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THE TAX MAN COMETH
It's that time again...time to start gathering all of that dreaded documentation for your tax preparer to send to good old Uncle Sam! And even though this may seem like a very painful process, taking just a few simple steps right now will make your tax planning far less painful than you think.
STEP ONE: Start by reviewing a copy of last year's tax return, and make a quick list of all the documents or statements that were needed to complete the return. Examples would be W2 forms from employers, 1099 forms for income earned but with no withholding for taxes, 1098 forms documenting all interest paid on a mortgage, interest and dividend income from banks and other financial institutions, a statement for stocks and bonds that were sold during the year, donations that were made to charities, and property tax statements. Many tax accountants will provide a checklist for you, but if you do not have access to one, simply hit this hotlink: TAX PREP CHECKLIST and use this generic checklist as a guide.
STEP TWO: In the coming weeks, you'll be receiving tax documents in the mail. Some will be easy to identify, as many institutions use envelopes marked "Important Tax Document", but others do not - so check all your incoming mail very carefully. When a tax document arrives, grab your checklist, mark the item as received, and keep it all in one place like a file or large envelope marked "2006 TAXES". That way, when it is time to meet with your accountant, all documents will be stored in one location.
NOTE: the IRS rules require that most tax documentation like W2's be mailed out to you by January 31st. If you do not receive all needed tax documentation by February 15th, contact the company that was supposed to send it out, and request the documentation be mailed immediately. If the company fails to comply, contact the IRS at 1-800-829-1040 for help. Additionally, if a statement is received and the amount reported appears to be incorrect, contact the company who sent it to you right away, and ask that the form be corrected. Within a few days a new form should be mailed, and when received it will be marked "Corrected".
With the tax laws constantly changing and the complexity of filing taxes increasing every day...having a great tax accountant will save you time and money. In fact, most tax accountants find enough missed deductions or changes to more than cover their nominal fees. And, working with a professional can help ensure that your return is as accurate as possible, and may help avoid a painful audit. During 2006, audits for individuals increased by 6% across the board. Business owners need to be on their toes too, as audits for Partnerships increased by 15%, and S-Corporations by 34%!
It pays to invest in working with a tax professional. If you are in need of a referral, contact me - I'd be happy to help provide one to you.
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