Julianna Brion for Vox
Including when to do them yourself, when to seek out help, and helpful strategies for keeping track of it all.
Caitlynn Eldridge, an Omaha-based certified public accountant with 14 years of experience including two years at Deloitte Tax Services, has done a lot of tax prep. She’s also worked with many different demographics, from business owners to billionaires to single parents trying to make ends meet. After having her first child and then twins, Eldridge opened her own company with the goal of improving her work-life balance. Today, she’s a mom of five with a thriving small business that focuses on bookkeeping, tax planning, tax prep, and advising. That’s why we thought she would be the perfect source for our CPA Q&A — and why we hope you can benefit from her advice.
Our conversation has been lightly edited for clarity.
When should people seek out a CPA versus doing their taxes themselves or using a tax software program? What kinds of services can a CPA provide in addition to tax prep?
Many people can do their own taxes! If you have one or two W-2s [the wage and tax statement you receive from your employer] and one or two 1099-Bs [the proceeds statement you receive from your investment brokerage], you should be able to self-file with software.
If you start getting into K-1 territory [a form that allows you to report gains, losses, etc. in a business partnership], you’ll want a CPA.
CPAs can help with adjustments of withholdings, recommendations on tax savings opportunities, amending any returns. CPAs are also really good for state-specific items, such as special state credits or if you are having income tax issues in multiple states — if you live in one place and work in another, for example.
How early do you start preparing for tax season, and how early do you suggest your clients start preparing?
Five years ago, I would have said that I started preparing in December. Gathering everything, making my lists — but ever since Congress started doing this thing where they pass legislation in January, February, or even March and then apply it retroactively to the previous year, I go into January with a very open mind.
Most forms don’t come out until January. People with investments don’t get those forms until mid-February. If you’re gathering your documents by the end of February, you’re doing great. If you’re self-preparing, that gives you all of March and half of April to put things together. If you’re working with a professional, I know a lot of us have upped our deadlines for clients [to turn in their tax information] which is hard for them, but end of February is still a great time for you to gather everything. Then Congress will sort out what they’re going to retroactively pass, and the softwares will be updated and ready for you.
A lot of people plan at least some of their major expenses — buying a house, closing down a business — with the potential tax implications in mind. Since we no longer know for sure which rules will apply to the current tax year, is gaming out your refund still a smart strategy?
At this point, I would do my best to eliminate the refund and have the money throughout the year for myself. You just don’t know what the tax year is going to look like — and with high-yield savings accounts, it’s easy to get 4 or 5 percent interest. I would prefer to keep my money rather than let the IRS hold on to it for me.
Honestly, from the corporation down to the individual, the laws just aren’t incentivizing anymore because they’re retroactive.
What kind of changes are we seeing this year? I know that last year the charitable deduction rules changed, for example. Is there something about the 2023 tax year that’s changed in the last few months?
We don’t have an official change yet, but what we’re sitting on is the child tax credit becoming refundable at lower income levels. I’ve been telling my clients that we have to wait and see what happens, since we had heard that we might find out in January but we still haven’t seen anything finalized about this change.
Now people are starting to file, and the IRS has said, “We’ll just true it up if we have to,” which could take months, but I’d rather get some money into the hands of clients than nothing.
That’s a big one for the individual, and there’s also a bonus that’s caught in that for the business side.
In your role as a CPA and tax preparer, is your goal to give your client a stress-free experience? If it’s not about maximizing the refund, since you’re trying to help people keep more of their money throughout the tax year, what do you hope to achieve with your clients during the tax prep process?
I have some clients who, no matter how much I tell them that a big refund isn’t worth it, still want the refund. So that’s how we plan the year. We make sure they overpay throughout the year, so they know the cash is coming and they can expect it. For other clients, it’s the reverse. We plan for the lowest refund possible. The whole point is to make the year as predictable and planned as possible, so come January, February, March, we have no surprises.
That’s a big part of what we do. I don’t want any news I deliver at this time of the year to be a surprise. I try to leverage technology to make the process as effortless and stress-free as possible, but at this point, they’re just turning in documents. We’ve been talking about this all year, and now all we have to do is finalize everything.
I’m sure you’re familiar with the idea that some people prefer the refund because it’s the only time they ever get a lump sum. In some cases it’s a socioeconomic thing — this is one of the only times people at certain income levels get that much money at once, for example. Is that what’s motivating some of your clients?
I’ve seen that kind of thing, but it isn’t always socioeconomic. For some people, owing any money to the IRS — even a hundred dollars — is scary. These clients might be making six figures, but they don’t want to owe any money.
