passenger vehicle (car, truck, van) and use it for business purposes more than 50% of the time, you’re able to claim a portion of your expenses the year it was purchased and made available for use.

• Cars - up to $3,160 for regular depreciation
• Trucks and vans - up to $3,460 for regular depreciation

Under Section 179 of the tax law, there’s a specific depreciation break for certain passenger vehicles with a gross weight between 6,000 and 14,000 lbs. If these vehicles are financed and meet proper conditions, you can qualify for expensing up to $25,000 the first year. Regular depreciation can also be taken depending on the cost of the vehicle. 

Here’s a list of vehicles that qualify under Section 179, although this list is not exhaustive:

• Audi: Q7 TDI
• BMW: X5, X6
• Buick: Enclave
• Cadillac: Escalade
• Chevy: Silverado, Suburban, Tahoe, and Traverse
• Dodge: Durango and Ram pickup
• Ford: Expedition, Explorer, all F-Series pickups, Transit vans
• GMC: Acadia, Yukon, all Sierra pickups 
• Infiniti: QX56
• Jeep: Grand Cherokee
• Land Rover: LR4, HSE, Sport
• Lincoln: MKT, Navigator
• Mercedes: GL 350 diesel, ML350, R350
• Nissan: Armada NV, Pathfinder 4-wheel drive, Titan
• VW: Touareg hybrid

In past years, there’s been an opportunity for additional deductions through bonus depreciation. Bonus depreciation for 2015 is not yet available, but this could change before the end of the year.

Here’s a look at last year’s numbers, which included bonus depreciation:

• Cars - additional $8,000 bonus depreciation (for a max of $11,160 in deductions) 
• Trucks and vans not qualifying for section 179 - additional $8,000 bonus depreciation (for a max of $11,460 in deductions) 
• Vehicles qualifying for Section 179 - additional bonus deprecation for up to half of the remaining cost of the car (up to $8,000), plus regular depreciation
  
  For example: The first year depreciation for a Nissan Armada costing $40,000 could be like this:
  • $25,000 per Section 179
  • Plus bonus deprecation of half of the remaining amount, not to exceed $8,000. 
    • $40,000 less $25,000 = $15,000 remaining
    • Half of $15,000 = $7,500 bonus depreciation
    • $25,000 plus $7,500 = $32,500 total
  • Plus $1,500 for regular depreciation. 
    • Totaling $34,000

(Please remember that as of this writing bonus deprecation is not available for 2015.) 

If your vehicle is used for business 100% of the time, you can likely claim maximum deduction figures. But if only 75% of its use is for business, your deduction will decrease by the appropriate percentage. 

For example, if you purchased a new car in 2014 and used it for business 75% of the time, you were were able to take $2,370 in standard deductions regular deprecation (3,160 x 75%) and $6,000 in bonus depreciation ($8,000 x 75%) for a total of $8,370 in deductions. 

These were the basic figures for first-year depreciation on new vehicles in 2014, and, again, the decision on 2015 bonus depreciation will be made within the coming months. 

If you have specific questions, talk to a qualified tax professional. There might be nuances to your finances that affect the numbers we’ve crunched here. Our team is available to listen to your questions and help explain your tax situation so it’s easier to understand.