Getting Ready for Tax Return Preparation

As the holiday season nears, few taxpayers recognize that "tax season" looms not too far behind. Most accountants, on the other hand, are waiting and ready with forms in hand, tax software installed, and schedules rearranged for the long hours ahead of them. As a taxpayer, there are a number of things you can do to make this unavoidable experience go smoothly for years to come.

First, know yourself.

Recollect past years and determine whether you will be able to itemize or not. If you cannot itemize, this will save on a lot of unnecessary record keeping. However, if you can itemize your deductions, you will need to create an effective record keeping system. If you are unsure of whether you can itemize or not, you can refer to IRS Tax Topic 501, Should I Itemize? for a list of deductible categories.

Also, determine whether you will have dependent exemptions available to you. Did you have a baby this year? Is a parent or relative living with you whom you support? Are you supporting a grandchild that lives in your home? Not sure if somebody living with you is classifiable as a dependent? Refer to IRS Tax Topic 354, Dependents, for clarification.

Second, prepare yourself.

Nobody likes to scurry around at the last minute searching for receipts, paid invoices, income statements, social security numbers, and dates of birth. Create a record keeping system to track these items. If you don't have a file cabinet available, use a file storage box or envelopes. Label your folders/envelopes accordingly. You can title your labels as you see appropriate, or use the following examples: Income & dividends, Business expenses, Medical & dental, Taxes paid, Interest paid, Gifts to charity, Job expenses, and Miscellaneous expenses. For further explanation of deductible expenses please refer to IRS Tax Topic 500, Itemized Deductions, for a list of deductible categories.

Also, if you have dependents, keep a list of their dates of birth and social security numbers in a secure location so you can provide them to your accountant to include on your tax return.

Third, present yourself.

If you really want to impress your accountant, present your accumulated records in an organized fashion as the one stated above, or a record keeping method you have created on your own. This will save you time and money because your accountant won't have to sort and classify a jumble of receipts and papers or call you for birth dates and other vital tax information. Also, just as a side note, many accountants prefer records in a box as opposed to a plastic shopping bag.

It is best to get your tax information to your accountant as soon as possible. Waiting until just before the tax deadline will only create undue stress for yourself and your accountant. A six-month extension is possible, but your accountant will still need your records timely in order to determine if you will need to make a payment with the filing of the extension.

Fourth, applaud yourself.

You've done it! You've created a record keeping system, you are happy, your accountant is happy, and the IRS is happy (hopefully). Now you can store your copy of your completed tax return along with appropriate records and start all over again for next year.