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PREPARING FOR TAX
PREPARATION Essential
information you need to know. |
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PREPARING FOR TAX
PREPARATION By
Tiffany J. Morisue, CPA, Being
prepared for your tax appointment can really pay off in terms of maximizing
deductions and minimizing tax as well as lowering fees charged by your
preparer! Additionally, you should be
able to walk away from your tax appointment with peace of mind that your
returns are complete and accurate and maybe even with some tax savings advice
that you can really use. Finding a Preparer First
of all, finding a tax professional to work with is a very important
decision. A tax professional is not
only a tax preparer, but someone who can provide you with advice on tax
issues and assist you with tax planning.
You want to find someone who is not only professional and competent,
but who is also a good fit for you and your specific needs. Selecting
a preparer solely based on price is not necessarily in your best
interest. Preparers who are preparing
many returns at lower prices may be more concerned with the quantity of returns prepared than the quality of the returns prepared. Returns that are rushed through may have
errors or omissions which you are ultimately responsible for. A thorough, accurate return where deductions
have been maximized legitimately should be your primary tax preparation goal. If
possible, it is best to assess your situation and look for a preparer
early. This will allow you more time
to find a preparer that is a good fit for you and to possibly even take
advantage of a tax planning consultation that could save you more money in
taxes. Keep in mind that if you wait
to call around until tax season (mid-January through mid-April), it may be
challenging to find someone who will be willing or able to speak with you
over the phone in much detail about your specific situation. If
you find that it is tax season already and you have not decided on the tax
professional that you will be using, there are a few ways that you can find
out more about some of them without taking up much of their time on the
phone. If you have access to the
Internet, you can check out websites of local tax professionals to find out
more about their businesses, their credentials, and the services that they
offer. You can also check with family
and friends to get some referrals. One
last point about finding a tax preparer that you really need to know – they
are not all the same! Did you know
that only a few states require any kind of licensing or registration of
preparers? Thus, in most states, just
about anyone can open up a tax preparation business. Did you know that they all do not have
full-time, year-round hours? This is
important in case you have questions or problems after your taxes are
prepared. You should do your homework
when checking out potential preparers - find out about their
licensing/credentials, education, experience, and availability throughout the
year. Two professionals that you
should consider in your search are Certified Public Accountants (CPAs) and
Enrolled Agents (EAs). They each must
meet strict criteria to obtain their designations as well as adhere to a
strict code of professional ethics and meet annual continuing professional
education requirements. Getting Prepared and
Organized Once
you find a preparer that you want to work with, you will want to be well
prepared and organized to ensure that you get the most from his/her time and
service. Being organized and prepared
can reduce not only your tax liability, but your tax preparation fees as
well. Before
proceeding with the actual pre-meeting preparation steps and specific items
that you should bring to your tax appointment, it should be noted that all
preparers do not actually meet with their clients face to face to prepare
their returns. Some just have clients
drop off or mail their information.
Once the returns have been prepared, they mail the returns to their
clients or have the clients pick them up.
Would you feel comfortable not meeting with your family physician for
your child’s annual physical exam?
There is so much more you can get out of the tax preparation process
by meeting and working with the preparer!
The
following are steps that you should take before
meeting with your tax preparer: ·
Schedule your appointment early. The earlier in the tax season you schedule
your appointment, the less likely it will be that your preparer is dealing
with many stressed-out, last-minute clients.
Additionally, you will be more likely to get an appointment for a day
and time that fits well into your schedule. ·
Review last year's return.
This will remind you of any tax issues or situations that you will
need to discuss with your preparer as well as remind you of items that you
will need for your appointment. ·
Organize all receipts and paperwork. The “shoebox” or similar method is not the
best for your tax appointment, unless you want to pay your preparer to sort,
organize, and add up receipts. Have
your receipts organized and totaled by category. Have other relevant documents organized by
category. ·
Gather all tax-related mail that you receive to include
pre-printed tax forms, tax booklets, and tax reminder notices. These items often will include information
that is helpful to your preparer in regards to your situation. Many tax clients assume that because their
preparer uses tax software that there is no need to bring these items to
their tax appointment. ·
Prepare information on unusual situations. If you have any unique tax situations or liabilities,
prepare to discuss them. This includes
any past problems you may have had. ·
Bring relevant computer data files. If you track your finances with a program
such as QuickBooks or Excel, bring the data file(s) with you. Having the data file(s) handy might assist
in answering any last minute questions.
