Top 5 Tips for Hassle Free Tax Preparation

by Guest Contributor · 19 comments

I know what you’re thinking. It’s not even Halloween yet so why in the world should we be thinking about the most dreaded day of the year, April 15th? The truth is, now is exactly the time when you should begin planning the preparation of your 2009 tax return. Here are a few tips to help you get started:

  1. Avoid tax preparation services such as H&R Block and Jackson Hewitt. Instead, put in the time and effort to find a good C.P.A. If you’re serious about wealth building, then you need an accountant who’s going to be available to you throughout the year, not just during tax season. Tax service companies open their doors during the weeks leading up to tax season and close them shortly thereafter. If in September, the IRS decides that they have a question about your 2009 tax return, it will be almost impossible for you to get in contact with the tax preparer who completed your return if you used a tax service. Instead, you’ll be stuck playing phone tag with the tax service’s corporate office. This is not a good position to be in when you’re up against the Internal Revenue Service.
  2. Don’t make the mistake of not knowing ahead of time your estimated balance due or refund amount. Whether you make estimated tax payments throughout the year or have withholding from your payroll check, follow this link to access the IRS withholding calculator. The calculator will prompt you to answer a series of questions about your current tax situation including the amount of federal tax paid thus far, number of dependents, and your filing status. It will then provide you with an estimate of the amount you will owe or the amount to be refunded back to you at the end of the tax year. If you’re unhappy with that amount, you have time to make the necessary adjustments. Be proactive.
  3. Remember, the tax code changes from year to year. A deduction you were eligible to take in tax year 2008 may have been reduced or removed for tax year 2009. It pays to review changes to the tax code since your last filing. Click here to review the changes that could affect your bottom line.
  4. With the unemployment rate approaching 10%, it is a given that 2009 was a difficult year for many taxpayers. Many of you may be looking to your 2009 refund to lighten your financial load. Just make 100% sure that you are not behind with your student loan payments or child support. If you are, the IRS will take your refund and apply it to what you owe the Department of Education or the state in which you owe child support. The process of getting back on track can take months, so start now.
  5. RECEIPTS! RECEIPTS! RECEIPTS! As I mentioned previously, if your return is flagged for an audit, you’ll need to document your deductions with receipts. Now is the time to start collecting and organizing your receipts, not mid April!

This is a guest post from Yvette Carnell, who wrote it for Tax Matters Solutions, a Fort Wayne, Indiana business helping people with IRS problems.

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{ 19 comments… read them below or add one }

Eric J. Nisall September 19, 2009 at 7:22 am

I couldn’t agree more about there not being such a thing as “too early” to get organized and prepared to have have your taxes done. I especially agree with the first point about not using chain services. Most have had plenty of lawsuits filed against them for unethical practices, and almost more importantly they do not screen potential preparers for experience or educational background. I do, however have to disagree about looking for a CPA as there are many tax preparers who have been preparing taxes for many years within CPA firms and simply never got the designation. All that means is that they cannot appear before the IRS in case of an audit, and if the person preparing the return is worth their salt, they will make sure to only use rock-solid information in order to avoid raising red flags when the return is processed by the government.

The most important aspect in my personal and professional opinion is being organized and timely. That is why I provide organizers to past clients so that they have one place to fill in all of their information for the upcoming filing year, and a way to keep the corresponding documents together. I also post a simple outline for getting ready on my blog for anyone else who may happen to come across it and who may derive some benefit. Last year’s post was called Get A Jumpstart On Your 2008 Tax Return By Getting Organized Early which I posted in December, but this years’ will probably be up a little earlier because I have a feeling many people will be “needing” their refunds earlier as well.

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Financial Samurai September 19, 2009 at 7:51 am

Ah, dreaded taxes. Honestly, I think it’s too early to think about it. I need to get my W2 form for the whole year in my hand, as well as all my interest income and private equity statements before I can start the process.

I’ve done all three: hire an expensive CPA, a 25 year veteran from H&R block, and I’ve done it myself. I actually recommend you do all three and then decide. Doing your own taxes teaches you an ENORMOUS amount of things you would have never known. You’ll make mistakes, but you just make it up in the next one.

