Taxes are an important part of your financial picture, so getting sound advice and guidance as you file your tax returns is one of the most important parts of your financial plan. You might have heard of tax planning and tax preparation. While both terms are often used interchangeably, they’re drastically different. They vary in their scope and goals. They can also be different in terms of their impact on your financial goals.

The Main Difference Between Tax Planning and Tax Preparation

Tax preparation involves the process of gathering your tax information, completing your tax forms, and filing them with the IRS. It also involves the filing of any state returns that may be required. You can do your own tax preparation, or you can hire a professional to do it for you. Tax planning is an ongoing process that explores strategies for minimizing your future tax liability.

What Tax Planning Involves

Tax planning isn’t just a one-time event. It can happen over many years to make sure you pay the least amount of annual tax (all while trying to achieve your financial goals). Tax planning can apply to many areas of your financial life. Some of them include the following:

• Portfolio management.
• Income strategies.
• Deduction maximization.
• Charitable giving.
• Retirement savings.
• Withdrawal strategies.
• Estate planning.

Be sure to speak to a financial professional for more information.

How Tax Preparation is Different from Tax Planning

Tax preparation focuses on the completion of your tax return. This includes gathering documents, completing the necessary forms, and filing returns with the appropriate tax authority. By obtaining the proper documents, you can have all the information you need to report and support your sources of income (along with all the deductions you had throughout the year).  This information can be used to file your federal and state returns.

Once the forms have been completed, they can be filed with the appropriate tax authorities. Your federal return should be filed with the IRS, while your state return must be filed with the appropriate tax office. Most people choose to work with a professional tax preparer, but you can file your own tax returns with one of the many tax preparation tools on the market.

Comprehensive Tax Planning Strategies

Some of the specific tax planning strategies include the following:

• Income Timing — This strategy controls your income tax liability by moving your taxable income out of (or into) a specific calendar year. The goal is to defer taxable income to a future date while moving deductible expenses into the current fiscal year.
• Tax-Advantaged Savings — This strategy is similar to income timing because it can reduce your taxable income, but it’s done through tax-advantaged savings. This includes saving for retirement and Health Savings Accounts (HSAs).
• Charitable Giving Strategies — A deductible charitable contribution is money or goods given to a federally-recognized organization that’s tax-exempt when you expect nothing in return. However, there is a limit to how much of your adjusted gross income you can deduct for charitable contributions.
• Asset Location Strategies — This strategy can help you reduce your investment taxes. You spread your investment portfolio across many different accounts with different tax treatments. The goal is to hold less tax-efficient assets (such as bonds and bond funds) in tax-advantaged accounts and to hold more tax-efficient assets (such as ETFs) in accounts that don’t have any special tax treatments.
• Roth Contributions and Conversions — If you make contributions or conversions to these accounts, you can pay more taxes today so you can save on your tax bill later on. Roth IRAs are retirement accounts that are contributed to with after-tax dollars, so their financial benefits come later.
• Tax-Loss Harvesting — No one likes to see their investment portfolio lose value, but markets don’t move in a straight line. It goes through a series of ups and downs during a typical market cycle. Tax-loss harvesting tries to take advantage of the downs by using investment losses to offset capital gains.

Be sure to speak to a financial professional for other ways that tax planning can benefit you and your financial future.

Integrating Tax Planning with Your Tax Preparation

While they’re two different disciplines, they’re closely related parts of a comprehensive tax strategy. A good tax planning strategy can help you with the tax preparation process, because you’ll be better able to gather the necessary documents and identify any opportunities for reducing your tax liability. It will also make sure you’re compliant with current tax laws.

If you’re looking for a CPA in Corpus Christi that can help you come up with a solid tax strategy, be sure to reach out to Jennings & Hawley.

Because your business takes up much of your time and responsibilities, you may be tempted to postpone your retirement planning. But it’s an important step if you want to step away from your business. There is no set time to retire, but 42% of small business owners plan to do so at 65 or older (while 29% of them plan to do so between the ages of 55 and 64. Only 19% of small business owners plan to retire between the ages of 40 and 55. But whether your retirement is five years away or 15-20 years down the road, you can benefit by starting the planning process now.

When it’s time for you to enter your next phase of life, you need to have a plan that will help you to live comfortably in the future. You should think about retirement in four different phases, which include the following:

• Accumulation.
• Transition.
• Distribution.
• Legacy.

