1. We see many disastrous returns prepared by ill-trained preparers.
When selecting a preparer, many people shop price and not experience. We don't like to knock the competition -- however, the old axiom, 'you get what you pay for' is often true. There are some companies that put their newly hired preparers through a six-week, evenings-only tax course, and then turn them loose to prepare returns with very little oversight. In other words, the person preparing your return might have been styling hair or selling appliances six weeks ago. --Dennis Coomes, CPA, Kansas City, coomescpa.com
2. Nothing is more frustrating than when clients show up with a box full of receipts
and forms and say 'prepare my tax return.' Take the time to organize your tax items into something we can use -- like a spreadsheet. At the very least, write everything down so we know what is included.--Caleb Newquist, CPA and editor of the accounting blog goingconcern.com
3. People often lose out on deductions by overlooking non-cash charitable contributions.
If you make several trips to your local Goodwill or Salvation Army in a given year, keep good records of these donations. An excellent iPhone app, iDonatedIt
(created by a CPA firm) can help you determine the value of your donated items.--Caleb Newquist, CPA and editor of the accounting blog goingconcern.com
4. When it comes to an audit, hire your CPA
to go with you, as opposed to going yourself. I've had a few clients who went to the audit themselves and they’re now facing a huge liability because the auditor found their documentation to be insufficient. If you go yourself, you’re probably more vulnerable. You can even authorize your accountant to go on your behalf.--Anil Melwani, CPA, New York City, akamtax.com
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5. When in doubt, throw the receipt in the tax file, and we can discuss it.
I tell my clients, 'If I don't know you spent money for a tax deductible item, I won't claim it on your return.' Tax filers need to talk with their tax preparers. We ask questions to try to get the information we need to file an accurate return, and to legally minimize the taxes our clients pay. However, we can't ask every question.--Dennis Coomes, CPA, Kansas City, coomescpa.com
6. For those of you who are self-employed, it's critical to set money aside for taxes
so you're not slapped with a massive tax liability at the end of the year. We see it happen all the time. If you're an independent contractor, you should be setting aside money for taxes equal to 35% to 45% of your gross pay, and you should be paying quarterly estimated tax payments for federal and state taxes. The self-employment tax is computed at 15.3% of your net income. Sources:Anil Melwani and Dennis Coomes
7. Please don’t complain about and/or negotiate our fees
based on the fact that you or your business had a bad year. You’ll be surprised at how many clients try to do it. What most people don't understand is that the time and effort that it takes to complete a tax return does not change in relation to your annual income or loss. --Anil Melwani, CPA, New York City, akamtax.com
8. You don't need to spend $200 on a CPA if your return isn't complex.
By 'isn't complex' I mean you receive a W-2, you receive a couple of 1099s, you don't work in multiple states, you have no partnership income or other flow-through income, and maybe you itemize. If you have just a few issues, those can be easily researched on the web. And if you're expecting a refund but need extra time, file an extension. There's no harm in filing after April 15th if you're expecting a refund. Â Sure you might want your refund now but if you take the extra time to learn how to prepare your tax return, you're likely to save money long-term. --Caleb Newquist, CPA and editor of the accounting blog goingconcern.com
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9. Don't be pound wise and penny foolish.
If you have complex returns, trying to save money doing the return yourself may cost you more in the long run, through missed deductions or dealing with subsequent IRS tax notices about missed income or misapplied deductions. Also, remember that with free online programs, while the federal return is free, there are charges to prepare and electronically file state returns. --Dennis Coomes, CPA, Kansas City, coomescpa.com
10. One of the most challenging issues we battle is the word of mouth
shared by 'experts.' Just because they say it is deductible on TV or radio doesn't make it so. Nearly every deduction or tax credit has limitations, exemptions and exceptions. Clients will come in and say “You know, I heard that I can deduct (insert here) from my taxes. I know this is true, because my brother's barber's sister's husband owns a business, and he has deducted it for years.' Quite often the information is flat out wrong. --Dennis Coomes, CPA, Kansas City, coomescpa.com
11. If you show up after April 10 asking us to prepare your return, in all likelihood, you'll be going on extension.
We rarely drop what we're doing for just anyone, and the final few days leading up to April 15, things are hectic. If you wait until the last minute and come unprepared don't even bother asking for it to get finished by April 15, the deadline. --Caleb Newquist, CPA and editor of the accounting blog goingconcern.com
12. Make it a priority to keep good personal financial records.
to track everything you spend and you'll maximize your eligible deductions, thus reducing your taxable income, which will lead to less tax due. Â --Caleb Newquist, CPA and editor of the accounting blog goingconcern.com
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13. Extensions! Many tax filers are confused about this.
If you cannot file your return by the April 15 tax filing deadline, you can file for an automatic six-month extension. However, the extension only extends the time to file your returns -- not to pay your taxes! If you properly file the extension, you will avoid being assessed 'late filing penalties' of 5% per month, up to a total of 25%. However, if you file the extension and pay the balance owed on your prior year taxes after April 15, you will still be assessed a minimum of 1/2% per month plus interest at the federal established rate. If you owe taxes and file your return and pay your taxes after April 15, you will incur late filing and late payment penalties, plus interest. Therefore, if you need to file an extension, you must send in a payment for the taxes owed to avoid penalties and interest. This is true for state and local income tax returns as well. If you pay too much with your extension payment, you can have the excess refunded, or applied to the following tax year.--Dennis Coomes, CPA, Kansas City, coomescpa.com
PLUS: 5 Helpful Tips for Tax Time