Preparing for Your Tax Preparer

With income tax season well underway, many people are getting ready to see a tax preparer to get their 2023 income tax return prepared and filed before April 15, 2024. Some may have a long-standing tax pro while others are selecting a tax preparer for the first time. About half of U.S. taxpayers use a paid preparer according to the Department of the Treasury.

Below are tips for working with a tax preparer:

Check Credentials- Choose a tax preparer with tax-relevant credentials such as certified public accountant (CPA) and enrolled agent (EA), especially if your tax return is complex (e.g., capital gains, rent, and royalties). Credentials are an indication of a tax preparer’s expertise and adherence to professional standards and ethics. Also check reviews and references from previous clients.

Understand Fees Upfront- Clarify the fee structure before engaging a tax preparer. To avoid unexpected costs, find out if the fee is a flat dollar amount (e.g., $500) or based on the complexity of your tax situation (i.e., hourly fee x number of hours spent).

Organize Your Tax Records- Group like items (e.g., W-2 forms, 1099-INT for interest on savings, 1099-DIV for investment distributions, 1099-NEC for nonemployee (freelance) income, estimated quarterly tax payments) together and subtotal them. Make it as easy as possible for your tax preparer to find information, especially if the tax preparer is billing on a hourly basis. Not only can document organization save money, but it can also reduce the chance of errors.

Be Transparent About Income- Disclose all sources of income, including side jobs, tips, bartering activities, and gambling winnings. Open communication with a tax preparer ensures accurate reporting and compliance with tax regulations.

Provide Correct Information- Make sure that your tax preparer has your current address and bank account data (routing number and account number). The latter will avoid issues with direct deposit of a tax refund.

Discuss Life Changes- Inform your tax preparer of any significant life events that can impact your tax situation. Examples include marriage/remarriage, divorce, widowhood, the birth or adoption of a child, unemployment, and retirement.

Respect Deadlines- Remember that paid tax preparers are juggling the tax returns of many clients. Be aware of deadlines set by the tax preparer as well as the IRS tax filing deadline. Provide your tax preparer with ample time to file your return. Also, the earlier you file, the more time you have to address any issues that may arise and the earlier you will receive a tax refund, if any.

Review Your Tax Return- Take the time to review your entire tax return before it is submitted (about 94% of tax returns were e-filed online in 2023). Ensure that all information is accurate and ask your tax preparer about any unclear sections.

Discuss Future Planning- Ask your tax preparert discuss future tax planning strategies and expected changes in income (e.g., reaching the required minimum distribution (RMD) age of 73) to optimize your tax situation for the upcoming year.

This post provides general personal finance or consumer decision-making information and does not address all the variables that apply to an individual’s unique situation. It does not endorse specific products or services and should not be construed as legal or financial advice. If professional assistance is required, the services of a competent professional should be sought.