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MoneyNing September 19, 2009 at 8:41 am

I totally agree with the guest author. Taxes are a year round thing and definitely not a big April only event. If everyone truly understand how taxes affect our lives, at least we won’t be misled by salespeople who say that we should buy this and do that because of tax write offs.

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Samuel September 19, 2009 at 8:46 am

No one should ever wait till April to think about their taxes. The great thing about being able to file online now is that you can prepare your taxes and just fill in the blanks as those W2s, 1099s and others come in the mail. Those software also give you an initial estimate of the refund or how much you owe ahead of time so you can prepare.

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Eric J. Nisall September 19, 2009 at 11:35 am

@Financial Samurai – don’t you think it would work to your advantage to have a system of tracking your income, investments, and expenses so that you can plan and adjust accordingly throughout the year? This is what real tax preparers & CPAs provide as part of their services that the chains and you yourself cannot. We call clients in order to get an understanding of what their year has consisted of (if they are not already business clients) and how this year has differed from the prior one. This way, if there is going to be an overage or shortfall of witholdings, it can be dealt with during the year, and not come as a complete surprise at the time of preparation. Of course, they are only projections, but an informed projection is always a great planning tool.

@Samuel – How can you use these online tools or software to prepare if you are waiting until you have the documents in hand? The resources you mentioned are all after-the fact tools, and in no way can they help you plan or prepare. They simply take the final figures and come up with a calculation.

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Samuel September 19, 2009 at 4:40 pm

The online tools allows me to put in all the fixed ones, so when I get close, I can estimate what the refund will be even if I don’t put in some of 1099s I’m missing since I can guesstimate what those amounts will be.

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Lee September 19, 2009 at 11:55 am

I’m fortunate enough to have my tax dealt with by my employer for the moment. I fear that will change once I start investing properly though. :(

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Financial Samurai September 19, 2009 at 10:05 pm

Hi Eric – My income is pretty consistent, except for when stock gets vested and bonus gets paid. It’s pretty straight forward i.e. income, + rental property, + stock proceeds and dividends. I don’t have anything funky. Mortgage interest deduction is straight forward too.

It all depends though. How much do you/your firm usually charge per individual? If it’s $500 or less, it’s probably worth it for me, but not so if more no matter how much I make.

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Eric J. Nisall September 20, 2009 at 9:15 am

@Samuel – The problem is, that most of those programs are not available far enough ahead of the end of the year for you to be able to take any real advantage of them. And, if you are using the prior years version, it will not be accurate depending on the variety of tax code changes and special tax breaks the government decides to put in place (ie: the first time home buyer credit, or the cash for clunkers credit). The goal is to have a clear enough picture ahead of time to be able to make adjustments should they be necessary, and Turbo Tax, Tax Cut, free e-file sites, etc simply do not not afford anyone those benefits.

@Samurai – Understood. I set my rates on a case-by-case basis, generally depending on the complexity of a return and the individual situation (I will give discounts to public servants like police and firefighters, single parents or households under a certain gross income level, etc) and that is one of the biggest points that I founded my company on–people before profits. Unless you have 10 K-1’s, are a day trader or have multiple rental properties (or something along those lines), I doubt that I could charge close to $500 for an individual return. There are people whose returns have cost several thousands which I have seen when I was working for someone else, but as I said, that person had almost 100 K-1s from various investments and a significant amount of time went into the preparation.

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MoneyNing September 20, 2009 at 4:16 pm

Question for you… Do you actually work with your clients year round, or does your client have to call you up continuously to ask questions? I know my accountant never calls me until I find her, and even then, she sometimes gives me the feeling that she’s in a rush. However, at the rate I pay her ($200 a year for filing taxes), I can understand that she can’t possibly take care of me year round.

How do you do it?

