How to drive your tax preparer crazy

And spend much more on tax preparation than you need to

Last updated: February 2012

Accountants call them “shoe box people”—clients so disorganized that they file everything financial under Reebok. When a client walks in carrying bulging boxes, tax preparers like Karla Dennis know they're in for a long night.

“If you bring in the shoe box, your tax fees will escalate,” says Dennis, an enrolled agent and principal of Cohesive, a tax-preparation and consulting company in Cypress, Calif. That's because the time it takes her and her staff to sort through the mess translates into a higher tax-prep fee.

We asked CPAs and enrolled agents—individuals who are qualified by the Internal Revenue Service to prepare federal tax returns and to represent clients before the agency—what sends them round the bend and boosts their fees. If you relish throwing cash at your preparer, feel free to use the tactics below. Otherwise, avoid them to save your money and your tax preparer's sanity.

Schedule your meeting for early April

Getting a first appointment late in the season creates stress and adds to the risk of mistakes and overlooked tax savings. It's best to see your tax preparer in February, shortly after the Jan. 31 deadline for companies to send out employees' W-2 earnings forms and 1099s, the forms that show investment and other miscellaneous income.

In recent years, an increasing number of investment companies have been sending corrected 1099s after the deadline. Doug Thorburn, an enrolled agent in Granada Hills, Calif., would rather not wait to get started. “If there's a history of getting amended 1099s, remind us to hold off completion until they arrive,” he tells clients.

Make your appointment or send in your materials early even if you expect to owe money. You don't have to pay the IRS until April 17 this year, but knowing the damages several weeks early gives you more time to plan how to pay. If you have issues to discuss with your accountant besides your 2011 return—say, tax planning for coming years—you'll need to schedule more time, which is easier to do early in the season.

Pile on those receipts

“Oh please, oh please, tell them not to send us all their receipts,” says Eva Rosenberg, an enrolled agent and author who operates Your tax preparer is not an auditor, so you don't have to show him or her all your receipts for business expenses, charitable contributions, and other deductible costs. Instead, bring to your appointment a list of those items organized by category (for example, home office, rental property, charity, etc.). Your receipts and statements should be filed away for seven years, the maximum time the IRS recommends for such documents. But there are exceptions to the no-receipts rule. You might improve accuracy by bringing receipts for complex transactions such as those for real-estate and property taxes.

Remember that all charitable cash donations, no matter how small, must be substantiated either by a canceled check; a bank record with the charity's name, donation amount, and date; or a detailed receipt from the charity. Otherwise, the contribution is not deductible. So collect everything in one place.

Do nothing in advance

“Don't confuse your tax professional with a secretarial service,” says Sally Herigstad, a CPA in Kent, Wash., and author of “Help! I Can't Pay My Bills” (St. Martin's Griffin, 2006). Being unprepared wastes time, which will cost you money. Open any envelopes with the words “tax information” or “tax documents” before your appointment, and sort the contents by category. If you have several income documents, group them into subcategories: W-2s and 1099s, for instance. You will pay extra if your preparer has to make copies, sort papers, and check for duplicates and missing items.

Many preparers send their clients a tax-organizer worksheet, a paper to fill out in advance based on last year's tax returns. Ask your preparer for one or create your own.

Tax preparers mentioned several other items that clients should bring:

  • The closing letter if you refinanced your home mortgage.

  • Real-estate tax receipts if you don't pay those taxes through escrow.

  • A new baby's Social Security number (needed to claim the child as a dependent).

  • The taxpayer ID numbers, addresses, and phone numbers of child-care providers.

  • Business mileage for your unreimbursed employee business expenses. (Last year, it was 51 cents per mile for the first half of the year, and 55.5 cents for the second half.)

Dennis says that her company rewards clients who arrive with materials complete and organized properly with a 15 percent discount on tax-prep fees. Shoe-box clients, on the other hand, are first assigned to one of her firm's bookkeepers, at $75 an hour, to organize the paperwork.

Don't bother with cost basis

If you can't find the cost basis of investments you sold last year, assigning the task to your preparer can cost hundreds of dollars extra. Cost basis is the purchase price of the securities plus transaction costs such as commissions or transfer fees. You are required to pay capital-gains tax on the difference between the cost basis and your selling price, so the higher the cost basis, the less tax you'll owe.

Your broker or financial adviser should send you a 1099-B form summarizing all your sales. But if you have no original receipts or if you received the investment as a gift, you'll have to find the purchase information to determine the cost basis. (If the shares were inherited, the basis is the investment's price on the day the owner died.) That can be hard to uncover if the securities were purchased a long time ago or transferred to a different brokerage. Long-held shares of funds or companies that morphed through spin-offs or mergers can also be hard to track.

Depending on where you live, expect to pay a professional at least $100 an hour to figure out your cost basis. An alternative you might want to try is low-cost, do-it-yourself software. TurboTax, for instance, has a cost-basis calculator in its higher-priced products. In tests in the past, we found it helpful in tracking and calculating cost basis.

Don't look back on your financial 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. You might remember, for example, driving to the next county to help a charity rebuild a house. That mileage is deductible, at 14 cents per mile. Perhaps you paid someone to fix a computer you use only for your home business, or you subscribed to a publication related to your job. Those expenses might be deductible.

Tell your preparer about any major events in your life and purchases or sales of note, even those without an apparent tax benefit. You might be surprised at what you'll save. Herigstad recalls a friend who bought an alpaca for $20,000, which she boarded at a nearby farm. The friend did not bother mentioning the purchase to her preparer. After the tax deadline, at Herigstad's urging, she sheepishly told her about it. “An amended return later, with deductions for livestock depreciation, boarding, and other related expenses, my friend's tax refund had doubled,” Herigstad reports.

Better than waiting until your appointment, put comments and questions in an e-mail message and send them in advance. Your tax preparer can quickly identify what’s relevant and request more information, if necessary, before your visit.

Don't look forward, either

Just as important as looking back is envisioning what's coming up. Are you planning to withdraw money from a retirement account? Are you starting a new business? Will you be drawing money from a home-equity line of credit or speeding up your mortgage payments? Are you expecting to sell property? Those changes will have an impact on what you'll pay over the next year and during tax-season 2013.

Moreover, scheduling time to talk about your long-term goals, such as retirement and estate planning, gives you a chance to prepare corresponding tax strategies. “To set up a long-term plan, you're not going to do everything on April 17,” says Gary Garwitz, a partner with BKD, an accounting firm in Springfield, Mo. “But at least you can get the wheels in motion.”

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