How to Prepare for your Tax Return

 

Before you agree to let someone prepare your return for you, ask them some preliminary questions, such as: How long have they been preparing returns? How many returns have they prepared? Have they received any training courses in tax law? How many and when? And, will they be available to answer questions if the return is audited? You may also want to consider calling the Better Business Bureau to find out if any complaints have been lodged against the preparer.

Bring all your financial documents with you when you meet with the preparer.

Although this is not a complete list, these should include:

 

• The tax package you received in the mail from IRS (if you received one);

• Your W-2 form that shows your income and taxes withheld;

• Any other forms (such as 1099s) that you've received at year end from banks or other institutions or individuals with whom you have had financial dealings during the year;

• Social Security numbers of yourself, your spouse, and your dependents. (If possible, bring the social security cards themselves, to avoid errors in transcription);

• Statements or receipts for tax related payments, such as mortgage interest payments, real estate tax payments, charitable gifts, entertainment expenses, and/or business related car expenses

• Cancelled checks for tax deductible payments, such as for medical expenses, child care services, charitable gifts, business related moving expenses, and business travel;

• A copy of your tax return for last year;

• Anything else you think you might need.

 

Discuss fees before you start.

Generally, fees are based on the complexity of the return. The more complicated the tax return, the higher the fee. In no event, however, should the fee be based on the amount of the refund you expect to receive; it is illegal for a preparer to charge a contingent fee for service. Ask the preparer whether there are any extra or optional fees, such as for Refund Anticipation Loans (RALs), follow-up submissions to the IRS, etc. Consider carefully whether you need these extra services.

 

Review your return for accuracy.

Do not assume that your return is accurate just because it has been professionally prepared. Before you sign it, read it over (including all schedules and attachments) and make sure everything on it is correct. If you are unsure about any part of your return, ask your preparer before filing it. Remember that you are signing the return under penalty of perjury, and that if there is a mistake, you, not your preparer, will be liable for the deficiency, interest, and penalties. Never sign a blank return and never sign in pencil.

Sign and date your return before filing it. If it is a joint return, both spouses must sign.

An unsigned return will be returned, and your refund may be delayed. Note: If you use an electronic signature or PIN number, it is not necessary to have a paper signature.

 

Make sure the preparer signs and dates the return, and gives you a copy to take with you.

The law requires that a paid preparer must sign the tax return and complete the preparer areas of the form. If the preparer is reluctant to sign the return, take that as a warning. Keep the return and your supporting financial records in a safe place for at least 3 years.

Ask whether you should expect a refund and what the timetable might be.

 

• Times for refunds to be issued vary. Ask about e-filing your return. An e-filed return will be rejected by the IRS computer if there are certain errors on it (such as erroneous Social Security numbers). Immediate correction of such errors can speed up your refund, and significantly reduce the likelihood of a future IRS contact.

• Remember, a refund anticipation loan is not a refund from the IRS, but rather a loan from a financial institution that includes a fee and interest.

Even if you cannot pay the tax shown on the return, you must still file for the year.

In addition to late payment penalties, there are also penalties for late filing, which you can avoid if your return is timely filed. Ask your preparer about the rules for requesting an installment payment agreement with the IRS. He or she can help you file Form9465.

Free tax preparation services are available nationwide.

The IRS has free programs to help taxpayers file, including walk-in sites at IRS offices. Low-income taxpayers can receive tax preparation assistance from VITA (Volunteer Income Tax Assistance) programs at public libraries, and TCE (Tax Counseling for the Elderly) sites administered by the American Association of Retired Persons (AARP.) To find the location of the VITA and/or TCE site in your community, call toll-free (800) TAX-1040, or contact the IRS Taxpayer Education Coordinator at your local IRS office. The AARP also can direct you to the nearest TCE/Tax-Aide site by calling 1-888-227-7669.

Notify the IRS immediately of any change of address.

This will speed up your refund check and make sure IRS correspondence to you is not lost or misdirected.

If it sounds too good to be true, it probably is!

There are red flags that should alert you to potential problems with your preparer:

 

• Beware of preparers who guarantee a refund. Only the IRS can determine whether you receive a refund, which is based on your income, deductions, and credits for the year.

• Preparers should not promise a bigger refund than anyone else. If returns are prepared correctly, every preparer should derive substantially similar numbers.

• Preparers should not ask you to sign a blank return.

• Preparers should not want the refund mailed directly to him or her.

• Preparers may not charge a percentage of your refund as a preparation fee

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