Tax losses are becoming more and more complex. Most of the people think that hiring a tax consultant is a better option as he will do some magic to reduce their taxes.
Admitting that there are many competent tax consultants to take care of your return, check what you take with you when you go to request him for preparing your return? Remember he is not a magician. Go to him with organized papers and let him work on them to give you real tax saving tips.
The box system
To begin with, save all your receipts in one box, as and when you get them. They will put real dollars in your pocket. You may walk out of a store without small change but you should never walk out without a receipt. These receipts are very important because IRS is demanding documentation for every claim you make.
Once you grab the receipts, put them in a box or in a special file. After a couple of months sort them out into categories and put the checks and receipts in envelopes with the name of category written on them. So you will have envelopes for charitable contributions, medical expenses, property taxes, mortgage and so on. If you feel there is no category then keep such receipts in a separate envelope. Now it’s easy for your consultant to translate them into deductible expenses.
You can do all this work while listening to music and such light work will save hundreds and thousands of dollars for you.
Never give your consultant a bag full of unsorted receipts. It’s the most irritating thing. It will waste his time and your money. Tax preparation is not a fun and your sincerity will make him happy. Try to minimize his pain.
Using this “box” method your consultant will be able to complete his work faster and with more accuracy. He can concentrate on tax planning issues instead of concentrating on organizing the vouchers, receipts and checks. What you want from your consultant is the key question. More interest you show in your approach, more proficient he will be.
There are some other ways to help your consultant
There are some other methods by which you can help your consultant to get better results. If you are having sale of stock or mutual fund, you should make the cost basis available to your consultant. This can be done by adding the reinvested dividends and capital gains. So you don’t pay taxes on them two times.
For getting the necessary statements you need to call your broker soon after January 1. The broker will take some time to send you the statements but then its well within the deadline of April 15.
It is also important to take an early appointment with your tax consultant so that you are not bothering him at the last moment. If you wait until April, he is going to be very busy and may not be able to concentrate fully on your work. Taking into account the stress and the workload, you get much better results in February or March. Also if your consultant wants some additional papers, you have sufficient time to get them for him.
You may be having certain questions which you wanted to ask your tax consultant. List down those questions and take them with you when you approach him. He may not be able to give you instant answers but he can come back to you after looking at your papers. He may have certain questions for you. You may answer them on the spot or after you come back from the meeting. But then there should be some time for all this activity.
Leave behind the fear of tax audits
Many people feel that tax audit is worst then death! But with these preparations you have already reduced the chances of tax audit considerably. Actually what is the main purpose of tax audit? Getting supportive paperwork for the claims you have made in your return. So for your claim of deduction of charitable contributions, the tax auditor is going to ask you the receipts of your contributions. And if you are already equipped with all of them, what else you want? You have already audited your tax return before IRS does!