The accumulation phase starts when you’re still working. You then make the transition into retirement, where you distribute your assets for yourself and your loved ones before leaving a legacy for the next generation.

If you’re a small business owner, here are some strategies you can use to help you gain financial independence in the future.

#1: Define Your Retirement Goals

Retirement planning doesn’t happen overnight. It takes time to determine your retirement goals and accumulate enough assets to create enough of a financial cushion for when you retire. You should think about specific details (such as where you want to live, how much it will cost, the types of expenses you’ll have, and where you’ll get your retirement income).

You should start by answering the following questions:

• When do you want to retire?
• What kind of retirement do you want?
• How much money do you need to set aside?

Make sure your goals are written down, specific, measurable, and time sensitive. That way, you’ll know how to achieve them.

#2: Choose the Right Retirement Savings Plan

Once you have outlined all of your goals, it’s time to come up with a retirement plan. You can strengthen your retirement strategy and open the door to possible tax advantages by opening up retirement savings accounts. You want to find an option that will suit the needs of both you and your business, but you also want to think about how much financial independence you want to have when you retire.

Some of the most common retirement plans include the following:

• Traditional or Roth Individual Retirement Account (IRA) — A traditional IRA will allow you to make tax deductible contributions, and taxes are deferred until the savings are withdrawn. With a Roth IRA, the taxes are paid up front. So, you can have access to tax-free money when you retire.
• Simplified Employee Pension (SEP) IRA — An SEP IRA is a type of tax-advantaged retirement account that’s used most often by self-employed individuals. It can be either set up by employers or self-employed people and will allow them to make small contributions to the accounts.
• Savings Incentive Match Plan for Employees (SIMPLE) IRA Plans — This is another tax-advantaged account that’s designed for businesses with 100 or fewer employees, who can choose to contribute a percentage of their salaries to the plan. Employers also have the option to match up to a percentage of their salary.
• Solo or Individual 401(k) — If you’re a business owner, this plan can cover you and your spouse if that person is employed by the business. But it may not be an option if you have other people working for your company.
• Traditional 401(k) Plan — This is one of the more popular types of retirement plans that’s funded with employee contributions and matched contributions from their employers. They can also give business owners a great deal of flexibility on how they can structure the plan.

Be sure to speak to a financial professional for more information.

#3: Diversify Your Retirement Savings

Having both tax-deferred and tax-free savings may help with your current taxes and long-term planning goals. Take a look at your cash flow, tax situation, and long-term retirement goals so you can come up with a savings plan that’s right for you. You also want to diversify your investment selections within these accounts by not having a concentration of individual companies or industries so you can manage your risk.

#4: Come Up with an Exit Strategy

Once you have figured out what you want to achieve and have implemented a retirement savings plan, you need to come up with an exit strategy because you will eventually want to leave your business or turn over the day-to-day operations to someone else. It may take years of planning to shape the future of your business, but don’t leave it to interpretation before you retire.

If you’re looking for a CPA in Corpus Christi that can help you with your retirement planning, be sure to reach out to Jennings & Hawley.

Missing the tax deadline can be a stressful experience, but it’s not the end of the world. Whether you’re an individual filer or a business owner, knowing what happens next will help you take care of the situation while minimizing your financial consequences. If April 15 has already passed and you haven’t filed, you need to act immediately if you want to reduce your penalties. It’s also important if you want to avoid interest charges and stay compliant with IRS requirements.

The Consequences of Missing the Tax Deadline

If you mix the tax filing deadline, some issues can come up (depending on whether you owe taxes or expect a refund). If you owe taxes, the IRS may impose a Failure-to-File Penalty. It’s usually 5% of the unpaid taxes for each month (or part of a month) that your tax return is late, but this penalty can be up to 25%.

The IRS can also impose a Failure-to-Pay Penalty, which is 0.5% of your unpaid taxes per month. But it’s capped at 25%. It also grows in addition to the Failure-to-File Penalty. These penalties can add up quickly if you miss the filing and payment deadlines.

