It’s that time of year — tax-preparation season will be here before you know it. I’m sure some of you dread this time of year, but I’ve got a few suggestions that can make it a bit more bearable and help you in the long run.
• If you’re not the do-it-yourself type, hire an experienced, professional tax preparer to handle your returns. Stay away from the generic chain tax-prep services — they tend to significantly overcharge for preparing returns by charging by the form (which we view as being a rip-off) instead of using an hourly rate (which is much more fair).
• Make sure you have all necessary tax documents. Sounds simple enough, but being organized about collecting your tax documents (“Where did I put that W-2?”) makes life much easier for your preparer (and you, too).
• Your preparer should ask you many questions, especially if it is the first time he or she is preparing your returns. Even after the first year, personal and financial situations change, and any qualified tax preparer will know to ask the important questions (e.g., law changes, new possible deductions, etc.) so you don’t leave anything on the table.
• If you work with a certified public accountant, hopefully he or she offers advice for your specific tax situation during and after preparing your returns. This can be very important for not only the current year (e.g., “Can a traditional IRA contribution lower your tax bill?”) but the following year, as well (e.g., “Should you contribute more to your 401(k) plan at work?”). Offering suggestions that can improve the amount you get back (or help you pay less than you have in the past) can be very valuable for some.
• Your tax professional should be willing to speak with any other professionals you have hired. There are many reasons why insurance professionals, financial advisors, attorneys, etc., should speak to your tax preparer (with your permission, of course) to coordinate on issues that may be important and need to be looked at from different perspectives. This way, you get the input of trusted professionals on issues that overlap into several areas of your personal financial/tax situation.
Find an experienced local tax preparer who works for a professional tax preparation firm, earns his or her money from hourly fees (not charging by the form), believes in helping clients improve their tax/financial situations and has the heart and demeanor of a teacher — not a salesman — and, chances are, you’ve found the right tax preparer to help you with your tax situation.
(Editor’s note: This guest column originally appeared on Investopedia.)
— By Martin A. Federici Jr., CEO of MF Advisers