How to Prepare for Your First Tax Appointment
You don’t have to do it all on your own!
Most people rely on tax preparation professionals to file their taxes. Why? Because they have received specialized training, certifications and in most cases, an extensive education to understand the vast (and often confusing) landscape of taxes. Most importantly, tax professionals are aware of any and all changes in the federal tax laws. Having a tax professional your trust is also great if you are looking for a tax plan, or need help with your personal and/or business finances. It is essential to be well prepared for a tax appointment so that you save time and money.
During your tax appointment, your tax preparer will ask you a series of important questions. They will also provide you with a list of documents you will need for your annual filing. You’ll want to make sure that you have all your financial information with you at the time of your appointment.
Here are some essential tips on how to prepare for your tax appointment!
CHOOSE A CERTIFIED TAX PREPARER
The first thing you will need to do is choose the right tax professional. Make sure that you select someone who is well-trained, knowledgeable, and experienced. The individual should have a Preparer Tax Identification Number (PTIN), which means that they are empowered to do federal tax preparation. A certified accountant will be able to handle complex tax problems that you may have, and answer detailed questions on tax laws and regulations. They will also be aware of any updates in tax laws or allowances that may help increase your tax efficiency. An experienced preparer will have handled many similar situations and, therefore, can help you with any tax problem you may have.
When researching and choosing a professional tax preparer, make sure you talk to your friends and co-workers about individuals they have worked with before. If they were happy with the services provided, you are likely to be too. You can also go online and look at reviews of the accounting firms or preparers you are considering. If they have many positive reviews, you are likely to be happy with the services that they will provide. You should also check the IRS website, which has links to the IRS directory of preparers. If the person you are considering is not on this directory, they may not be the best person to hire. Lastly, you can always reach out to a tax professional and set up a free consultation! Speaking directly with tax expert can also help you choose the right person.
GATHER YOUR DOCUMENTS
By the end of January, employers, banks, brokerage firms, and other institutions will have sent you all the documents you need to file your tax returns. Check the forms and make sure that the information they have is similar to what you have. Contact them if there are any discrepancies. Here are some of the most common forms you will need to have.
* W-2
A W-2 form, is also called the Wage and Tax Statement, and you can get one from your employer. It details your annual wages and the amount withheld from the paycheck for tax purposes. A W2 employee is not responsible for their taxes as their employer deducts and submits them to the government.
* 1099
There are various 1099 forms, and they report any other income you might have made throughout the year. 1099-B is sent by brokerage firms, 1099-MISC reports income paid to independent contractors, 1099-INT reports interest, and 1099-DIV report dividends. Bear in mind that brokerage firms have until February to send 1099-B, so it might arrive later than the others. Ensure that any firm you worked with or have made income from sends you these tax forms.
* 1098
Form 1098 reports any interest that you may have made on your mortgage.
* W2-G
W2-G reports any winnings that you made from certain gambling activities.
Some other important items are bank statements, interest statements, IRA statements, and any financial documents from entities you may have donated to throughout the year.
ROUND UP YOUR RECEIPTS
The receipts you provide are dependent on whether you are making the standard deduction or itemized deduction claim. If you are itemizing, make sure that you have all the necessary receipts. It is important to compare your itemized deduction and standard deduction to ensure that you get the higher amount. When making the itemized claim, you will need to gather all receipts from medical costs not covered by insurance, investment-related expenses, and property taxes.
If you made donations of more than 250 dollars to a charity, you need to get a written confirmation from that organization. The acknowledgment should mention the donation amount and that you did not receive anything in return. In case you do not have such a statement, contact the charity and ask for one. If you own a business, you will need to share your accounting information with the preparer. Make sure all your records are well organized.
MAKE A LIST OF YOUR PERSONAL INFORMATION
Everyone knows their social security number, but you may not remember the numbers of all the dependents you claim. Write them down before you talk to your tax preparer to ensure that you do not waste time during the meeting. Make sure that you have the addresses of all your properties, not just your home address. If you sold property during the year, make sure that you write down the date you did, how much you sold it for as well as its original price.
PLAN FOR ANY TAX REFUND
If you are likely to get any refunds, plan on where that money will go. You can use your refund to cover some of the tax from the new financial year, or the government can send it directly to your bank account. Alternatively, you can contribute it to your education savings account, IRA, or health savings account. You can split the refund between various accounts by filling form 8888. Make sure your tax preparer is aware of your plans!
HAVE A COPY OF LAST YEAR’S RETURNS
If you are using the same preparer you used last year, they will have your returns on file. However, when going to a new one, make sure you have your previous year’s tax returns. They will ensure that you do not forget anything. The returns will show you which firms and banks sent you 1099 forms. You can use that list to ensure that you received all the 1099s you need to file your returns. They will also help you remember the small donations that you might have made for deduction purposes.
Having good records is essential when filing tax returns, whether you hire a preparer or not. It will also save you money and time when working with a professional tax preparer.
If you have been wondering how to prepare for your tax appointment, the above tips will ensure you have a smooth experience and not cause any delays in your filing!