Other consequences for missing the tax deadline can include the following:

• Interest Charges — The IRS charges interest on unpaid taxes, and it starts from the day after the filing deadline. The interest compounds daily and continues to do so until the balance (including penalties) has been paid in full.
• Delayed Refunds — You won’t have to pay any penalties if you’re owed a refund and file late, but it may be delayed (which could affect your financial plans).

Missing a deadline even once can flag your account with the tax authorities, which could increase the amount of scrutiny around any future filings. For business owners, it could mean a higher risk of audits.

How to Address a Missed Tax Deadline

If you realized that you missed the tax deadline, you don’t need to panic. But you need to act as soon as possible, because you’ll be better able to mitigate the penalties and interest that can accumulate.

Here is a list of things you need to do if you miss the tax deadlines:

• File as soon as possible — Even if you can’t pay the full amount, filing your tax return as soon as possible will reduce your Failure-to-File Penalty.
• Pay what you can — Pay as much of the owed taxes as you can, because it will reduce the penalties and interest on the balance. The IRS has flexible options (such as payment plans) that can help taxpayers manage their balances. This can include a short-term payment plan (up to 120 days) or a long-term installment agreement.
• Request a penalty abatement — If it’s your first time missing a tax deadline, you can request a First-Time Penalty Abatement. This relief is given to taxpayers with a history of filing and paying on time. Contact the IRS to request this option, but you will need to file all past due returns and pay any outstanding taxes beforehand.

A tax professional (such as a CPA or enrolled agent) can help you negotiate with the IRS, set up a payment plan, and look at any penalty relief options for which you may qualify. They’re invaluable resources for businesses with complex filings or large balances.

How to Prevent Missing Tax Deadlines in the Future

If you don’t want to miss any more tax deadlines in the future, you’ll need to take an organized and proactive approach. Here are some tips that can help you:

• Mark Your Calendar — Keep track of any important tax deadlines (which are April 15 for personal taxes and March 15 for certain types of business filings). These dates might change in some years, so be sure to confirm the deadlines every year.
• File an Extension — If you’re not able to file your taxes by the deadline, you can request an extension by using Form 4868 (for individuals) or Form 7004 (for businesses). It will give you six extra months to file your return, but it doesn’t extend the deadline for any taxes you owe.
• Automate Your Payments — Set up automatic reminders or electronic payments to make sure you’re always on time with what you owe to the IRS and other state tax agencies.

If you’re looking for a CPA in Corpus Christi to help you manage your tax filing and payments, be sure to reach out to Jennings & Hawley.

The cash and accrual accounting methods are like sibling rivals because while one clashes with the other, you can see the resemblance. Even if you don’t take care of your own financial reporting, you need to know how each one works so you can decide on the best bookkeeping practice for your business.

Both methods have their pros and cons, but the one you choose can affect many parts of your business (including your tax liability, financial statements, and decision-making process). That’s why you need to know both methods and how they work.

The Differences Between Cash and Accrual Accounting

Cash accounting records income and expenses as they’re billed and paid, while accrual accounting records income and expenses as they’re billed and earned. As long as your sales are less than $25 million per year, you can use either method. But why would you choose one over the other?

With cash accounting, you record income as it’s received. You record expenses as they’re paid. Cash accounting only records your expenses when the money has left your account to pay suppliers, vendors, and other third parties. If you have a small stationary business that purchased paper supplies on credit in June but didn’t pay the bill until July, you would record those supplies as a July expense.

With the accrual method, your income and expenses are recorded when they’re billed and earned (regardless of when the money has been received. The accounting standards outlined by the generally accepted accounting principles (GAAP) say that using the accrual accounting method for financial reporting will provide a clearer picture of a company’s financial situation.

Small businesses can use the accrual method as their primary accounting method, but it’s not required. According to GAAP regulations, any company that’s either publicly traded or generates more than $25 million in sales revenue over a three-year period is required to use the accrual method.

Unlike cash accounting (which gives you a short-term overview of your company’s financial situation), accrual accounting will give you a more long-term perspective of how your business is doing because it will provide a more accurate picture of how much money you’ve earned and spent within a certain period of time.

Benefits of the Cash Accounting Method

Here are some of the benefits of the cash accounting method:

• It has a shorter learning curve.
• There are fewer items to record.
• It’s easier to track expenses and revenue.

Many small businesses and sole proprietors use the cash accounting method because of its simplicity. So if your business earned less than $25 million in annual sales and doesn’t sell merchandise directly to consumers, this method might be your best choice.

