Associate partner Anne D’Amico, CPA/PFS offers advice on how to endure a smooth tax filing season each year.
Following are some simple steps you can take to decrease anxiety associated with the preparation of your tax returns, whether you prepare them yourself or hire a tax professional.
- Get Organized. Keep a large envelope wherever you open your mail and immediately place all documents labeled “Important tax information enclosed” in the envelope. Keep this envelope handy during the year as well to collect receipts and canceled checks. Most of my clients dread getting all their paperwork together which can be easily avoided using this technique. You will have to scan your check register for personal and business deductions, but at least you will have all your tax documents in one place.
- Don’t Procrastinate. April 15 happens every year. This year, you have three extra days to fret since the tax filing deadline is extended until April 18. I am always amazed at my clients who wait until the last minute to make an appointment to come and see me. Prepare your tax returns as early as possible whether you owe money or expect a refund. If you are getting a refund, send them in immediately. If you owe money, wait until the filing deadline to mail them. This is no different than exercising, dieting, going to the dentist, or quitting smoking. The earlier your tax returns are prepared, the better you will feel.
- Plan Ahead. You should have a good idea if you are receiving a refund or paying taxes well before April 15. Review your prior year tax returns and look at the result. The optimum result is break even or owing a small balance. Many of my clients take extra taxes out of their pay in order to receive a refund when they file their tax return. Think about this; you are giving your money to the federal government all year long, and they are giving it back to you the next year with no interest.
- Seek Help. If you are not sure how to prepare your tax returns, seek the help of a professional. The Internal Revenue Code is voluminous, and many of the laws are complicated. Most of my clients are long term clients of my firm, but some of my new clients gave up trying to prepare their tax returns themselves because of the complexity of the laws and the forms.
- Ask Questions. If you take my advice about seeking the help of a professional, ask questions about the upcoming year. Tax return preparation is a looking backward service. Tax planning is a looking forward service. After I complete my clients’ tax returns, I talk to them about the year ahead. Were they happy with the results of their tax returns? Are they going to experience any life changes which will affect their tax situation? Tax planning is crucial for everyone, at every income level.
- Review Paystubs. I can’t tell you how many of my clients never look at their paystubs. If your net pay increases from what you are accustomed to, don’t assume this is a gift from your employer or your payroll company. Be cautious and assume this is a mistake. Granted, new tax laws will affect your pay, and when you reach certain limits, deductions may stop which will result in a higher net pay. Your employer or human resources department can let you know why your pay is not what you expected.
- Invest Wisely. In conjunction with reviewing your pay stubs, review your retirement plan contributions if your employer sponsors a plan. If you participate in a 401(k) or other type of defined contribution plan at work, take a look at your deferrals to the plan which are also on your pay stub. Invest as much as you can afford, and consider increasing your deferrals each year until you reach the maximum allowable contribution. You will save money for retirement as well as save taxes since your contributions will reduce your federal taxable wages. I don’t hear any of my clients complaining that they have too much money when they retire.
- Cut Costs. Once you have made the decision to utilize a tax professional, following is my advice on how to cut costs on the preparation of your tax return.
- Wait until you have all of your tax documents or at least 90% of your tax documents before you visit your accountant. Don’t send your documents in piecemeal.
- Give your accountant neat and organized records. Open your mail and review the information. If it is a tax-related document, include it. If the information has nothing to do with your tax return, leave it at home.
- Do as much of the work you can yourself. If you have a business or own a rental property, add all your receipts and expenses, and categorize them. If you sold stocks, look up the date you purchased the stocks and the amount you paid for them if this information is not readily available from your broker.
- Ask about the fee ahead of time. Neither you nor your accountant likes surprises.
To learn more about Alloy Silverstein’s tax preparation services for South Jersey individuals and businesses, or to meet our tax experts, explore our Tax Services page.
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