Posted by Tim Thompson CPA PLLC

Steps To Follow Before Tax Preparation

Steps To Follow Before Tax Preparation

The federal government estimates that approximately 60% of people use paid tax preparers to complete and file their tax returns. If you fall into this category, you have nothing to worry about. However, in the scenario where you don't enlist the services of a tax preparer, it is, therefore, imperative to start organizing your receipts, forms, and other documents well in advance of the tax deadline. The tax profession may receive information directly from you or ask you to complete a questionnaire. However, you will need time to collect everything you and the preparer needs. Here are the steps to follow.

Key Points

    •    Even if you get the services of a tax preparer, you have to do some of the work planned, and before you start, the better.

    •    Collect income and check that you have received all the necessary forms from financial institutions, and employers alike.

    •    The previous year's return can be a good guide to make sure important information is not lost.

Pick a Reputable Tax Preparer 

If you don't have a tax preparer, a good way to find one is to seek advice from friends and advisers (like a lawyer, you know). Make sure the person you choose has a tax PTIN (Preparer Tax Identification Number) that proves that they are authorized to prepare income tax returns.

It would be best if you also asked for commissions, which likely depend on the complexity of the return. Avoid using a company that intends to receive a refund percentage. 

Schedule A Business Meeting

The sooner you meet the tax preparer, the faster you can complete your return, even if you decide to request an extension. If you expect a refund, you will receive it in advance. If you wait too long to make an appointment with a tax preparer, this may not happen until April 15, and you may lose the opportunity to reduce your taxes, such as deductible contributions to an IRA or a savings account. 

Gather The Relevant Documents

You should have received all of the necessary tax documents from your employers or employer, as well as from brokers, banks, and others with whom you do business before the end of January of each year. For each form, make sure the information matches your records.

Here are some of the most common forms:

    •    Form W-2, if you have a job

    •    The different forms of 1099 account for other income received, such as dividends (1099-DIV), interest (1099-INT), and non-dependent compensation paid to independent entrepreneurs (1099-MISC). Brokers are not required to submit Form 1099-B, which reports gains and losses from securities transactions until January 31, so they can arrive a little later.

    •    Form 1098, which shows all the interest rates related to the mortgage loans you have paid.

    •    Form W-2G, if you have won game winnings

Round-Up Your Receipts 

The receipts you must provide depends on the details of the deductions or the standard deduction request. You have to choose the one that produces the most depreciation, but the only way to be sure is to add your itemized deductions and compare them to the standard deduction. This year, for example, the standard deduction for individual taxpayers is $ 12,400; and for couples who file a joint return is $ 24,800.

In particular, look for income for medical expenses that are not covered by insurance or reimbursed by another health plan such as a flexible spending account or a health savings account, property taxes, and expenses. All these elements are subject to limitations, but if they are important enough, it may be useful to detail them.

If you itemize the deductions in detail, you should also need to collect any backup that you have for charitable contributions. For example, contributions of $500 or more, must be recognized in writing by the charity, which indicates the value of your donation and that you received nothing (except perhaps a symbolic item). If you do not have this recognition, contact the institution and ask. 

If you have income and business expenses to report on Schedule C, you must share your books and records (for instance, any accounting system used, relevant expense receipts and bank statements, and cards credit cards). The better the organization, the less time it takes for a tax preparer to process your fees, which translates into lower costs for your service.

Itemize Your Personal Info

You know your social security number, but the question is if you know the social security number of each dependent you claim. Ensure to write it down alongside with any other information that the preparer may need. For instance, if you bought/sold a property in the past year, note the data you bought/sold and the amount you received from the sale.

Decide If You Want To File For An Extension or Not

If you need time to achieve all of these activities, you can request an extension until October 15 to file your tax return. However, to avoid fines, you will still need to estimate the tax amount and pay that amount before the April 15 deadline.

You can request an extension to enable you to file your tax return, but you must estimate the amount owed and pay the amount before April 15.

Plan Your Repayments In Advance

If you expect a refund, you have numerous choices on how to go about it.

    •    Part or all of the tax refund can be applied for the following year. If you normally pay estimated taxes during the year, this can help cover the first quarterly payment.

    •    The government can send a check or deposit the refund directly into your current or savings account.

    •    You can contribute, in whole or in part, to the refund of certain types of accounts (health savings accounts, IRAs, education savings accounts) or buy American savings bonds Via Direct Treasury.

It is also possible to split the refund between the direct deposit options by filling out Form 8888. It would help if you informed the tax preparer of what you want to do so that it can be declared at the time of return.

Get A Copy Of Last Year's Statement

If you are using the same tax preparer as you used last year, you probably have the previous information. If you are using a new tax preparer, the statement from last year can be a reminder to you and the trainer about some things you don't want to ignore. Here are two examples:

    •    Charitable Deductions: If you have donated small gifts, you may not receive any recognition from the organization you donated to, but you can still deduct these contributions as long as you have proof. Check the list of organizations to which you have donated last year and see if you have made similar donations this year.

    •    Interest and Dividends: Last year's statement should indicate which banks, mutual funds, or other financial institutions sent you Form 1099. Use this list to make sure you received 1099 again this year (unless you've closed these accounts or sold your investments in the meantime.)


Whether you pay your taxes or hire someone else to do it, keeping good records will save you time and money. The earlier you start, the more comfortable it will be, and the more you will be through with the process.

Tim Thompson CPA PLLC
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