Advantages of the Accrual Accounting Method

Here are some of the advantages of the accrual accounting method:

• It creates a more accurate financial picture — It can give small business owners a more realistic idea of what their income and expenses look like within a specific time period.
• It conforms to GAAP principles — This is why companies that earned more than $25 million in annual sales are required to use the accrual method.
• It scales with your business — You may not be there now, but you could double or even triple your revenue in a few years (which may push you past the $25 million mark). If you already use the accrual method, you don’t need to switch over because it will grow with you.

Be sure to speak to a professional for more information.

The Disadvantages of the Accrual Accounting Method

Despite its advantages, the accrual method has its drawbacks. Some of them include the following:

• It requires more resources — Many small businesses see the accrual method as more complicated and expensive to implement, because it’s more complicated and requires more paperwork. The company records revenue before the money is received, so the cash flow has to be recorded separately to make sure you can cover your bills each month.
• It has an inaccurate short-term view — The cash method will give you a better picture of how much money is in your bank account. So if you don’t have good bookkeeping practices, using the accrual method could be financially disabling. Your books could show a large amount of revenue, but your bank account is empty.

If you’re looking for a CPA in Corpus Christi that can help you come up with the best accounting method for your business, be sure to reach out to Jennings & Hawley.

Whether you’re buying or selling a home, the process can be stressful (especially when you start thinking about the tax implications). If you sell your home, you could pay capital gains tax if it has gone up in value. But the IRS gives you one major tax break, which is referred to as the “home sale exclusion.” It allows you to deduct a large amount of the profit from the sale of your home to avoid paying capital gains tax. If you’re selling an investment property, you can use a “like-kind exchange” to reduce your tax burden. But it only applies to rental properties.

When you buy a house, you’ll receive a “Closing Disclosure Form” that lists all of the closing transactions as well as any important incoming and outgoing funds. It’s one of the most important documents in the home-buying process, because it can help you determine the basis of your new home and what you can deduct on your taxes. So, you should keep it in a safe place.

Tax Considerations When Buying a Home

Once you have purchased your home, you should think about itemizing all your expenses. As a homeowner, you can deduct any of the following:

• Qualified home mortgage interest.
• Points paid on a loan.
• Real estate taxes.
• Private mortgage insurance.

You also want to look for Form 1098, “Mortgage Interest Statement.” It’s used to report mortgage interest (which includes points). It can help you claim those deductions on your tax return. But even if you don’t itemize, you can still benefit from other tax advantages associated with being a homeowner. If you’re a first-time homebuyer, you can make penalty-free IRA withdrawals if you’re under the age of 59 ½. You will also earn residential energy credits.

Tax Considerations When Selling a Home

The Closing Disclosure Form is just as important if you’re a seller as it is if you were a buyer, because it has information that can affect your basis. This can determine how much gain or loss will be calculated when you report the property’s sale. It will also have information about any deductions you can claim.

You should also be aware of Form 1099-S, “Proceeds From Real Estate Transactions” (which you will receive if the gain on the home sale isn’t excluded from your income). You usually don’t have to pay taxes on gains up to $250,000 ($500,000 if you’re married).

There are three criteria you will have to meet if you want to qualify for this tax break. These include the following:

• Ownership — You must have owned the property for at least two years during the first five years before the date of the sale. It doesn’t have to be continuous, and it doesn’t have to be two years immediately before you made the sale.
• Use — You must have used the home as your primary residence for at least two years of the five years before the date of the sale.
• Timing — You haven’t excluded the gain on the sale of another home within two years before the sale in question.

If you’re married and want to use the $500,000 exclusion, both of you must file a joint return. At least one spouse must meet the ownership requirement. Both of you must also have lived in the house for at least two of the five years leading up to the sale. But even if you don’t meet all these requirements, special rates may allow you to claim a full or partial exclusion.

It’s also important to keep your receipts, because certain closing costs and home improvements can increase the basis of your home. You want to show these receipts as proof of the increased basis, which can reduce your taxable income when you sell the property.

Some of the closing costs that can increase your basis include the following:

• Survey fees.
• Recording fees.
• Owner’s title insurance.
• Abstract of title files.

