AH!!! It’s that time of the year again when we need to start filing our taxes. Instead of procrastinating or stressing about the hassles of tax time, we put together a few tips that you may want to consider to keep things as easy and as painless as possible this year. They are designed to help you stay on top of your game during tax time and to ensure that you don’t overpay your taxes.
1. Don’t Throw Away Your Records: By now you should start to receive your 2013 tax documents from W-2s to 1099s to name a few. For any of these tax documents, please be sure to save them and provide a copy to your CPA or tax preparer. Making sure that all of the correct info is reflected on your tax returns can definitely help to minimize chances of unwanted IRS questions. If you receive something and you are unsure whether it needs to be sent to your CPA – send it to them anyways! Better safe than sorry.
2. Organize & Review Your Financials: Whether you do your own bookkeeping or if you have someone else do it, be sure to review your numbers before you send them off to your tax preparers. You don’t need to look at every transaction that happened last year, but you do want to look at the big stuff. For example, does the net profit look correct? If you sold a property, does the gain or loss seem accurate? Make sure your books are correct before you sent them to your CPA to avoid confusion and re-work costs.
3. Real Estate by Property: If you have rental real estate or if you are in the fix and flip business, your income statement needs to be shown on a property by property basis. If you identify any major issues with your income statement or balance sheet, be sure to contact your bookkeeper or your CPA as early as possible to determine the most time and cost efficient way to make the appropriate corrections.
4. Don’t Forget the Balance Sheet: One of the financial statements that a lot of investors forget to look at is the balance sheet. What is a balance sheet? Simply put, it is a financial statement that shows a list of all of your assets and liabilities as of year-end. Not everyone needs to have a balance sheet, but keep in mind that if you operate with a legal entity, chances are good that you need to have a balance sheet reported on the tax return. So what you want to do now is print your balance sheet from QuickBooks and review it with your bookkeeper to see if the numbers make sense. Is the correct cash balance showing? Is the mortgage balance correct? If not, now is the time to meet with your bookkeeper to get that cleaned-up before tax time.
5. Know What to Bring: Whether you drop off, mail, or fax your documents to your tax preparer, make sure that you know what they need. Now is the time to ask for a Checklist or Organizer so that you can be prepared. Taxes change every year and so do credits, so make sure that you review the information request carefully to ensure that nothing is missed.
6. Make a List of Questions Beforehand: Write down a list of questions for your CPA before your meeting. If you have questions related to gathering documents, ask these questions early to save yourself time. For example, your CPA may not need to see each and every one of you receipts. Knowing what is needed and what is not can help to save you time and make the process more efficient.
7. Legal Entities: Did you form any new entities last year? Dissolve any entities? Or maybe change ownership in your entities? These are some major changes that can have a significant impact on how your taxes are filed so be sure to let your CPA know ahead of time regarding any entity-related changes.
8. Real Estate: If you bought or sold properties last year, be sure to let your CPA know. To ensure that all of your costs are denoted correctly, be sure to send in copies of the final HUDs so that your preparer can capture all of your write-offs.
9. Major Life Changes: Marriage, divorce, babies, inheritances, and death are examples of major life changes. If you haven’t already notified your CPA, be sure to let them know of any major life changes before they start working on your taxes so that they can help you file in the most beneficial way.
Tax time can be stressful for a lot of people, but with these simple tips you can get ahead of the game and file your taxes with confidence this year!