YOUR TAX PREPARER IS A FRIENDBondBeebe
Individual tax return preparation is in many ways like putting together a jig saw puzzle without seeing the picture on the box. Unless the preparer has intimate knowledge of the taxpayer’s situation, he/she must rely solely on the information provided and ask questions when items appear to be missing. A picture of the tax situation, given this information and answers to those questions will soon emerge. Will it be the correct picture? That will depend on completeness of the information. provided. The more accurate the information, the less likely errors will occur or beneficial items missed. The tax preparer should be your friend, not someone who is viewed as making your life difficult.
For many, putting together each year’s tax information can be unpleasant. Often, like most distasteful tasks, this process is often delayed until the last minute. Your tax preparer will do a much better job in putting your return together the more time he/she has to work on it prior to the April 15 deadline.
The purpose of this article is to outline 5 top tips to follow so you may become more active in your own return’s preparation. Your involvement will increase the accuracy of your return, ensure that all legal tax benefits are claimed and result in a preparation fee compatible with the complexity of the return.
1. When unsure, submit all information that may have tax implications.
Tax laws change every year. Something that meant nothing last year may have advantages this year. An example…If you purchased an energy efficient HVAC system in 2009, a credit against your taxes of up to $1,500 may be available. In 2008 this credit was not available.
2. Make sure you have received all interest, dividend and investment sales/costs information from investment accounts.
Your tax preparer will usually be able to determine if all accounts held the prior year are accounted for this year, but of you have added new ones, he/she will not know that unless you tell them. Making sure all of this information is included on your return will eliminate IRS notices.
3. Provide documents to support deductions.
This is especially true for charitable contributions, which have strict documentation rules. Donations of clothing and other non-cash items should be itemized and valued. The charity will not usually do this for you. It is your responsibility to properly value any non-cash donations.
4. Discuss any changes in your income/deductions from 2009 to 2010.
In order to avoid underpayment penalty, a certain percentage of your taxes must be paid throughout the year. Having an idea of what your tax liability will be for 2010 will allow the preparer to recommend an increase or decrease in the amount you should pay.
5. Discuss contemplates financial transactions before they happen.
Not much tax planning can be done once December 31 passes. Often the form a financial transaction takes can create positive or negative tax conequences. Once the transaction is complete, little can be done to change the tax ramifications.
Although the above 5 tips are by no means all-inclusive, they do represent the major steps to ensure your return relects all the benefits the tax law has to offer.