Examples of improvements that can increase your basis include the following:

• Building a deck or garage.
• Adding central air conditioning.
• Installing a lawn sprinkler system.
• Installing a new roof.
• Installing new siding.

Because a lot goes into the purchase and sale of a home, you should speak to a tax professional so you don’t miss out on any potential tax benefits. If you’re looking for a CPA in Corpus Christi that can help you understand the tax implications of buying or selling a home, be sure to reach out to Jennings, Hawley & Co., P.C.

Tax season can be stressful. But if you’re able to avoid the common pitfalls, you can save both time and money. The Internal Revenue Service (IRS) reports a large number of simple errors that taxpayers make on their returns. While electronic filers don’t make as many errors, many taxpayers improperly report their income or claim credits and deductions in an improper manner. Using a tax preparer (such as a CPA or enrolled agent) can help you. But even if you work with a professional, you still need to understand how to avoid these common errors.

Here are some of the common mistakes you should avoid while you’re filing your taxes.

#1: Filing Past the Deadline

If you don’t file your return by the due date, the IRS will send you a notice or letter if you owe them a Failure to File Penalty (which will be a percentage of the taxes that you didn’t pay on time). The IRS will calculate the penalty according to how late you file your tax return and the amount of unpaid taxes you owe as of the original due date.

If you don’t file on time, it can also delay any tax refund you may receive, so it literally pays to file your return by the deadline. If you need more time to file, you can always apply for an extension. But even if you can get an extension to file your return, it won’t extend the amount of time you have to pay.

#2: Not Filing Quarterly Estimated Taxes

You need to know if your income type requires you to pay taxes more than once a year. If you’re a freelancer or are self-employed in some other capacity, you don’t have an employer who will automatically withhold taxes from your paycheck. So, you will be required to pay quarterly estimated taxes (in addition to filing an annual return).

You can calculate your estimated quarterly taxes by filling out Form 1040-ES and mailing your payments to the IRS by the deadline for each quarter, which you can find on the form. You can also pay your quarterly estimated taxes online through the IRS tax payment service.

#3: Leaving Out or Messing Up Important Information

When it comes to filing your taxes, you need to make sure you have all the necessary information and it’s accurate. This means double-checking your name, address, Social Security number, and any other important information to avoid delaying the process. If you’re getting a refund and opt for a direct deposit, make sure the tax form has all the correct banking information. It will make sure all the money goes to the right place and you can access it as soon as possible.

You want to make sure you include copies of all the required documents, and be sure to sign your name at the end. The IRS doesn’t process returns that haven’t been signed, so you will need to give them a signed copy after the fact if you miss this important step. Be sure to put a stamp on the envelope, because the U. S. Postal Service won’t deliver a letter or package to the IRS without the right amount of postage.

#4: Not Double-Checking Your Math

Not double-checking your math can delay the processing of your return, but it can also cause you to pay an incorrect amount. This can result in the IRS charging interest on any unpaid taxes. Many people use tax preparation software or hire a professional to help them, because it helps them to avoid these types of penalties.

The IRS also has Volunteer Income Tax Assistance (VITA) and Tax Counseling for the Elderly (TCE) programs that offer free basic tax return preparation to qualified individuals (including people with disabilities and with limited English-speaking skills).

#5: Not Taking Advantage of a Potential Tax Break

When you file your taxes, be sure to take advantage of any deductions and other tax breaks that may be available to you. If you have a child or take care of another dependent, you may be able to claim the Child Dependent Care Credit. If you own a small business, you may be able to claim certain purchases as business expenses that are tax-deductible. You also don’t want to claim credits for which you’re not eligible. You might get a bigger tax refund in the beginning, but it can lead to an audit that will cost you more in the long run.

If you’re looking for a CPA who can help you with tax preparation in Corpus Christi, be sure to reach out to Jennings & Hawley.

IRS audits are rare, and most of them are done by mail. You will, however, have to send a complete and timely response. Face-to-face IRS audits are even rarer, but it’s important to take a careful look at your record so you can be prepared for the audit interview. The determination of the IRS agent isn’t final, so you have the right to appeal. You can also get expert help and can even have a professional tax preparer represent you in an IRS audit.

The IRS doesn’t perform audits at random. They select returns that are most likely to have errors, and they base it on a complex set of criteria. After you file a return, the IRS usually has three years from that date to start and finish an audit. But they start most tax audits within a year after you file the return, with most of them being completed in less than a year.

