Financial advisor and "Early Show" contributor Ray Martin asked certified public accountants and enrolled agents - professionals qualified to prepare federal tax returns and to represent taxpayers - "What you can do to help them do a better job for you?"
Martin explained on "The Early Show" how doing these four simple things can help them save you time and money - and maybe even leave time for them to give you some advice to make this year even better.
REVIEW YOUR 2008 TAX RETURN
A tax preparer will always review the prior year's tax return before they begin to prepare your current tax return - so you should, too. Review your past year's tax return to familiarize yourself with what you reported for income, adjustments and deductions last year. This will serve as a good guide for the categories of income and expenses you'll need to tell your accountant.
Your 2008 tax return also provides amounts that can be carried over into 2009, such as tax refunds and excess losses on investments.
Finally, look for any information - such as your address or dependents - that may have changed, and make a note to tell your accountant.
ORGANIZE YOUR RECEIPTS
Don't send a pile of receipts to your tax payer -- they are not an auditor, so you don't have to show them all your receipts for every expense that may be deductible!
Instead, bring to your appointment a list of those items organized by category (for example, home office, rental property, charity, etc.).
Also, don't confuse your tax professional with a secretarial service. Being disorganized and unprepared wastes time, which will cost you money.
Open any envelopes with the words "tax information" or "tax documents" and sort the contents by category before you meet with your tax person. 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 expenses.
Here are a few more tips:
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.
Other items to remember to organize and bring:
• 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.
• 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, or the contribution is not deductible. So collect everything in one place.
• Did you drive your personal vehicle to do work for a charity? That mileage may be deductible, at 14 cents per mile.
• Did you pay 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.
The bottom line: some tax preparers will reward their clients who have their tax information complete and organized properly with a discount of up to 15 percent discount on tax-prep fees.
Shoe-box clients, on the other hand, can be charged additional fees to complete and organize the paperwork.
GATHER COST OF INVESTMENTS SOLD
Cost basis is the purchase price, plus transaction fees, etc. of the investments you own. 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. (This applies ONLY to taxable, non retirement accounts.)
If you can't find the cost basis of investments you sold last year, assigning the task to your tax preparer can cost hundreds of dollars extra.
Your broker or financial firm should send you a 1099-B form summarizing all your investment sales. But if you did not originally purchase the investment at the firm (because you purchased it at another firm and transferred it to a new account, or you received the investment as a gift). You'll have to find the purchase information to determine the cost basis. That can be hard to uncover if the investment was 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.
Dumping this problem on your tax preparer will mean they will need to spend extra time to get this information and charge you for that time.
Instead, ask your financial firm where you purchased the investment to research their records for the cost basis information, or go through your records and statements and do it yourself. An alternative you might want to try is the cost-basis calculator in popular tax software products such as TurboTax, which can be helpful in tracking and calculating costs basis.
DOCUMENT MAJOR PURCHASES
Tell your preparer about major purchases such as a new vehicle, purchase of a home, refinance of your mortgage and even some major home improvements made in 2009.
Doing so can save you real money.
In 2009, there are new tax credits for first time home buyers (up to $8,000) repeat home buyers (up to $6,500) and tax credits for energy saving home improvements (up to $1,500). There is also a deduction for vehicle sales and excise taxes paid for new vehicles purchased in 2009. If any of these things apply to you, here is what you need to do:
• Provide your preparer with a copy of the Vehicle Purchase Receipt which details the excise and sales taxes paid for a new vehicle you purchased.
• Provide a list of the improvements, description and cost of any energy saving improvements made to your home in 2009.
• Also, points, interest and property taxes paid in connection with the refinance of your mortgage or a home purchase can also be deductible. Give a copy of all three pages of the Settlement Statement (HUD - 1), which provides amounts for these items, to your preparer.