(The author is an enrolled agent (EA) with over 50 years of tax preparation and representation of taxpayers in disputes with the IRS. EA's must maintain mandatory hours of study on how to manage taxes to get the best legal fiscal advantage for their clients. They receive regular notices of changes in tax law and use the information to get the best results. This particular author has developed a simple record keeping system his clients can use to have all needed information available for preparation instantly. <br />
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Many taxpayers just file the short form (no itemized deductions, extra income from various sources such as stocks, bonds, rentals, etc). This may or may not be the smart thing. Others with the aforementioned types of income always file the long form and take all the deductions, etc. A surprising number rotate: one year long form, the next short form.<br />
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Here's how to get ready.<br />
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Using the simple record system, merely list the sources of income and add up the totals of income and expenses related to each source. Turn the lists over to your preparer and he/she can get right to it. Be sure you have the names, addresses, dates of birth, Social Security numbers, of all family who will be on the return.<br />
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Some dates are important. (1) if you are an employer, all W-2s, the 1099 series of-forms, K-1's, partnerships, limited liability firms, etc. are due Jan. 31. WARNING: The IRS already has announced it won't be accepting any of these until sometime in February -- automatic penalty and interest applied by law. (I contacted my Congressman and told him it isn't fair to ANY taxpayer who is ready to file on time to be fined for something they were ready to do but couldn't because of the IRS itself. He is looking into one-time emergency legislation to fix that problem.<br />
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On to regular filing. Corporate returns are due March 15, and personal returns April 15 unless those dates fall on week-ends. All are entitled to automatic 6-months extensions. The form (Form 2848) for doing so has spaces for amounts you expect to owe (if anything) and for listing the amount of your estimated tax.<br />
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Charitable contributions each can be deducted up to 50 percent of one's income, and if it results in no tax due from you, the balance can be carried forward for up to 5 years. In some areas (including mine), there are ways to carry balances forward even more years. I'm actually using that right now.<br />
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Following is how you can get the best return for your tax buck. In many instances, it can pay to rotate the type of return you file. The most frequent instance is when you are on the borderline of short-long form. The solution: One year, take every deduction you can. (Example: When I do that on my personal return, I, a tither, pay not only the amount for the filing year but add 3-4 months for the next year. The extra is automatically carried forward. If you are expecting medical bills early the following year, pay them in advance if the vendor agrees. (EXAMPLE:) I knew dental work was coming up early the following year. I paid about what I expected to pay. My dentist gladly accepted it and also gave me a small discount for the early payment. If your business has an office and you subscribe to magazines and/or newspapers for the waiting room (and yourself), take two-year subscriptions, one falling in the high deductible year the other in the short form year.<br />
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I worked for years with a client (a banker who on the outside dealt in real estate, some rental properties, some lived in (and improved while in it), etc. We'd time the best time to do whatever with it. The above should give you the idea. Only when your preparer knows your specific situation can he/she guide you the best route.<br />
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These examples should give you an idea of how a professional preparer may be able to help you. How much does it cost? That is determined on an individual basis and depends upon all the factors. All I can give you is my policies. All preparers have different policies. My first interview with you when we discuss your situation is free. If you decide to work with me, I'll give you several blank record keeping charts with instructions. You make your own record-keeping charts from these. As we start working together, my current fee is $100 per hour with a minimum of one hour guaranteed not to be increased for at least 3 years. The first year is most expensive because of the initial set-ups taking more time. If the records are kept correctly, subsequent years should be less.<br />
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I e-file most of my returns. I give you a hard copy of it, keep a hard copy in my files, and of course keep the completed return on my computer. As the following year's tax season comes, I can "rollover" the previous year's return and it automatically enters all carry-forward material saving the time consumed re-entering it. My tax program has a feature called "check the return" which shows potential errors or mistakes in various color codes. Only when all of these are corrected or satisfied will my tax program let me e-file it. Should you move, I can (and have for a number who moved away) still do your taxes, you sending or e-mailing me the needed information except copies of W-2.s, 1099's etc. Or I can send a copy of your latest return to your new preparer. All professional preparers can do the same. Like many preparers, I carry insurance to cover errors, penalties and/or interest not the taxpayers' fault, etc. so they won't be stuck with the bill.<br />
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I have two longtime friends who have tax preparation businesses (one fulltime, the other part-time). Neither are enrolled agents. When their clients have problems requiring a CPA or EA, they refer them to me. I hope these tips have given you many ideas to get yourself the best deal regardless of who does your taxes: you doing your own or hiring a tax professional in your area. There are many. <br />
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Ted Oglesby, P.O. 663 Gainesville, Ga. 30503, Phone 770-534-4203. <br />
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