How the IRS Audits Returns

The IRS will audit returns in the following ways:

• By mail (which is referred to as a correspondence audit).
• At an IRS office (which is referred to as an office or desk audit).
• In person at your home or place of business (which is referred to as a field audit).

During an audit, the IRS will ask you for any information or documents that can explain your position with regard to the tax return. It’s important to provide them with information exactly as they requested. And if you have a licensed tax preparer taking care of it, you can help this person by providing any relevant facts.

What to Do When the Notice Arrives

Getting a letter from the IRS can make some taxpayers nervous, but you don’t need to panic. The IRS sends notices and letters when they need to ask questions about a taxpayer’s return, let them know about a change to that person’s accounts, or request a payment.

Here are some things you should do once you receive a letter or notice from the IRS:

• Read the letter carefully — Most IRS letters and notices are about federal tax returns or tax accounts. Every notice will deal with a specific issue and will list any steps you need to take. A notice may reference changes to your account or list any taxes you owe. It may also make any payment request or inform you of any specific issues on a tax return. It’s important to take prompt action, because it can minimize any additional interest and penalty charges.
• Review the information — If the letter is about a changed or corrected tax return, you should review the information and compare it with the original return. If you agree with the changes, you should take notes about the corrections on your copy of the return and keep it for your records. In most cases, you only have to act if you don’t agree with the information, if the IRS asks for more information, or if you have a balance due.
• Take any requested action (including making a payment) — The IRS and any authorized debt collection agencies send letters in the mail. You can also access digital copies of certain IRS notices by logging into your IRS Online Account. And if you’re struggling to pay your tax bill, the IRS has several options that can help you.
• Only reply if you have been instructed to do so — You only need to respond to a notice unless you have been told to do so. There’s usually no need to call the IRS. But if you need to, you should use the number listed in the upper right-hand corner of the notice while having a copy of your tax return and the letter with you.
• Let the IRS know of a disputed notice — If you don’t agree with the IRS, you should follow the instructions on the notice to dispute it. Include any information and documents for the IRS to review while they’re evaluating the dispute.
• Keep the letter or notice for your records — You should keep any notices or letters you receive from the IRS. This includes any adjustment notices where the IRS takes action on your account. You should keep records for three years from the date you filed the tax return.

The IRS will never contact you via social media or text message. The first way they will contact you will always be in the mail. If you’re not sure if you owe money to the IRS, you can look at your tax account information on their website.

If you’re looking for a CPA in Corpus Christi that can help you with any tax situation, be sure to get in touch with Jennings & Hawley.

Having a budget is an important part of having a financial plan. Not only does it force you to keep track of your spending, but it also allows you to focus on which areas (such as loans and credit card debt) you need to pay off or pay down so you can save for retirement, education, or buying a home. While the process may seem daunting, it’s not hard to create a budget. Once you have one, most of the work will be done. You would only have to make minor changes as your spending and income habits change.

Here are some tips that can help you with your budget preparation.

#1: Learn from the Past

Before you can look into the future, you must get information about the past. You will need to look at your financial data from the last three years. You want to look for trends, patterns, and problem areas (in terms of both income and expenses). Take a close look at each line item to see if it has gone up or down in the last three years. Some expense categories are more likely to show a steady increase as prices go up, but they can be easily budgeted with an uptick in percentage. You want to look for any trends and anomalies that need to be adjusted or accounted for.

#2: Fine-Tune Your Expenses

You want to look at some of your ongoing costs (such as insurance and utility bills) because price increases can sneak up on you, but the budget preparation process can allow you to look at your regular spending habits. It will also allow you to trim down any discretionary expenses, but be sure to budget for an emergency fund.

#3: Track Your Income from a Realistic Viewpoint

To prepare a budget, you need to know how much money you’re bringing in each month. This includes regular wages, side hustles, freelance work, online sales, and other income streams. You want to focus on net income by factoring in taxes and other deductions, so you can get more accurate picture of your take-home pay.

If you budget based on gross income, you run the risk of overspending. If your income changes from month to month, you should base your budget on your lowest expected amount. This will keep you from scrambling if your income dips, and you can always adjust your budget during months when you earned more.

