Prepping for Prep: Get Ready for Your Tax Advisor
If you’re doing meticulous planning for income taxes year-round, making an appointment with your accounting professional probably doesn’t induce that much anxiety. Maybe you have all of the required documents neatly organized in paper folders. Or you’re using a cloud-based accounting application that you’ve kept up with conscientiously throughout the year, so your tax preparer can run the reports he or she needs and get any other relevant information and forms from you.
But if you have trouble staying on top of your company’s bookkeeping, that kind of organization may be a stretch for you. Since you can’t go back and do things differently, start where you are now.
The idea, of course, is to report your income accurately while finding every possible expense that can be used to offset it and reduce your tax obligation. Financial professionals try to identify deductions that you might have missed, but you can help by being prepared.
Try to get started as soon as all of the required documents have come in. Tax preparation professionals work ridiculous hours in the late winter and early spring, and that only gets worse as the deadline approaches.
If you’re self-employed and haven’t been tracking tax-related expenses all year, prepare yourself for some tedium. You’ll have to go through your check register and credit card statements to identify deductible expenses. Consider creating an Excel spreadsheet containing all of these that you can give to your tax preparer. Look for entries pertaining to expenses in areas like:
- Technology (computers, internet costs, phone charges, etc.),
- Office rent and supplies,
- Insurance and professional fees, and,
- Mortgage interest or rent and utilities (if you’re claiming office-use-of-home).
If you only have income that’s reported on 1099s, that side of the equation will be easy. If not, you’ll need to provide your own sales totals. And if you’re a product-based sole proprietor who has inventory, your accountant will need a lot of other numbers to calculate your Cost of Goods Sold.
If you have employees, you’ll of course have to supply your accounting professional with numbers and forms that go beyond these more basic expenses. You’ll need to produce
W-2s and W-3s, as well as your Form 1096 and any 1099-MISCs. Your preparer will need your federal and state payroll information (Form 940, 941, etc.) and your contractor and benefit expenses. Basically, anything you paid to anyone for services rendered and anyone you paid on their behalf (the IRS, Blue Cross, etc.) must be reported.
A Paper Nightmare
If you’re doing your accounting manually, no one needs to tell you how time- and labor-intensive the process of preparing for your tax preparer is. There’s a better way. These days, there are so many online accounting options that it’s unlikely you’d have trouble finding one that met your needs.
These cloud-based applications range from simple solutions that track income and expenses and help you estimate your quarterly taxes to full-featured, double-entry accounting websites. Using one of them, you can connect to your financial accounts online. So finding the transactions you need in report or statement format is much simpler than thumbing through stacks of papers.
Start Planning for 2016
Instead of breathing a sigh of relief once your 2015 taxes have been filed and turning your attention to other pressing matters, take some time to plan. How can you be better prepared for your 2016 taxes? What income and expenses should you pay special attention to so that you can make adjustments if necessary before December 31?
Once your accounting professional has had a chance to catch his or her breath after tax season is over, consider making an appointment to talk about tax planning (and about web-based accounting if you’re still using paper). If you get your financial advisor more involved in your accounting process (creating reports, reconciling accounts, advising on tax-related expenses, etc.), you won’t be feeling that familiar sense of dread come this time next year.