Advice: Put your tax-return preparer in the best position to help you. You’ll save time and money by following these five steps before you meet with your preparer this year:
1. Organize your records. Don’t expect your preparer to unravel your collection of receipts, credit-card slips and other paperwork. Arrange for a meeting early in tax-return season to cover all the bases. Then provide the requested information and documentation in a neat and logical order.
Tip: In that initial meeting, bring along relevant articles clipped from Research Recommendations. Pinpoint the tax strategies you think could be used on your return.
2. Don’t assume the tax pro recalls all of your personal circumstances or any recurring quirks. Give him or her a quick refresher.
3. Report all security transactions. This is vital info your tax pro will need to complete your return. Sometimes, a few trades might slip between the cracks, especially if you have multiple transactions involving mutual fund shares. Provide your tax return preparer with all 1099s you’ve received.
Remember that transferring shares within the same “family” of mutual funds is a taxable event. Don’t forget to include these transactions.
4. Support your basis adjustments. If you sold securities, you owe tax on the difference between the sales price and your basis. Make sure you provide all the documentation for adjusting your basis. Otherwise, you might overpay the actual tax bill.
Typically, mutual fund distributions of dividends and capital gains are automatically reinvested. If you don’t account for taxes previously paid on those amounts, you’re paying Uncle Sam twice on the same gain or dividend!
5. Combine business with personal. Don’t treat your personal tax return as if it exists in a vacuum, especially if you own a pass-through entity (e.g., a partnership or S corporation) or have other business interests. One is dependent on the other. It’s typically best to employ the same preparer (or firm) to handle your business and personal returns.
Tip: The deadline for calendar-year corporate tax returns is March 15. So you’ll have to move faster if a business is involved or extend your filing deadline.