Is my account ripping me off by asking to do a mock return in December?

Submitted by senseibrittany t3_z93om8 in personalfinance

Hello! I am a self employed individual and I need some advice. I've got an s-corp set up and I pay myself and taxes to the IRS/state DOR through a monthly payroll run. I've been lucky enough to have a great year in 2022. The amount I'm paying in taxes each month is based on 2021 income, which was significantly less, so I know I owe a lot in taxes. My accountant just hit me up to run a "mock return" sometime in early December. While I can see the value in doing this for her (she gets to bill me more hours), I'm struggling to see the benefit for me. I've pressed her on it and I'm not really getting a straight answer.

Below is how I understand the situation. I'm hoping some of you redditors with more knowledge than me can chime in to confirm that I'm right or correct me where I'm wrong.

I'm going to owe a lot in taxes. If we had done a mock return in June, it may have had some value. We would have seen that my income was growing quickly, and we could have bumped up the amount I'm paying in taxes each month. Instead of paying a huge tax bill at the end of the year, I would have been slowly paying it each month.

However we didn't do that. That means I owe a lot in taxes now. However, as long as I can afford to pay it (I can), we should be fine. My understanding is that as long as the amount of taxes I've been paying throughout the year is the same or greater than last year's tax bill, I won't get hit with any penalties for the remaining amount I owe. That means I can pay the remainder of my tax bill in April if I want.

My accountant is suggesting we do a mock return in the next week so that I can make a big tax payment before the end of the year. It seems like this doesn't do anything for me except cost me accounting fees. At this point, I'm paying a large tax bill no matter what. I can either pay her to do a mock return so I can pay it now, or we can just do my final return in March and pay roughly the same amount then.

Am I right? Thanks in advance!

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rpsg0534 t1_iyeypx3 wrote

CPA here. As another poster said the work done prior to the end of year will allow prep of the final return to go more smoothly so it should not be "double" work or billing. I think it is a good strategy to look before the end of the year at the tax situation because some things may pop up that can only be mitigated prior to the end of the year. It will also save time in gathering info now rather than during the busier tax season.

Also, asking your accountant what the goal of doing a mock return is a reasonable question. Ideally, a good accountant will be a trusted advisor looking out for possible areas of ways to mitigate headaches for you.

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senseibrittany OP t1_iyezx7l wrote

Thanks for your insights. I guess I'm having a hard time understanding how crunching a bunch of numbers based on estimated revenue and expenses and then redoing them with the actual numbers doesn't create some double work. Also, we're only 31 days from being able to do all of this with the actual numbers.

I should also point out that I have the world's least complicated business. I could put all of the info together that she needs to do my taxes in maybe 2 hours.

Yeah, I asked her about it and her response was super vague: "You can do an additional year-end payroll to pay additional taxes. That’s why we do planning now too." That was the entirety of the message.

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rpsg0534 t1_iyf1kg8 wrote

Understood. It may be boiler plate for the accountant to reach out to do year end planning regardless of your individual situation. It also sounds like you have a good bead on your business status and requirements. Not all business owners do.

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dmaxd123 t1_iyetkl0 wrote

i'll be curious to see what others say. i would think that if you were to do something that it would be to see how much equipment/supplies you need to order for the company in 2022 to cut down your taxable rate. s-corp might have a different setup though so like i said, curious to see what others say

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senseibrittany OP t1_iyetsdk wrote

I actually run an online business, so my supplies, equipment, etc is basically nothing. Every few years I buy a new laptop... other than that my biggest expense is my accountant.

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woodstock99forlyfe t1_iyew9yr wrote

I think they anticipate that it will be complicated and want to make sure you either have ready or know where to get all of the documentation now versus at the filing deadline.

It does end up being more billable hours but if it makes rhe actual return go smoother and get filed on time I would probably be ok with it. If you work with the same cpa over and over I wouldn't want to do it every year though once both sides know what yo expect.

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senseibrittany OP t1_iyf04wo wrote

Ok.... but couldn't we do this Jan 1 with the actual numbers instead of estimates and call it my return instead of my mock return?

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woodstock99forlyfe t1_iyf0nbp wrote

It's probably also because the further you get into kept yesr the busier they are going to be. They can probably pre-prepare a ton of the documents and then just fill in specifics later, at least I would assume so. Seems like they really just want to button up what forms they are going to need and make sure you have a list, etc to provide them as they become available.

Thats just my thoughts though I'm not a cpa nor do I run a business.

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No_Tension_280 t1_iyetq99 wrote

Maybe she wants you to open up or more fully find some qualified plan

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senseibrittany OP t1_iyevloo wrote

Sorry if I'm ignorant here, but I don't know what this means.

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No_Tension_280 t1_iyewi67 wrote

(find should have been fund)

Do you have an ira? Every dollar you contribute up to the maximum comes right off your taxable income. So if you make 50,000 and contribute 5000 to your IRA, the IRS would act as if you only made 45000. It lowers your taxes.

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