3 Things Your Tax Preparer Wants You to Know



Form 1040. The federal government first released this infamous income tax document in 1914. Back then, it came with just a single page of instructions. Americans today need a 117-page booklet to make sense of the tax code.


No wonder millions of taxpayers hire someone to help prepare and file their returns. You’ll want to follow these tips if you’re one of them.


Do your homework. You entrust your tax preparer with the personal information necessary to file an accurate return. That’s why it’s important to find the right person. The IRS Directory of Federal Tax Return Preparers at irs.treasury.gov/rpo/rpo.jsf is a good place to find tax pros with credentials. Check with the Better Business Bureau for complaints, and avoid preparers who base their fees on percentage of your refund.


Once you’ve found the right person, stick with him, says Raymond Wilson, a metro Atlanta-based certified public accountant. “When you change preparers frequently they don’t know your tax history,” Wilson says. “Even though you may have a copy of the previous return, there’s only so much a preparer can deduce from a few sheets of paper.”


Gather up your paperwork. Organizing your tax documents before your appointment can make the process go more smoothly and quickly — which saves you money if you’re paying by the hour. At the very least, you’ll need to provide identification, a copy of your most recent return, and all income- and expense-related documents.


Don’t leave any tax forms at home, Wilson says. “I can’t even count the number of returns I’ve amended because people forget about those one-time distributions they took to buy a car or take a vacation,” he says.


But Uncle Sam remembers. That’s because the financial institution that distributes the funds, say from an IRA or 401(k), notifies the IRS each time you withdraw money — whether it’s taxable or not.


The end result? A nasty letter from the IRS, says Wilson, that prompts panic in clients and return visits to his office. “The moral of the story is, if you get a tax form in the mail, report it,” he says. 


The IRS issues most tax refunds within 21 days. But what if you need the money sooner? Some tax preparation companies offer refund advances along with their other services. Be aware that some advances require a credit check and come with fees and interest payments. You may be better off waiting.


Ask about withholding. Everyone, retirees included, must pay tax liabilities throughout the year. If you don’t have enough taxes withheld, you could face a surprise year-end tax bill or even a penalty.


That’s why seniors need to consider their total income when deciding how much tax to withhold from their pensions and Social Security, Wilson says. “A lot of times people will have 10% withheld from their pension,” he says. But they fail to account for other sources of income, such as dividends, interest, and required minimum distributions, that could push them into a higher tax bracket.


“If they had considered their total income they would have realized they needed to withhold, maybe, an average of 15% on everything to cover their total liability for the year,” he says.


Your tax preparer can help you decide on the percentage of income you need to withhold each year, Wilson says.


Scams 101: How to spot a shifty tax preparer


Scammers posing as tax preparers tend to pop up each filing season in fly-by-night storefronts that advertise big refunds. Once tax season is over, they’re gone. And the client is left holding the bag.


That’s why you need to steer clear of anyone who operates on a cash-only basis, claims bogus deductions and credits, or directs refunds to an account other than yours. Another red flag? Tax preparers who say they’re endorsed by the IRS. The agency doesn’t do that. 


Always read your return and question anything that doesn’t make sense. Never sign an incomplete return, and make sure it includes your preparer’s signature and tax identification number. Remember you’re responsible for the information on your tax return.

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  • FC&A Staff Writer