The real difference is whether the client is a spender or a saver. If they’re a spender, they would rather have the IRS hang on to the money. That goes across all economic levels, and it often has less to do with income than it does with personality.
Is it still possible to make mistakes on your taxes? Since most people are working with either a software program or a tax professional, are mistakes still getting through?
I think the biggest mistake I saw in the last year was someone who just miskeyed and didn’t catch it. They accidentally said they made $300,000, but they were retired and on Social Security, and then the IRS went and pulled a bunch of money. So check your work because the software won’t catch that for us!
The other big mistake I see has to do with forgetfulness. Something we do in March and April, for example, we’re likely to forget it by the next March or April. Did you pay for summer camps for kids under 13, when you and your spouse were both working? That’s a deduction, but at the time we think of summer camps as something we’re doing for fun, and we forget that it’s a child care deduction. Pulling those receipts and asking for that information, either in the moment or a year later, is a big one.
We’re not in a huge itemizing time right now because of the increased standard deduction, but when more people used to itemize they would often forget about their charitable contributions. They’d donate $50 here and there and they wouldn’t keep track.
On the flip side, I still see people trying to deduct things that aren’t deductible, like GoFundMe contributions. Giving has changed. People still want to give to charitable organizations, but they also want to give to the single mom on GoFundMe. If people are self-preparing, they might try to deduct that gift, and if they get audited, we have to explain all of that.
What about forms and statements? Are there documents people forget to look for?
The 5498/1099-SA [a form that reports distributions from a health savings account (HSA) or medical savings account (MSA)] and the 1099-INT/DIV/B for investments — those come out mid-February and sometimes people forget! You should also collect a statement from your child care provider even if they didn’t issue one to you. Make sure to ask for a statement that includes their EIN/SSN. If you own a rental house and have a property manager, you’ll want a statement for the year showing all income/expenses.
There’s always someone who asks, every year, why the government can’t just do our taxes for us. They could collect all of the information and calculate what we owe, and that way nobody would miscategorize, nobody would miskey. Why aren’t we doing that, do you think?
I have many theories. One of my theories is that the AICPA — that’s the American Institute of CPAs — likes to keep it complicated because it keeps us employed!
There’s money in taxes. That’s what it really comes down to. The lobbyists have the money, and they have the ears of the politicians, and the more complicated it can be to carve out this one deduction for themselves, the better.
Other countries have this figured out a little better than we do. We’re a capitalist society that really encourages people to pick up side hustles, and we keep changing the rules on how to track all of that. If everyone was employed in a W-2 job, we could track everything a little more easily — but we tell everyone to take their hobby and turn it into income, and that income needs to be reported.
What fears and anxieties do people have about their taxes that you feel are unnecessary?
I see a lot of people who have this fear of missing out. “The rich have all these deductions, and they’re not paying any taxes, and I’m paying too many taxes, and that’s not fair.” There’s a lot of that. I try to explain that while the super-wealthy do get out of paying certain taxes, they still pay a lot in taxes. The wealthy are also less focused on how to minimize their taxes in any given year and more focused on a generational tax planning strategy. They’re thinking decades from now: “How do I get my money from this generation to the next with the least amount of taxes?”
I also see a lot of people who are afraid of doing something wrong. “If I try to take any deductions, if I do anything besides put my W-2 into the form, the IRS is going to show up at my door and arrest me.” I try to explain that, first of all, there will be a lot of letters before anyone ever shows up at your door, and we can answer those letters, and we can talk to the IRS [and figure out if there was a legitimate mistake]. Also, you have the legal right to take these deductions. It’s okay to take them.
Do you have a strategy or system to help people track their taxable expenses and potential tax deductions throughout the year?
I heavily encourage an inbox folder because most of our receipts these days are electronic. Make a folder and put the tax year on it, and use it to file everything you get. That way, when you start prepping your taxes, everything will be in one place. Take a second, as soon as anything tax-related arrives in your inbox, to transfer it into that folder. Don’t let it get buried in the rest of your email.
If you have something more complex, like a rental house, I recommend creating a Google Sheet — and every month, just taking 10 minutes to track income and expenses. Then you can close the sheet and not worry about it until the next month.
That’s what I do! I have the email subfolders labeled by tax year, and once a month I tally up all my freelance income and expenses onto a spreadsheet! So I can prove it works, at least for me.
It’s a great system. I like numbers. I work with numbers, but I don’t like them to take up any more of my life than they have to!