It is inevitable that technology will continue to move forward, giving us access to more information and allowing us to do more things by ourselves than ever before. This will affect everyone, though in many different ways. Personally, my profession has seen a shift with more people preparing their own taxes with the proliferation of do-it-yourself tax software.

Of course, it is both not surprising and a bit self-serving for me to say that I don’t think this is the greatest strategy for people to employ. It may also be a bit hypocritical, for I’m sure there are some (former?) travel agents who would tell me that I do not find the best deals when I book my own trips on the internet. Still, there is a recent story that shows the potential dangers of tackling the tax code alone.

This case concerns an insurance consultant who used software to prepare his returns. The IRS believed he claimed too many deductions. This led to the consultant saying he had evidence to prove some, while blaming his tax software for “luring him” into claiming others.

Now if you are actually interested in the details of the case, feel free to read the linked article from taxadviser.com.  In this space, however, I want to look at it from a larger view.

First, I don’t question that tax software is made by designers with good intentions. They do not want to produce a product that leads to people filing incorrect or fraudulent tax returns, for they would not remain in business long with that tactic.

Also, I think that this software can help many people with simple financial situations quickly and easily file a legal return. If your financial picture is not complicated, there are an easy series of questions that could be asked to fill out the necessary forms and have it be a less painful process than actually reading over the actual IRS forms and instructions by yourself and going at it completely alone.

As this article shows, however, not everyone has such an easy tax picture. And if you are not 100 percent sure on any question the software asks or on any deduction you’re claiming … well … let’s just note that the case in question involved a claim of a net operating loss of $185,673 that the IRS disallowed all but $142 of. That’s the type of mistake that can haunt someone for years. Now I don’t know if there was any willful, or at least optimistic, reading of what the tax software said, but this is not the type of mistake any credible tax preparer would have allowed.

I don’t think that the only danger in tax software is the possible claiming of deductions to which you are not entitled In fact, I think the biggest danger when filing a return is such a manner is that you will miss deductions for which you legally qualify. You see, no matter what questions the computer asks, it cannot understand your situation in the same way as another person, someone who can better understand you as an individual, and not just as some answers on a flowchart.

Either way, allow this to be a cautionary tale, even if self-serving

I know that I am one of the few people out there who actually doesn’t mind (and maybe even enjoys?) looking ahead to the next tax season, but I know that I am not the only person who could benefit from thinking about it.

Just think about how every tax season feels, with that persistent feeling of how much of a pain it is to gather all the necessary paperwork. Now I certainly understand that there are a number of forms you will not have for months, but there are some things that you can start gathering now, you know, before you toss some pertinent receipts in your next cleaning binge. I cannot possibly overemphasize the importance of good recordkeeping. Any tax audit can be a hassle, and most likely comes with some fear, but if you kept good records, retained all necessary documentation, and have your return prepared by someone trustworthy (you know someone like that, don’t you?), then you can simply prove that what you reported is correct, and soon forget that it ever felt like an issue.

Tax issues and audits become real frightening, however, when those things aren’t in order. I mean, you can convince yourself (and any tax software) that you handled everything correctly, but you are not going to be able to convince an IRS agent that your interpretation of the rules trumps the government’s view. Furthermore, even if you did have a correct understanding of how the numbers work, they can be thrown out if you cannot prove where your numbers came from. And if your numbers get thrown out, chances are that it will result in a higher tax bill.

So if you know that you do not have everything ordered in a way that will lessen your stress come tax time, this is the time to start doing so.  If you have a pile of receipts hanging around in an envelope somewhere, start going through them so you know you have the ones you need. Or if you haven’t been keeping them, and you know you should, well you at least still have about four months to start doing so. And if you’re not sure what to keep, keep anything you have a question about. You will always be happy to have saved too much than to have kept too little.

There is then the idea of what to do with the records you are keeping, though. Maybe you are keeping everything you should, but do not have any sort of bookkeeping system in place, and know that things would be easier if you already had concrete numbers to work with at the end of the year. Well, again, there are four months to set that up, which is more than enough time to get a system in place that will remove that stress.

Finally, many people have had changes in life or changes in income that will alter your tax picture. When that happens, it is worth taking the time to be sure you understand what that will mean to your final numbers so that you can plan for it.

All of this comes back to planning and diligence, two areas that we pride ourselves in specializing in. So if you need any help with these, please don’t hesitate to contact us … while there is still time to make it really meaningful.

Do you ever find that as soon as you start thinking about something, you see it everywhere? You know, like how there never seems to be only one shark attack at a time? Well, empirical data says this isn’t true and is just a type of confirmation bias, but it still just happened to me.

It was just last week that I wrote about some cash-flow issues that affect all businesses. In that blog, I said that one reason for that happening was not getting paid on time (or as quickly as would be ideal) by customers. Well, since that time, I also read a recent article on cpapracticeadvisor.com that spoke to that issue.  When this type of coincidence happens, I think it is worth paying attention to, so I wanted to spend this week’s space looking at a few of the things brought up in that article.

The first thing I wanted to point out was how key communicating with customers is when it comes to solving these issues. Sometimes there is going to be a genuine dispute at the heart of why you aren’t getting paid. It is best to handle this as soon as possible if you want to get any of the money owed you. At other times, it may just be being overlooked or forgotten about. Here again, a plan for continued communication will help you get paid.

