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Whether you prepare your own taxes or use an accountant or a tax preparation company, you can make the whole process easier by being organized. You might even save some money!
There's a name tax preparers have for many of us. They call us "shoebox people." That's a client who walks into their offices with everything that might be tax-related in a shoebox - or two, or three. Time spent sorting through all those bits of paper, doing the organization for the client, ratchets up the preparation fee. Some preparers reward a client who has documents complete and properly organized by giving a discount on their fee.
If you use a tax preparer, you have three jobs:
Gather the numbers that substantiate your entries.
Sort the information into the correct categories.
Summarize each category and give your preparer the information.
You better start doing the first two right now for your 2010 return. Then get a system in place to keep current you're your documents over the coming year, in preparation for your 2011 return. Here are some tips to help get tax- organized:
Check it out. You have to know what you need before you can organize it. Ask your preparer for a tax-organizer worksheet, a framework to fill out in advance. Or you can create your own based on your last year's tax return.
Prepare ahead. You should open any envelopes with the words "tax information" or "tax documents" when you get them, and sort the contents by category. It's not too late, if you didn't, but do it now. If you have several income documents, for instance, group them into subcategories, like W-2s and 1099s.
Review the past year.Preparers say their clients often find new deductions or old deductible expenses just by combing through their day planners, appointment calendars, and check registers. Unreimbursed mileage is deductible, at 14 cents per mile, for business or for charity. When you pay someone to fix a computer used only for your home business or subscribe to a job-related publication, those expenses might be deductible.
When in doubt, ask.Note down any major events in your life, including purchases or sales of note, even those without an apparent tax benefit. You might be surprised at what you'll save. Rather than waiting until the appointment, send your questions in an e-mail a couple of weeks ahead. Your tax preparer can quickly identify what's relevant and request more information, if necessary, before your visit.
Don't bring too much.You don't have to show your tax preparer all your receipts for business expenses, charitable contributions, and other deductibles. Just bring a list of deductions organized by category: home office, business expenses, rental property, charity, etc. Of course, it will be helpful to bring receipts for complex transactions such as real-estate and property taxes, as well as things that you are uncertain about. Again, have them categorized. The IRS recommends that you keep those receipts and statements for seven years.
Should you use a tax preparer? Not if you're sure you don't have any deductions and can get by with just the simple Form 1040, 1040A or 1040EZ and/or you enjoy figuring out instructions and doing the math. But if you think you'd rather pay an expert, here's an idea of what it will cost you:
The National Society of Accountants says the average hourly rate for a tax preparer is $120 and the average flat fee for a single form is $115. If the taxpayer needs to include additional schedules the flat fee could be around $200. A recent survey by the National Society of Tax Preparers found the average fee for the most popular tax firms is $187.
For help finding a tax preparer, check out:
http://taxes.about.com/od/findataxpreparer/Find_a_Tax_Preparer_How_to_Find_a_Tax_Preparer.htm
and
http://www.ehow.com/how_4442839_find-tax-preparer.html
Also, find IRS information about all forms at
http://taxes.about.com/od/preparingyourtaxes/File_Your_Own_Taxes.htm
Ready to get all your important documents organized? Watch for next month's article: Ending Your Paper Drama with Papervana.
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