Call first to make sure the preparer's office supports your file
format. ·
Brush up on relevant tax law/tax changes. While this it is not always possible for
the non-tax professional to be fully versed on tax law, the more informed you
are, the better you will be able to assist in the return preparation process,
provide important information, and keep unnecessary questions to a
minimum. Visit the IRS website
(www.irs.gov) and the website for your state department of taxation/revenue –
you will most likely be surprised how taxpayer friendly these sites can
be. ·
Compile your questions into an organized list. Try to avoid asking questions
haphazardly/at random during your tax appointment or making multiple phone
calls to your preparer in the same manner.
This is not an efficient use of your time or your preparer’s. ·
Be on time for your appointment. While we are all busy, there is probably no
one as pressed for time as a tax preparer during tax season. If you are late, this could take away from
the time the preparer can spend with you.
It is important to keep in mind that your preparer may have
appointments with other clients before and after your appointment. Accordingly, keep in mind that it is
possible for your appointment or the one before yours to run a few minutes
over the scheduled/allotted time, so be patient. ·
Avoid distractions during your tax appointment. Chit chatting with your preparer, cell
phones and pagers, and bringing children with you to your tax appointment can
create unnecessary distractions for your preparer which could result in
unintentional errors on your tax returns.
Your preparer needs to be able to fully concentrate on the task at
hand. ·
Do not delay getting information to your preparer. If after your tax appointment you need to
get back with your preparer with additional information, do so immediately so
your return is still fresh in your preparer’s mind and to avoid the last
minute April 15th rush. Remember, your
preparer has many other clients to deal with.
Thus, he/she cannot be expected to call to remind you that he/she is
still waiting on information from you.
You should take responsibility for getting additional information
needed to your preparer and for following up in regards to your returns in
process. As
for some specific items that you will not want to forget to bring to your
appointment: ·
Make sure you have all documents related to income. Examples include wage statements (Forms W-2s); pension and
retirement income (Forms 1099-R); interest and dividend income (bank
statements and reports, Forms 1099-INT, Forms 1099-DIV); self-employed
business income; lottery or gambling winnings; Social Security; unemployment
compensation; rental income; commissions; and tips. ·
Provide documentation of expenses and losses. Examples include self-employed business
expenses; lottery or gambling losses; expenses from rentals; medical and
dental expenses; unreimbursed employment-related expenses; job-related
educational expenses; job search expenses; moving expenses; and child care
expenses (to include care provider’s full name, address, and tax ID or Social
Security number). ·
Provide documentation related to your home. Typically, home ownership provides many
great tax benefits. If you buy or sell
a home during the year, make sure you bring complete documentation regarding
the sale or purchase of a home.
Additionally, bring information/statements related to real estate and
personal property taxes and mortgage and/or home equity loan interest paid. ·
Documentation related to miscellaneous income or
debt. Other items to bring
documentation on, if applicable, include, but are not limited to: sales of
stocks and bonds; state and local tax refunds; alimony paid or received;
estimated or foreign taxes paid; and cash and non-cash charitable donations. ·
Information on new dependents to be claimed on your tax
return or changes to dependents. If
you have had a baby, gotten married, have begun supporting a relative, etc.,
your preparer will need name, Social Security number, and date of birth
information (also discussed below). A
name change is another example of such information that your preparer will
need. If
you are not sure if something has tax implications, bring the related
document or information and ask! Furthermore,
if you are a new client to your preparer, you will need the following
items/information as well: ·
Your prior year tax returns to include relevant supporting
items such as Forms W-2s. Not only
your Federal return, but also your state and any local returns. There are items on your prior year returns
that may carry forward to your current tax returns. Additionally, the returns allow the
preparer to better understand your tax situation. ·
Full names, Social Security numbers, and dates of birth
for all persons that will be included on your tax returns. It is very important that names and Social
Security numbers given to your preparer exactly match up with what is on the
individual’s Social Security card.
Bringing actual Social Security cards to your appointment helps to
ensure this. Additionally, dates of
birth must be accurate. When such
information is not accurate, this can cause your return to be rejected for
processing or otherwise cause a delay in processing of your returns. In
addition to the above listed items, your preparer may have some additional
required items, such as a valid state issued identification card or driver’s
license for each taxpayer. Remember,
even though the preparer bears some responsibility, you are ultimately
responsible for your tax return. So
finding a great preparer and being prepared and organized will help ensure
that you recognize the greatest tax savings possible and that your tax
appointment goes smoothly! By
Tiffany J. Morisue, CPA, e-mail: tiffany@abcsolutionsohio.com |
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