How To Prepare For Your Tax Preparer

From WikiTaxGuide.com

So, you've decided to hire a tax pro to complete your taxes. So now you can just go into your tax preparer's office, and walk out with a large deduction, no fuss, no muss, right?

Well, not exactly. While your tax preparer will likely have a much better grasp of the current tax laws than you, and could find several deductions that you might otherwise miss, the preparer does this using the information you provide. In fact, if you come to your tax preparer unprepared, there's not much even the most knowledgeable tax pro can do for you. Like the phrase goes, "garbage in, garbage out."

In order to help your preparer save you the most money on your return, you yourself have to be prepared. Moreover, your preparation should not be in one mad dash immediately before going to see your tax analyst, but with brief, no-stress, consistent efforts though out the year.

The best approach, experts say, is to keep any and all receipts you think would be tax deductible and keep them in the same place. Then every month or so, take the receipts and organize them into relevant categories. Create classifications like charitable contributions, medical or investment expenses, property taxes, mortgage interest or other relevant categories. If you're not sure what category to put a receipt in, make your best estimate or create a category for it. Your tax representative can tell you which deductions are will fly, and which ones won't

Once you have categorized your receipts and are ready to put into your envelopes, write a one or two-word description of each receipt and keep a running tab of each category.

Then at tax time, all you have to do is hand your preparer your envelopes. Your preparer can quickly look through your envelopes and can easily enter the deductions in the proper category. If your tax specialist has any questions about a possible deduction, he or she can easily reference the receipt in the envelope.

For many taxpayers, this "envelope system" goes a step beyond their current "shoe box" system, where they simply keep all of their tax-deductible receipts in a shoe-box and let the tax analyst organize the receipts and find the appropriate deductions. But the minimal effort of categorizing the receipts can pay-off in big ways. For instance, it can:

• Save your tax preparer time, saving you money. By sending a few minutes organizing your receipts every month or so, you are saving your preparer a lot of time come tax time. Saving your preparer translates into saving you money since many tax analysts charge by the hour.
• Enable you to estimate your total deductions. Face it, if you just hand your preparer a shoebox overflowing with a hodge-podge of receipts, after your preparer sorted through them, you would have no idea what receipts translated into deductions, and which didn't make the cut. In turn, you'd have little means of discerning if the tax specialist found you every deduction you were entitled to. But with the envelope system, if you listed you donated $3,000 to charities on the envelope you gave to your preparer, but your tax accountant only listed $2,500 of charitable contributions on your tax return, you can quickly spot the discrepancy and ask the tax professional about it.
• Keep you prepared in case of an audit. The mere thought of getting audited by the IRS is enough to send people running for the hills in terror. But an audit is nothing more than the IRS asking you to provide back-up for your deductions. If you used the envelope system, you will have all of the back-up you need right at your fingertips, filed away along with your copy of the returns.

Having a tax preparer could be a good way of lowering the amount owed on your taxes, but only if you provide your tax expert the right tools for the job. By taking just a few moments of preparation throughout the year, you can be adequately prepared for your tax preparer and maximize your deductions.