Managing Money

How to Save Money on Tax Preparation When You’re Not Doing It Yourself

February 27, 2007

The ultimate way to save on tax preparation is to, of course, do it yourself. But what if you’re not comfortable with that proposition? Or what if your situation, like ours, is involved enough that it wouldn’t be wise to go it alone? Drawing on my own experience, I’ve listed below some ways to keep your tax bill in line while still employing the help of a preparer.

1. Shop around for a good preparer. My recommendation is that you use a CPA and that you find one who is both capable and a good fit for you.

For example, a CPA that we used for a number of years was very capable but not especially procative in looking at our big picture and suggesting ideas that might benefit us tax-wise. She answered all our questions, but didn’t ask many of her own.

Our next CPA was more interested in selling investments than doing taxes and after suggesting we put his firm on a high monthly retainer (we declined) he passed us off to a more junior associate. This firm wasn’t a good fit for the small client that we were.

Our current CPA values us as clients, asks as many questions as he answers, and charges a reasonable rate. He understands our needs and my husband’s business and is a perfect fit for us at this stage of our lives.

2. Go to your preparer with complete information. If they don’t send you one already, ask your preparer for a tax organizer. Make sure you understand what kind of information they’ll be needing and take it to them the first time. Take them information that is complete, organized, and easy to understand. If you discover they need something else while you’re meeting with them, make a note and get it to them ASAP.

You can go to your preparer with a shoe box, but someone has to organize that info and, in most cases, you’ll pay for your preparer’s time if he or she has to do that.

3. Ask questions. Every year when I meet with our accountant I have a list of questions that I want answered. I don’t worry that I’ll sound uninformed; that’s part of the service for which I’m paying. Occassionally I’ll ask the same questions from year to year. (What kind of documentation is adequate for charitable donations? How would a Health Savings Account affect our tax situation?) Tax policies are constantly changing and I’m never guaranteed that the answers will be the same.

4. Have a basic understanding of your tax situation. Don’t treat tax time as a once a year event and don’t delegate all of the responsibility for your tax situation to your preparer. Look at your return when you receive it back and make sure you understand it. Be aware of the kinds of things that can affect your taxes throughout the year and keep abreast of things in the news that relate to tax policy.

Essentially, you need to partner with your preparer and not just dump a bunch of paperwork on them once a year. If you do, you’ll likely reap benefits in both a lower bill from the IRS and the one you get from your preparer.

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