Things You Should Know About Tax Preparation

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Tax preparation can be a hectic process, especially if you or your business is set up in New York, as the laws over here keep altering every now and then, which makes it difficult to keep track all by yourself and may take a significant amount of your time. All of us want to maximize our tax savings and avoid unnecessary penalties, so accountant in Clifton Park, NY, are recommended to ensure an efficient tax preparation process and outcome. 

For new startup founders, it can be a bit confusing to differentiate between tax preparation and planning, but if they understand the difference, they can reduce their tax liability this year as well as their overall tax burden for years to come. 

Differences between tax preparation and planning:

The primary differentiating factors between these two are the purpose of the service and when it is performed.

  • Tax preparation happens once a year after the financial year is closed. Its primary purpose is essentially to file the necessary forms during tax season in order to comply with federal and state laws.
  • Tax planning, on the other hand, has the purpose of maximizing your tax savings, which includes minimizing penalties. Tax planning is essentially a year-round process, in contrast with tax preparation, which only occurs at the end of the financial year. The process itself takes into account your past tax filings, your current financial situation, your future financial goals, and your year-round activity. It is more of a long-term process.

Difference between Tax Preparers and CPAs

Let us acknowledge that not all tax return preparers are CPAs, and not every CPA can be a tax return preparer or expert at that.

It all essentially comes down to the financial requirements or needs of your business. CPAs are licensed professionals who possess expertise in several accounting services, whereas tax preparers do not possess a license, and their only area of expertise lies in tax preparation.

Why you need to hire a professional for the tax preparation process

There are several key reasons why you should hire a professional. It includes, but is not limited to:

As we know, tax preparation can be time-consuming, and most people do not have enough time for that. In such cases, hiring a tax preparer is a rational decision as they can save you plenty of time.

Letting a professional handle your tax preparation provides you with peace of mind.

At times, the process gets complicated, and you may require a tax preparer to handle those situations.

They possess technical knowledge, which may save you from making costly mistakes.

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