Be a savvy consumer and get the best value from the professional services that your CPA provides. Don’t just expect a tax return from your preparer but squeeze your CPA for advice on a broad spectrum of tax and financial matters. Sometimes the value of this advice can far outweigh the cost of preparing the tax return. Here are just a few ideas:
- How much do I need to save for retirement?
- Should I buy or lease a car?
- Should I get married or divorced in January or December?
- How can I reduce tax on the sale of real estate?
This list is endless, but pretty much any financial or tax decision is better made with guidance from someone with experience and objectivity.
For service providers like CPA’s, time is inventory. Just like a hotel room or airline seat, this inventory is in limited supply, particularly during busy times like tax season. This means that the amount you pay for services is related to the time that the CPA’s office spends on your project. Minimize this time by providing material to the CPA in as complete and well organized a fashion as possible.
For an Individual Tax return, you’ll receive a tax organizer booklet at the beginning of tax season. This booklet has sections for gathering items of income and expense that make up your return; each section shows the prior year amounts. Even if you don’t fill out the booklet, use it as a checklist to ensure that you have all of the information that your tax preparer needs. Gathering information can be a time consuming step for the preparer, so minimize this time (it’s your money!) by providing him or her with all of the information up-front. Obviously stopping and starting a tax return is an inefficient process, which significantly adds to its cost. If the preparer does need additional information, try to come up with this right away while the return is still being worked on.
Here are some tips to streamline the tax return process:
Automobile Mileage
Be sure to provide your tax preparer with:
- Business miles / unreimbursed miles for business use if an employee
- Commuting miles
- Medical miles
- Volunteer/charity miles
- Total miles
Automobile tags
Provide the automobile registration actually paid during the tax year. TIP: In Colorado auto registration tags come in duplicates: put one part in your glove compartment and one in your tax file.
Non-cash charitable contributions
Make sure that you collect receipts when you drop off old clothes and household items with charities. Come up with a totaled list of values for your tax preparer.
Real Estate
Provide settlement statements (closing statements) for all real estate purchased, sold or refinanced during the year.
Capital gains
Make sure that your investment advisor or financial institution has a complete record of the costs of all securities in your portfolio and provides a recap of realized capital gains and losses at year-end. Reconstructing the cost basis of stocks and mutual funds is a time consuming and expensive process.
Handwritten schedules
If additional information must be provided on supplementary pages, please use a separate page for each section of your tax return. Label each page clearly with the section of the tax return that it pertains to, e.g. “123 Oak Lane rental” or “Sally’s decorating business”. Providing the tax preparer with detailed information for various tax return sections all crammed onto one sheet of paper is the surest way to add to the cost of the return while significantly increasing the likelihood of errors.
NOTE FOR NEW CLIENTS
If this is the first year with a new tax preparer you will also need to provide:
- Prior year personal and business tax returns including detailed depreciation schedules and all state returns
- Dates of birth of all family members
