Business matters
Is it Tax Time Again? By Carol Gordon, CPA
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or those of you who are getting your tax information together to give to your tax preparer, here’s a “hit list” that will make the experience a little less painful. 1. Choose a tax preparer with the same diligence as you’d choose an instructor or trainer. Do some research by asking trusted advisors and friends. The IRS website offers tips on choosing a preparer and includes a directory of preparers by zip code. 2. Schedule an appointment ASAP. If you wait until the last minute, you dramatically increase the probability of errors on the return. 3. Gather your documents. By January 31, you should have received most of the common forms that you’ll need such as W2 and 1099 (MISC—as an outside contractor, INT—for interest, DIV—dividends, etc.) Round up your receipts. Some common documents that you’ll need for the personal portion of your return are property tax, mortgage interest, charitable contributions, medical costs not covered by insurance, etc. If you operate your own business, you’ll need documents for all of your businessrelated income and expenses. Make sure that you haven’t included any personal expenses in your business finances. That’s a big IRS no-no. Don’t give your tax preparer receipts and ask them to calculate the totals. Most will charge for this service and if you haven’t calculated the totals yourself, how will you know if the totals the preparer uses are correct? Once you have the totals, compare them to the prior year for reasonableness. 4. List all of your personal information such as address, Social Security numbers for you and your dependents so the prepare can compare to the prior year. Notify the preparer of any changes in your life that may impact your tax situation and any significant plans for the future. Inform your
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preparer of any sales of business property including the dates acquired and sold and cost to acquire and selling price. 5. If this is the first time that you’ve used this preparer, provide them with the prior year return. You can also use it yourself as a checklist to be sure you haven’t forgotten any types of income and expense. And when the current return is prepared and provided to you for review, you can use the prior year return to check this year’s for reasonableness. 6. If you don’t feel that you have adequate time to collect all of the documents or adequate time to review the return, discuss the option of filing an extension with your preparer. If you file an application for extension prior to the April 15 deadline, you have until Oct 15 to file your return. but (cue the flashing red lights!!!), you are still required to pay most of your tax liability by April 15 in order to avoid a penalty. The extension is an extension to file your
return, not an extension to pay your tax liability. 7. If you are receiving a refund, plan what to do with the money (no, not a vacation in the Bahamas). You have several options— applying the refund to your next year’s tax liability, purchasing US Savings bonds or receiving the refund (either via direct deposit—much quicker—or via check). And if there is a “significant” amount due, discuss with your preparer whether you should consider increasing your withholding or making quarterly estimated payments. If you prepare in advance, each year gets easier so that pretty soon, you won’t feel the need to hide in the closet when you realize that it’s that time again! About the author: Carol Gordon is a CPA with an MBA from Boston College and the owner of Carol Gordon, CPA, which provides consulting services to equine-based businesses. You can contact her at cgordoncpa@gmail. com. If you have any questions that you’d like covered here, please email her with your suggestions.
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