#4: Estimate Your Monthly Expenses

Knowing where your money is going is an important part of creating a workable budget, and it starts with categorizing your monthly expenses (which can be approached differently from person to person). List all of your fixed expenses, which are regular bills you have every month. This can include the following:

• Rent, mortgage payments, and homeowners association (HOA) fees.
• Utility expenses (such as electricity, natural gas, internet, and phone services).
• Transportation expenses (such as car payments, gas, and public transportation costs).

You also need to look at your variable expenses, which can fluctuate but can still be tracked. These expenses can include any of the following:

• Childcare of eldercare expenses.
• Insurance costs.
• Grocery expenses.
• Pet food and care.
• Clothing expenses.
• Medical and dental expenses.
• Charitable donations.
• Credit card payments.

You can also allocate funds or any of the following discretionary expenses:

• Entertainment expenses (such as dining out, movies, and hobbies).
• Subscriptions (such as streaming services and memberships).
• Savings for vacations or fun money.

It can be a good idea to use a budgeting app or spreadsheet to help you categorize and track your expenses. That way, you can get a clear picture of your spending habits.

#5: Analyze Your Cash Flow

Once you have a clear picture of all your income sources and have estimated your expenses, you will need to look at your cash flow. Start by subtracting your estimated expenses from your income and interpreting the result. A positive number will indicate a potential surplus, while a negative number will suggest a possible deficit. A zero balance means that you’re breaking even.

If you have money left over after your expenses have been paid, think about adding a new category to your budget for any of these financial opportunities:

• Opening a special purpose or club account to save for a dream vacation, new car, graduation present, or home upgrade.
• Donating to a local non-profit or community organization.
• Taking care of future medical expenses with a Health Savings Account.
• Setting up an emergency fund and building a safety net for unexpected expenses.

A Money Market Share Account is a great way to manage your emergency fund. You will need to make a minimum deposit of $1,000, but it offers a higher rate of return than a traditional savings or checking account.

If you’re looking for a CPA in Corpus Christi to help you with your budget preparation, be sure to get in touch with Jennings & Hawley.

Most people think about hiring a CPA when it’s time to do their taxes, but there are many other reasons to get one. Whether it’s for handling personal or business finances, a good CPA can be an invaluable resource. Most entrepreneurs don’t start their journey with a great deal of knowledge about how to manage business finances, and almost all of them would welcome the expertise of a CPA when it’s time to file their taxes. This person can put you and your business on the path to financial success and help you find areas that need improvement.

The Difference Between a CPA and a Tax Preparer

While the IRS has an online database of people with a Preparer Tax Identification Number (PTIN), everyone can call themselves “tax preparers.” Anyone who wants to prepare a federal tax return for compensation must have a PTIN, but there are no education or experience requirements to get listed in the IRS database.

While not all tax preparers are CPAs, not all CPAs are tax preparers. But if you can find a CPA with experience in tax preparation, you can be sure it will be done accurately by someone with the right knowledge (which can save you both time and money). It can help you avoid any possible IRS penalties or audits later on, but the experience of a CPA goes beyond tax preparation.

Because of the educational demands and testing requirements that CPAs must be able to fulfill, they can help you with many different issues. This can include future tax planning, coming up with college or retirement savings plans, as well as taking care of various financial problems. A lot of CPAs have the Personal Financial Specialist credential, which means they have additional expertise in personal finance. So if you’re looking for someone who can help you throughout the year and not just during tax time, a CPA/PFS may be the person you need.

How to Find the Right CPA for Your Specific Needs

Not only do you have to think about what you need a CPA for, but you also need to think about the areas where this person can be helpful. A CPA will have experience in a number of areas, which can include the following:

• Retirement and education savings planning.
• Personal financial planning for your life goals.
• Proactive planning for all your financial concerns.
• Starting and running a business.
• International and multi-state tax planning.
• Financial planning for a side hustle.
• Interviewing prospective CPAs.

CPAs usually cultivate relationships with their clients over a long period of time, so you want to be sure you can find someone with whom you’ll enjoy working. Don’t be afraid to ask questions that can help you get a better understanding of whether they’re the right fit.

Questions You Should Ask a Prospective CPA

The first question you should ask is what type clients make up most of their practice, because you want to hire someone who works with people with needs that are similar to yours. You also want to ask them what type of services they offer to those clients, because you want to make sure they can do the kind of work you need them to do.

