Let’s say you worked with “Accountant A” last year and owed $1,000 on April 15. This year, you switched to “Accountant B” and got a $1,000 refund. Did “Accountant B” save you $2,000 in taxes? NO! Your accountant can influence your tax liability via tax strategy, but not as much as most people think.
The government decides your tax liability, and you pay that balance throughout the year. On April 15, anything left unpaid is owed, and anything overpaid is refunded.
At CSI Accounting & Payroll, we’ve provided small business owners with monthly accounting and annual tax filing services for 60 years. We don’t claim to save business owners a certain amount in taxes. Our value is in tax strategy and insights. In this article, I’ll address these questions:
- How are taxes paid throughout the year?
- Why do people owe taxes or get refunds on April 15? And which is better?
- Why do some accountants claim to help clients save money?
How Taxes Are Paid Throughout the Year
If you owe nothing on April 15, you already paid your government-established tax liability. How did you do that?
If you’re an employee, you filled out your IRS Form W-4 and state withholdings when you were hired, and that information was used to take a certain amount of tax out of each paycheck.
If you own a business, you may have paid taxes throughout the year through quarterly estimated payments, payroll withholding, or both.
In the next section, we’ll discuss what to do if you overpay or underpay.
Owing Taxes or Getting Refunds?
Again, the government determines your tax liability, and you pay toward that balance throughout the year. If you end up with a large tax bill (underpaid taxes) or refund (overpaid taxes) come April 15, you may want to adjust your withholding forms or quarterly estimated payments.
At CSI Accounting & Payroll, we think it’s usually best to try to break even, especially if you own a business.
Why?
If you pay too much and are waiting on a refund, you’re basically giving the government a free loan… and it’s money that you could have reinvested into your business to help it grow.
On the other hand, owing money because you didn’t pay enough can throw off your cash flow, especially if it’s more than you expected. Monthly accountants can help you avoid this by giving accurate tax projections.
Why Accountants Claim to Help You Save
So, why do some accountants still say that they’ll save you money? There could be a few reasons:
- They’re lying. If they know nothing about your business or tax situation, they can’t make claims like “We will save you $500 in taxes” or “We will get you your maximum refund.” You’ll probably see some large tax filing services make these claims, but I don’t know why it’s allowed.
- They’re referring to their fees. Maybe they’re saving you money by charging less than their competitors for their services. They’re a cheaper option.
- They’re referring to avoided penalties and interest. If this is the case, a tax planning service can save you an average of 5-25% in avoided penalties and interest.
- They’re referring to saving money in other areas. Maybe they can provide financial insights and advice to cut down your expenses.
At CSI Accounting & Payroll, we legally minimize your tax liability through a complete tax strategy, and we offer even more value by being trusted advisors. Get unlimited advice from your dedicated accountant who knows your numbers. We take financial work off your plate and give you the advice and tools you need to grow your business and your profitability.
Not sure if monthly accounting is right for your business? Try our Ideal Accounting Solution Quiz to find out if you’re a match with the DIY approach, an annual tax accountant, a monthly accountant, or an in-house accountant:
Minimize Your Tax Liability & Get Valuable Advice!
Now that you know how taxes are paid, why people get April 15 tax bills or refunds, and why some accountants claim to save you money, are you ready to check out monthly accounting services with CSI Accounting & Payroll?
To see if we can be a good fit for your business, click the button below for a free consultation:
Not ready to talk? That’s okay! First, learn more about what our monthly accounting service may cost you.
