1. Many disastrous returns are prepared by ill-trained preparers
Many people tend shop tax preparers by price and not experience. Unfortunately for these people, the old axiom ‘you get what you pay for’ is often true. Some companies 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. The person preparing your return might have been styling hair or selling appliances six weeks ago. Just because someone claims they are a CPA doesn’t necessarily mean they know taxes. Ask about their background, what kind of practice they have, and if they’re familiar with your state’s tax laws.
2. Organize your papers before your appointment
Nothing is more frustrating a client showing up with a box stuffed with unorganized receipts and forms, then say say ‘prepare my tax return.’ Take the time to organize your tax items into something your preparer can use —like a spreadsheet. At the very least, write everything down so your preparer will know what’s included.
3. Keep a close record of all donations
Many taxpayers either forget to or don’t bother to track their non-cash donations. Those garbage bags of stuff you give to Goodwill can add up at tax time. Be sure to get a receipt and note exactly what you donated: “five pairs of women’s pants, three button-down men’s shirts, one child’s puzzle.” There are also cell phone apps that can help you determine the value of your donated items.
4. If you do get audited, never go it alone
Getting audited can be scary, but a smart move is to hire an accountant, enrolled agent, or tax attorney who has experience dealing with the IRS. Though the solution to the audit may be a sumple one, it’s best to work with a professional who knows what they’re doing and get it right. This is what IRS agents won’t tell you about tax planning.
5. Set aside money if you are self-employed
It’s critical for those who are self-employed to set money aside for taxes so you’re not slapped massive tax liabilities at the end of the year. It happens all the time. If you’re an independent contractor, setting aside money for taxes equal to 35% to 45% of your gross pay is recommended. Additionally, 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.