5 Steps That Help Your Tax Preparer Save You Money

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Calculator-385506_1920Hard to believe, but it is tax season again.  (For us it seems like it never ends!)  That means it is time to start getting ready to file your tax return and pay your taxes.  Most business owners put visiting their CPA right up there with visiting their dentist for a root canal.  One year I had a client who came to me straight from the dentist.  He said that he would rather go there because at least they give him painkillers before they drill him!

Now, ignoring your taxes is not the right solution.  Doing the following things will help your tax preparer ensure that you pay the lowest income taxes legally allowed:

  1. Get organized.  Don’t just throw your receipts in a big box and drop it off at your accountant’s office.  Not only will your tax preparation bill be higher, but you are probably not getting every deduction you could.  You know what you did better than your tax preparer.  Be sure to give a recap sheet totaling items in each category.
  2. Have a meeting with your tax preparer before they do the return.  Unless your return is very easy, schedule a meeting with your tax preparer to go over any unusual transactions, ensure that the preparer understands your information, and that all carryovers from prior years are included.  These include loss carryovers, depreciation amounts, and tax payments.
  3. Have the same preparer do both your personal return as well as your corporate or partnership return.  It is much easier for the same preparer to do both returns so they are filed consistently.  One return is often dependent on the other.
  4. Improve your accounting records.  If you don’t have good accounting records, I can promise you that you will overpay taxes every time.  When you don’t have good records, it very easy for the IRS to recreate your income.  Much of it now is reported to the IRS and the rest can usually be captured from your bank accounts.  The IRS has even come up with formulas to check up on the reasonableness of income reported when compared to product costs and labor hours.  But expense deductions require proper documentation that only good accounting records provide.  With the low cost and relative simplicity of accounting programs such as QuickBooks, there is no excuse for a business owner not to have good records.  Call your accountant early or get an extension so that you can improve your accounting records and cut your tax bill.
  5. Don’t wait until the last minute.  A couple of years ago I reviewed all of the errors that were made by our firm.  Thankfully, there were few.  But 90 percent of the errors occurred on tax returns completed the week before the deadline.  If you want your tax return to have the proper amount of attention to detail, either get it to your accountant early or file an extension and file it after the rush.  One caveat:  Don’t procrastinate until just before the extension deadline.  Many of us are even busier in September and October than we are in March and April because there are no more extensions and the work simply must get done.