The March 15th and April 15th tax filing deadlines have passed. You filed your tax returns for the 2011 and do not have to worry about 2012 taxes until next year. But how did the tax process go this year?
Tax preparation is the result of a very simple equation. It is the sum of 1) the completeness and accuracy of your business and personal financial records, plus 2) the knowledge and skill of your tax preparer to ask the right questions and then quantify that information accurately on the required tax forms.
If this past yearís process was burdensome and laborious, the following are some tips and suggestions to help make your 2012 tax preparation process a little less painful.
Get organized. In a recent survey by the National Small Business Association, 56 percent of respondents cited the administrative burden of filing taxes as the most significant tax-related challenge facing their companies. Get better organized for the coming year to reduce this burden. Organize paper items relevant to taxes, including receipts and bank statements, in files and store them in a secure location. If you use an electronic system, dedicate password-protected folders for your personal and business tax items. Regularly back up data to minimize loss if your computer hard drive crashes.
Keep copies of your prior yearsí tax returns in a secure and accessible location. We recommend keeping seven years of tax returns and supporting documentation.
Resolve to keep better records. To stay organized, consider a new record keeping strategy. Business records monitored on a regular basis can help you find problems quickly and correct them timely. These records should be maintained on a continual basis whether they are manual or electronic. If this task seems too overwhelming, consider using a bookkeeping service to assist you.
Meet with your financial and tax advisors. This is a good time to arrange a meeting with your financial and tax advisors and figure out what you might do differently next year. Did you fail to take advantage of potential capital losses? Could you have benefitted from contributing to a retirement account? What could have been the tax benefit of making a charitable contribution of stock that has appreciated in value? Ask these questions now to plan for the coming year. Quarterly or monthly follow-up meetings may be needed to ensure your financial and tax strategies are still on target as the year unfolds.
Think about the impact of major life decisions on your taxes. Are you planning to start a new business in the current year, incorporate your sole proprietorship, close or sell off your business or retire in 2012? Major life and business decisions can impact your income tax picture. If you are planning to make a big change, ask your tax professional about preemptive planning and tax strategies to lessen potential tax burden.
Interview a new tax professional if you need one. With the tax season rush over, now is a good time to call or meet with a few good tax professional to find the best fit for next year. If you plan to seek out a new tax professional to assist you with tax planning and filing matters, here are a few recommendations of what to look for.
∑ Check the preparerís business history and qualifications. Check out the preparer with the Better Business Bureau and check for disciplinary actions and licensure status through the state boards of accountancy for CPAs; the state bar association for attorneys; and the IRS Office of Enrollment for enrolled agents. Also ask if the preparer is affiliated with a professional organization and attends continuing education classes to keep abreast of changes in the tax law.
∑ Find out about their fees for services. Ask if you will be billed hourly or if your return will be prepared for a flat fee. If you will be billed hourly, ask about the hourly rates of the personnel who will be preparing your return. If you will be billed a set fee, ask the tax preparer for a fee estimate.
∑ Make sure your tax preparer is accessible. Make sure you will be able to contact your tax preparer after the return is filed in case questions arise. Your tax preparer should also be available to provide you with tax planning advice during the year, to represent you if the taxing authorities choose to audit your tax return, or to help respond to a tax notice.
∑ You are legally responsible for what is on your tax return even if someone else prepares it. Choose a paid tax preparer wisely. Reputable preparers will request to see your records and receipts and will ask you multiple questions to determine your total income and allowable expenses, deductions and other items. Before you sign your tax return, review it and ask questions. Make sure you are comfortable with accuracy of the return before you sign it.
According to Benjamin Franklin, nothing is certain but death and taxes. Even taxes are somewhat uncertain in a presidential election year. But you can relieve some of the stress and uncertainty that often accompanies the tax-filing season by organizing your records and planning with your financial and tax advisors now for the 2012 tax year.