The CPA Exam community & online study group to help you pass!
This week, we'll be taking a look at ten common mistakes first-year CPAs make and how to avoid them. Since ten points would make for a fairly long blog, we're dividing them up into a two-part series. Remember, you are expected to make mistakes in your first year. However, these are ten mistakes that can easily be avoided and earn you a good reputation among clients. Here's a look at the first five mistakes veteran CPAs say freshmen CPAs make.
1.Not Planning Ahead for Future Taxes One of your jobs as a CPA is to get your clients as many deductions and credits on their annual taxes. Unfortunately, many clients miss out on some of these deductions and credits because they don't plan ahead. As their CPA, it's your job to talk with your client about planning ahead for their future tax/financial situations. Take the time to sit down and properly study your clients current and past finances and taxes to give them the optimum deductions and credits available.
2.Not Familiar with Passive Loss Rules If your client is an active business owner, they should not be subject to passive loss limitation rules. However, from time to time, one or more of your clients may receive a k-1 from an investment for their business. It's important to know the passive loss rules, it can literally save your client thousands of dollars in taxes.
3.Not Filing the Appropriate Deduction Filing deductions can be a bit tricky, if you aren't careful. Knowing how to appropriately file business deductions can save business owners significant amounts of money each year. It's your first year, you are expected to make mistakes, but this type of mistake can easily be avoided by studying your tax laws.
4.Not Electing Real Estate Status This kind of goes hand-in-hand with filing appropriate deductions. Clients who are involved in the real estate investment business qualify for real estate professional status, an election that can make beneficial deductions and credits available. It's super important to elect this status, you don't get a second chance. This is something that cannot be amended at a later time.
5.Not Discouraging Business Owners from Dipping into Cash Reserves This is very common mistake many small business owners make that can cost them at tax time. While its understanding that business owners may be tempted to dip into their reserve funds to purchase new equipment, it's better for them in the long run if they take out a short-term loan or lease.
Now that you've had a look at five of ten common freshman CPA mistakes, we hope to have eased any anxiety you might have about beginning the first year of your new career. As you can see, most, if not all, of these mistakes can easily be avoided simply by learning tax laws and regulations.
Be sure to check out the next blog for part two of this series. - See more at: http://yaegercpareview.com/cpa-review-news/mistakes-to-avoid-in-you...