You want to know how they can help you save money and lower your tax bill. No CPA can give you a detailed answer without having specific information about your finances, but he or she should be able to talk about possible options that can help you improve your financial situation.

One of the biggest advantages of working with a CPA is that you can approach this person for a number of financial issues. So if you need advice in the future, you can ask them about their policies and availability. Most of them will be available throughout the year and will expect their work to extend beyond tax time.

CPAs will be happy to put you in touch with clients who can tell you about what it’s like to work with them, so be sure to ask them for any references. Those clients may have needs that are similar to yours or may be in similar industries. You also don’t want to be surprised when it’s time for a CPA to bill you, so you want to make sure both of you are clear about how much he or she will charge. That way, your relationship will start of on the right foot.

If you’re looking for a CPA in Corpus Christi to help you with your personal or business finances, be sure to reach out to Jennings & Hawley.

Figuring out how much money you need for retirement is like one of those word problems from high school that you’re still haunted by. It’s not an impossible equation to solve, but it won’t be a precise calculation. You should look at your retirement strategy at least once or twice a year to make sure you’re on the right track, and you should be ready to make adjustments if it isn’t. If you’re behind on your goals, there’s no need to worry because you can always catch up. But it’s important to take action.

Factors That Can Affect Your Retirement Planning

There is no “one size fits all” approach to retirement planning, and there are a number of factors that can determine how much you need for retirement. Some of them include the following:

• How long you will live — No one knows the answer to this question, but it’s still a good idea to look at some statistics. The average man who is 65 years old can expect to live 18.8 more years (which is almost to age 84), while the average woman of the same age can expect to live past her 86th birthday.
• When you plan to retire — This can have major impact on how much you need to save. The more you can postpone your retirement, the less you’ll need to save. Delaying your retirement can give your savings more time to grow. You’ll also have fewer years in retirement (in addition to more Social Security benefits).
• How you want to live when you retire — Do you believe your expenses will go down when you retire (what’s referred to as a “below average lifestyle”), or do you plan to spend as much as you do now (what’s considered to be “average”)? If you believe your expenses will be more than what they are now, it would be considered “above average.”
• How much you will earn on your savings — No one knows how stocks, bonds, or certificates of deposit will perform in the next 20 years.  Financial advisors often recommend caution when you’re estimating your portfolio returns. You should shoot for a 2.5% return after inflation, which would be about 5.5% today.

You should plan to save between 10% and 15% of your annual pretax income for retirement. But if you have a 401(k) or any other employer-sponsored retirement account and your employer matches your contributions, it can reduce the amount you need to save. It’s usually a good idea to contribute at least enough money to an employer-sponsored retirement plan to qualify for a full employer match.

Retirement Planning for Your Desired Lifestyle

You need to ask yourself what type of lifestyle you want to have when you retire. Do you want to travel the world, join a private country club, eat out at fancy restaurants, and participate in expensive hobbies? You may prefer to stay at home and live a more frugal lifestyle. Knowing the answer to these questions will go a long way in determining how much money you’ll need in your nest egg when you decide to retire.

You must also ask yourself where you want to live during your retirement years. You’ll need more retirement savings if you’re going to live in a city with a high cost of living instead of in a small rural area that isn’t as expensive. You should plan on needing between 70% and 80% of your pre-retirement income once you have retired, and you should consider the possibility of not having certain expenses that are often associated with working (such as commuting, purchasing work clothes, and eating out for lunch).

Retirement Planning and Social Security

You need to look at how much retirement income you may get from other sources besides your savings, which can include Social Security. You can get a current estimate of what your Social Security benefits could be at retirement by creating a personal Social Security account, but it’s only an estimate based on current law. So, there’s no guarantee that you’ll get that amount when you reach retirement age.

The Social Security Administration estimates that by 2033, the amount of payroll taxes being collected to fund Social Security will only be able to pay 79% of the scheduled benefits. But Social Security benefits aren’t meant to be your only source of retirement income. According to the Social Security Administration, it will only replace approximately 40% of the pre-retirement earnings of the average American.

If you’re looking for a CPA in Corpus Christi that can help you plan for retirement, be sure to reach out to Jennings Hawley & Co.