Essential Questions Your Tax Preparer Should Ask You

Here are three important questions your tax preparer should always ask—and why they actually help you.

1️⃣ How Did You Keep Track of Your Income and Expenses?

Why You’ll Be Asked:

The IRS requires income and deductions to be based on records—not guesses.

What Counts as Records:

• Bank statements

• Receipts

• Bookkeeping apps

• Invoices

• Payment processor reports (Cash App, Zelle, Stripe, etc.)

  
  

Why It Helps You:

Good records support your deductions and reduce the chance of IRS issues later.

2️⃣ Did You Use Business Expenses for Personal Reasons?

Why You’ll Be Asked:

Some expenses are partly business and partly personal, and only the business portion can be deducted.

Common Examples:

• Cell phones

• Internet

• Vehicle use

• Home office expenses

  
  

Why It Helps You:

Properly separating expenses protects you from penalties and ensures you don’t over- or under-claim deductions.

3️⃣ Are You Trying to Make a Profit with This Business?

Why You’ll Be Asked:

The IRS distinguishes between a business and a hobby. Businesses can deduct expenses; hobbies have limits.

What Your Preparer Is Evaluating:

• Whether you’re pricing services realistically

• How much time you invest

• Whether you expect to make money long-term

  
  

Why It Helps You:

Correct classification prevents denied deductions and surprise tax bills later.

✅ Final Takeaway for Taxpayers

If your tax preparer asks detailed questions, that’s a good thing.

✔️ It protects your refund

✔️ It keeps your return compliant

✔️ It reduces audit risk

✔️ It builds a stronger financial picture

Honest answers and good communication lead to better outcomes.

Understanding the Importance of Accurate Record-Keeping

Keeping accurate records is crucial for self-employed individuals. It not only helps during tax season but also provides a clear picture of your business's financial health throughout the year.

Benefits of Good Record-Keeping:

• Informed Decision-Making: With accurate records, you can make better business decisions based on your financial data.

• Easier Tax Preparation: When it’s time to file your taxes, having organized records simplifies the process.

• Financial Insights: Regularly reviewing your records can help identify trends, opportunities, and areas for improvement.

  
  

Tips for Effective Record-Keeping:

1. Use Technology: Leverage bookkeeping apps to track expenses and income in real-time.

2. Stay Organized: Create a system for storing receipts and documents, whether digitally or physically.

3. Review Regularly: Set aside time each month to review your financial records.

   
   

The Role of Your Tax Preparer

Your tax preparer is more than just someone who fills out forms. They are your partner in navigating the complexities of self-employment taxes.

What to Expect from Your Tax Preparer:

• Expertise: They understand the latest tax laws and how they apply to your situation.

• Personalized Advice: They can provide tailored advice based on your specific business model and financial goals.

• Support During Audits: If you face an audit, your preparer can help you respond effectively and protect your interests.

  
  

Building a Relationship with Your Tax Preparer

Establishing a good relationship with your tax preparer is essential. Here are some ways to foster that relationship:

• Be Open: Share all relevant information about your business and finances.

• Ask Questions: Don’t hesitate to ask for clarification on anything you don’t understand.

• Provide Feedback: Let them know what works for you and what doesn’t.

  
  

Conclusion

Navigating self-employment taxes can be daunting, but with the right support and preparation, you can manage it effectively. Remember, your tax preparer is there to help you succeed. By answering their questions honestly and maintaining good records, you set yourself up for a smoother tax season and a healthier business overall.

If you're looking for more information on self-employment taxes, consider checking out resources that provide in-depth guidance. This knowledge can empower you to make informed decisions and optimize your tax situation.