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Eric J. Nisall September 20, 2009 at 8:19 pm

Since my client list isn’t very extensive, and some are friends and family, I am able to keep pretty close tabs on their situations throughout the year David. It really isn’t very difficult, as all it really takes is a quick phone call at varying points during the year, but most importantly in the 3rd quarter to get a more accurate gauge of where they stand. When I worked at firms, many of the individual clients were also corporate clients, so we had quite a bit of their info throughout the year so that helped quite a bit.

What I plan on doing as my clientele expands is drawing up a form letter that I would send out in addition to periodic phone calls just to touch base and make sure that nothing drastic has occurred such as a large bonus or pay cut, planned stock sales or inheritances. To me, it’s more about developing and maintaining a relationship with clients that extends beyond just the accountant-client standard.

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Wealth Pilgrim September 20, 2009 at 1:12 pm

I do all my books on Quickbooks so at the end of the year, it takes me about 30 minutes to put everything together for my CPA.

If someone is using a home-made software package that doesn’t prep them for taxes, it may cost them more in time than they save in dollars by not buying this kind of software.

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Del September 20, 2009 at 3:46 pm

Pretty lame, having an anonymous guest contributor. Not much responsibility there. There are retail tax preparation chains which are open all year, albeit, with reduced hours. They are generally willing to make an appointment for other hours if you make a request, as revenue is pretty scarce for them when not in tax season. I know the 3500 Liberty Tax Service offices guarantee to remain open at least one day a week all year. And most individuals do not need an expensive tax CPA (who are also not perfect by the way.)

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MoneyNing September 20, 2009 at 4:14 pm

I am sorry you didn’t get a chance to read the whole post, as the guest poster was identified.

I think Eric’s point is that finding the same tax preparer from those retail chains is very difficult because most are temporary workers working for a month out of the year.

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Eric J. Nisall September 20, 2009 at 4:26 pm

That, and the fact that they do not require any type of educational background or experience. All that is required is that they complete a 60 hour course where they think that all relevant topics will be covered. That 60 hours is the equivalent of ONE college course in an accounting tract, which by no stretch of the imagination is sufficient to prepare ANY tax return that consists of more than a single W-2.

I speak from personal experience as I have completed a 4 year degree in accounting, as well as having 8 years of experience working in CPA firms. I have even heard of college grads who could not process a fairly early return based on the fact that they had difficulty putting the tax and accounting theory into practice.

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Eric J. Nisall September 20, 2009 at 4:19 pm

@ Del – Actually, the guest contributor is not anonymous, as his information is given at the end of the post. To address your assessment of chains being open at least one day, that may be true, but if you were going to use a paid professional (and I use that term loosely when referring to many who work at such establishments) wouldn’t you prefer to have access to them whenever you needed? And, not all CPAs/tax preparers are expensive, that is simply a common generalization. I will give an example for all: I did a return for a friend of a friend 2 years ago, and this lady had used H & R Block the year before. The chain charged her $180 for a simple 1040 (meaning that it was just the 1040 itself, no schedules, not even a schedule A). The most I have ever charged someone for a simple 1040 return was $100, and that was with e-filing included in the pricing. It is simply a matter of asking friends, family, co-workers, etc about their preparers and calling around and interviewing a couple to determine who is best for you.

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Wilson Pon September 27, 2009 at 11:13 pm

David, when it comes to the taxes, there’s always no “too early” in my dictionary. Honestly, I’ve already well-prepared for the upcoming 2010 tax payment…

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Tax Problems July 11, 2010 at 7:57 am

All tax professionals are not equal. Only attorneys, certified public accountants and enrolled agents are allowed to represent others before the IRS.

Of these three ask yourself who do you really want to deal with regarding tax returns and other financial matters?

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TeXan May 22, 2011 at 8:56 am

As you know most CPA’s mostly use one of the Tax preparation software ie Turbo Tax to do your taxes. CPA’s have no specific training in taxes and their certification s do not test for this. They are accountants (Hence Certified Accountant)
http://www.cscpa.org/Content/Students/College/Requirements.aspx

You may want to consider and EA or Enrolled Agent. They are specifically trained and tested on Tax preparation. They are somewhat hard to find. An EA who also has passed the cpa test is the best of both worlds.

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