Bob O'Brien
Head Instructor
bobrien@mywealth.com
I was at the computer store Saturday and couldn’t help but notice how many people there were purchasing tax preparation software programs. It is usually good to wait until about now (Mid-February) to do you return because you should have gotten all your W-2’s, 1099’s etc… and therefore not have to worry about receiving one after you have already completed the return.
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Unless you are involved in some type of business partnership in which you probably file an extension every year, you should have everything you need to complete the return now.
I want to give you some tips in order to make the tax preparing experience a more educational one for you. Even if you use a CPA or tax preparer, make certain you read on because some of these tips will apply to you as well.
Prepare to Prepare. Review last year’s return and all your W-2’s, 1099’s etc. Most people’s taxes are not different from year to year. So looking at last year’s return will refresh your “tax memory”.
Set time aside where you know you will not be disturbed and expect to have to sit down twice to complete your return. Take advantage of this fact with notes and questions. Be prepared to lock yourself in a room with no phone, TV, kids etc. and be completely focused on taxes.
Take your time and make it a learning experience. In my last blog, (http://www.mywealth.com/blog/post/more-common-missed-deductions) I pointed out some things on the Schedule A that pertain to the current economic troubles. See if you can find tax planning opportunities that may save you big money down the road. Even if you can increase your “tax smarts” in any way, there is sure to be benefits in the future from it.
Take good notes. Unless your return is real basic like one W-2 and a 1099, you will probably need to do the return in two sittings. I would strongly encourage you to take good notes if you are not doing this already. List questions that apply to your return and things that you want to better understand. This will be of tremendous value when you come back to the return to finish it (and also for future planning).
Let the computer program do the “heavy lifting”. You don’t need to know all the “ins and outs” of every tax rule. If you have trouble with something or with the program, take a step back and try to see the bigger picture and the rules that the program is probably trying to teach you!
Do “common sense” check ups. Don’t rely on the computer too much. Matching it up to last year’s return will always help with that. The best CPA’s out there at one time learned from another CPA’s work from previous year. So make sure you completely “milk” last year’s return for all it is worth. Make certain there is not a deduction you took last year and are not taking this year, unless of course you did not have that expense this year.
Don’t worry, be happy. As long as you act in good faith, then any mistake that you make will only result in you paying what you would have owed anyway plus some interest. So, don’t worry. It is really three years after the return is complete until you can call it “finalized” anyway. You can be questioned for up to three years by the IRS.
What’s most important is that you make it learning experience because it is not easy to learn about your taxes and yet it’s so important. It is for most, the largest expense in your life.
You can read books on taxes, but it is only real experience in which you can make real distinctions and learn to plan for taxes. Planning for your taxes and having strategies and being able to weight decisions against market conditions will make a huge difference. This will save you thousands at times.
When you use a tax preparer or CPA, make certain you are asking questions and reviewing your return for planning and opportunities. It is the planning and pro-active moves that make the difference and your CPA/preparer should help you with those services.
Do you have a tax question or is there an article that you would like to see written on taxes? bobrien@mywealth.com
Sincerely,
Bob O’Brien
Sr. Instructor
