Tax Time is Coming!
By Larry Merkow, President
Total Financial Management, Inc.
As April 15th is quickly approaching, I thought that we should discuss a few of the things you should be aware of before you file your tax returns. There are some last minute chores that will make your tax time a little bit easier.
One of the things that accountants have consistently mentioned to me as their chief complaint, when I asked them what would make their jobs a little easier, is the way their clients organize their expenses. They tell me that their clients bring in books and receipts and expense reports organized (sometimes, sometimes not) by the month. Apparently the average Joe doesn't think like bookkeepers and accountants. Expenses, they tell me, should be bundled by category. If you ask your tax person, they will give you a list of expense categories for you to follow.
If you are unable to file your tax returns on time the sooner you notify your tax preparer the better. If you can not file by April 15th you can apply for an automatic extension until August 15th. After that it gets a bit more complicated but you can file for a further extension to October 15th. Remember that you must keep your preparer in the loop and the more notice that he or she has the better.
If you have not contributed to your IRA for 2008 the deadline for making a 2008 tax-year contribution of up to $5000 ($6,000 for age 50+) to your IRA is April 15, 2009. You can also contribute for 2009 tax-year at the same time.
So let's talk about you preparing your own tax returns. It is my opinion that the tax code is much too complicated for most people to navigate by themselves. Further, the IRS encourages people to use its' online help and tax preparation software which is reason enough to seek out a qualified tax preparer to do the work for you. The IRS mandates that you pay as little tax as is allowed by law. The law (the IRS tax code) is more that 3 inches thick and close to impossible to understand and yet “you are legally responsible for what’s on your tax returns” according to IRS guidelines. In their defense the IRS does give this advice, which I feel is prudent.
If you will be paying someone to do your tax return, choose a tax preparer wisely. You are legally responsible for what’s on your tax returns even if they are prepared by someone else. So, it’s important to find a qualified tax professional. Reputable preparers will ask multiple questions to determine whether expenses, deductions and other items qualify and remind clients that they need to keep careful and complete records in order to substantiate information on their tax return. By doing so, they have your best interest in mind and are trying to help you avoid penalties, interest, or additional taxes that could result from later IRS contacts.
Most tax return preparers are professional, honest and provide excellent service to their clients. You can use the following tips to choose a preparer who will offer the best service for your tax preparation needs.
- Find out what the service fees are before the return is prepared. Avoid preparers who base their fee on a percentage of the amount of your refund or who claim they can obtain larger refunds than other preparers.
- Only use a tax professional that signs your tax return and provides you with a copy for your records.
- Avoid tax preparers that ask you to sign a blank tax form.
- Choose a tax preparer that will be around to answer questions after the return has been filed.
- Ask questions. Do you know anyone who has used the tax professional? Were they satisfied with the service they received?
- Check to see if the preparer has any questionable history with the Better Business Bureau, the state’s board of accountancy for CPAs or the state’s bar association for attorneys. Find out if the preparer belongs to a professional organization that requires its members to pursue continuing education and also holds them accountable to a code of ethics.
- Determine if the preparers' credentials meet your needs. 1. Does your state have licensing or registration requirements for paid preparers? 2. Is he or she an Enrolled Agent, Certified Public Accountant, or Attorney? 3. If so, the preparer can represent taxpayers before the IRS on all matters – including audits, collections, and appeals. Other return preparers can represent taxpayers only in audits regarding a return signed as a preparer.
- Before you sign your tax return, review it and ask questions.
So, this year, be timely. Be organized and well informed. Seek out and use a professional tax preparer. I believe that the money you spend will be well worth it both for your peace of mind and the representation it provides should you need it in the future.
For more information on financial planning, contact Larry Merkow at (559) 326-2027 or via email at lmerkow@tfminc.us.
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