Something worth pointing out apart from that area, though, is invoicing as soon as work is complete. There is nothing wrong with charging for services or goods that have already been provided, so there is no need to wait on this task. The article also makes a salient point that the sooner you invoice the easier it is for the client to connect it to the job done. From a psychological point of view, it then serves you best to make that request for payment when your project is fresher in the customer’s mind.

It might also be worth thinking about the ways that you allow your customers to pay. Are you only accepting checks that they have to mail to you? Well, that’s going to take longer to get paid by its nature. But if you have some sort of payment portal where they can pay you electronically, be it through ACH, write transfers, electronic check, debit card, credit card … well, the more options provided, the easier it becomes for someone to get you your payment.

Also, if you are in a business that works on larger projects, it could be worth thinking about implementing some sort of installment plan. This may not work for everyone, or be something that ever business wants to do, but it’s possible that getting some amount of money for, let’s say, three months, would be more beneficial to you than waiting the same amount of time for the lump sum. (And of course, it is possible to add a convenience fee onto such an arrangement).

More than these actual nuts-and-bolts pieces when it comes to collecting, though, I would say that there is a more important part to making sure you get paid – the work you do. Providing quality goods and services are the best way to make sure you get your money. Everyone is willing to pay for something we find valuable. 

When it comes to owning a business, how well it is running does not always depend on a year-end profit and loss statement. For even if you finish the year making a profit (and even assuming that you paid yourself what you wanted to be paid), there could have been many difficult times throughout the year, and those are very likely attached to cash flow.

Trust me, I do tax returns, so I fully understand the ebb and flow of how much cash is coming into a business.

I wanted to take this week to go over some issues concerning this subject. Over last tax season, I saw many businesses who were just breaking even, but with some adjustments or a change in mindset, improvements could start to be made.

First, if you are in a business like mine with unavoidable seasonal swings, be aware of this. In that situation, you cannot run your business as if every month is going to be like the best month, and you cannot run your business as if every month is going to be like the worst month. Instead, you must have control enough over your financial numbers to know when and how much you can spend – and in a way that will help your business grow.

A small corollary to this is that cash reserves are necessary. Sure, as a business you probably have access to some sort of credit, but the more you can access your own money that doesn’t require being paid back with interest, the sooner you get back to your starting position.

Although these may feel like smaller moves, being mindful of your receivables and payables can help ease cash flow issues. For the payables, putting off paying a bill can give you a slight cushion. Now I am not saying you should push anything past the due date, for this is likely to lead to other charges and only hurt the totals we are trying to improve. But it is possible that waiting two weeks until the bill’s due date could be beneficial.

On the other side, efforts must be made to see that your customers pay you in a timely manner. You may want to think about instituting some sort of reminder system if you don’t have one, or possibly even attach your own late fees to their bills if payment is not coming in on time. It is also possible to offer incentives for paying early.

Overall, it is likely that no one action is going to be enough to solve serious cash flow issues. And it is impossible to get a firm grasp on it as a whole without looking deeper into the actual numbers of your business. By being proactive, though, I am certain there are things you can be doing to improve the situation. If this is something you would be interested in delving into, please let us know. Putting in the time now to make positive changes will make much of your future time feel more positive.

As I write this on Monday, it appears that President Trump’s and the Senates Republicans’ attempts to repeal (and potentially replace) Obamacare have failed. By the time you read this, though, that may certainly change. For if there is one thing this story has taught us, it is that there is little one can count on during contentious political times.

Heck, it’s not like passing the Affordable Care Act was an easy thing even when the Democrats were in power during (slightly) less contentious times.

Getting into the political debate over the issue is not necessary or proper for this spot. If you want blogs that do that, you can find enough of them to keep you occupied until … well forever most likely as it is not likely this battle is end sanytime soon. From the moment Trump was elected, though, questions abounded as to how one’s tax picture would change if our country’s current health care plan went away.

Those questions were plentiful, and possible answers to those questions were probably more plentiful. Note though that they were only possible answers at the time and seem ever less likely to be possible the longer it takes for this saga to play out. It is impossible to say that prognostication plays no part in the financial world (the stock market is run by it in some way, after all), but it really should only go so far.

After all, if anyone made any significant changes because they were certain changes were coming in their company’s obligations concerning health insurance, they are hurting now as they roll back some numbers to what they were before any of this predicting began.

In here are many lessons …

First, work only from the numbers that are definite in your reporting. I have warned against fudging such things in an optimistic way before, for no matter how glass half-full you want to be, dealing with real numbers is what will allow you to get to the point where you can feel great because things are actually great.

Second, just as you have to work with real numbers, you have to work with real situations. If things happen in the political realm that suddenly improve your situation, celebrate that bonus when it happens. Counting on serendipity, however, is not sound financial advice.

Third, understand the timing of the political world. Things felt like they were going to completely change when Trump was elected, as it symbolized a great new world for some and a feared new world for others. Both sides, however, would now have to admit that whatever hopes or horrors they saw coming did not come to pass as quickly as felt possible at the moment. One must look to the future to be successful, but dealing with the present takes precedence.

Finally, try to keep your political views separate from your financial ones. You may wish that things were different than they are, but those wishes will not change your legal obligations. Be active in the political world if there is change you want to help enact, but concede that you must operate in the world as it now is.

There are so many twists and turns along the way in life that we can never really know how things are going to turn out, so let’s start by owning today.