When selecting a preparer, most shop price and not experience. But when it comes to taxes, the state, and the IRS, it’s better not to cut corners. There are some tax preparers that only go through a week course, while others are highly educated and seasoned experts. Just because someone claims they are a tax preparer, does not mean they know tax law.
Here are several tips that a tax expert wants to know.
Shoe box of receipts
Showing up with a box full of receipts that is labeled “for my tax preparer”, is not acceptable. Organize your tax items into a spreadsheet or an accounting software. In worst case scenario, write everything down and calculate your expenditures. Many times your accountant will not know how to categorize your expenses by the name of the company.
Keep a close record of all donations
Many people forget to track their non-cash donations. Make sure you get a receipt from the organization and list exactly what you donated. This will help prove the value of the donation in the event of an audit. You could also take a picture of the items that are highly valued.
Set aside money if you are self-employed
For those of you who are self-employed, it’s vital to set money aside for your taxes. You should be saving an estimated 35% to 45% of your gross pay. Also, you may need to be paying quarterly estimated tax payments for federal and state taxes. The self-employment tax is computed at 15.3% of your net income.
Keep organized records
Make it a priority to keep excellent financial records. You will always be able to maximize your deductions with better records, thus reducing your taxable income, which will lead to less tax due. Those who do not, will most certainly overpay the IRS.
If you cannot file your return by the April deadline, you can file for a six-month extension. However, the extension only extends the time to file your tax return, not to pay your taxes. Make sure to pay a realistic estimated tax payment.
Don’t fear e-filing
Most tax preparers will encourage you to allow them to e-file. This is because you will get your refund faster and there is an immediate approval or deny. If it was accepted, then you will get a confirmation, if not then you can quickly fix the errors and resubmit. In addition, paper returns have a 20 percent error rate, compared with 1 percent for electronic returns.