With memories (nightmares?) of this year’s tax season fresh on your mind, now is the perfect time to consider strategies and actions to make next year as painless as possible for you, your tax preparer and your bank account.
1. Assess Your Latest Effort
Did you have all your records at your fingertips? Did you have to go hunting for W-2s, or ask employers for second copies? Were possible deductible expenses in a file (paper or digital) where you could easily find them and transport them to your tax preparer? Did you have to make two trips to the preparer’s office because you found more items needed after the first trip? Make a list of the good, the bad and the “needs improvement” aspects of this year’s process and take steps now to ensure a more seamless and efficient process in 2020.
2. Communicate with Your Tax Preparer Sooner Rather than Later
Ask for advice or suggestions now, while they have time to consider your situation without the crushing pressure of clients waiting on returns. If you know of changes or unpredictable situations occurring this year, explain them now. Changes to consider discussing with the accountant could include new children, divorce, a death in the family, an income change or unpredictable income, retirement of one or more earners in the household, a household member taking Social Security or a pension, and inheritances. They will appreciate the questions now, but attitudes might understandably suffer when under deadline pressure.
3. Adjust Withholding or Estimated Payments
There are three reasons you might need to do this: (1) your refund was large, (2) your tax payment was large, or (3) you have changes in your situation this year. While it is a common emotion to be gleeful about a refund check, the fact is you just gave the government an interest-free loan on the money you could have been using elsewhere. If you work for someone else and your pay is relatively consistent, the solution is simple: just adjust your withholding rate. If someone in the household is self-employed and makes quarterly estimated payments, adjust those up or down as appropriate. If there are changes on the horizon that are unpredictable in scope, your tax preparer can suggest strategies to mitigate the effects. Your accountant can help prepare a strategy to increase withholding or estimated quarterly payments that would at least avoid penalties. If it happens you have to pay more, at least you will be paying only for what you legitimately owe without penalties tacked on.
Use some time now to establish a system for filing your records. It will pay off in more time saved, and much less stress, at tax time. Take a look at the documents you needed for tax preparation this year and ask your tax preparer if they have a checklist available to better plan for next year (most all of them do).
5. The Bottom Line
The steps listed above are suggested with one ultimate goal in mind: to have your tax documents prepared in a less-stressful environment, which, in turn, should produce an accurate tax return reflecting exactly what you owe, but not a penny more. Remember, your team at Merit is here to work hand-in-hand with both you and your CPA, not only during tax season but all throughout the year. Please do not hesitate to give us a call if we may be of assistance in any way.
This information is not intended to be a substitute for specific individualized tax advice. We suggest that you discuss your specific tax issues with a qualified tax advisor. LPL Financial, Merit and Merit Financial Group do not offer tax advice.