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Lehigh Valley Woman – Finance Section – February / March 2014

by Laurie A. Siebert, CPA, CFP®, AEP® Vice President, Valley National Financial Advisors

Preparing for Tax Season
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“Give me six hours to chop down a tree and I will spend the first four sharpening the axe.”
– Abraham Lincoln

Some of you prepare your own taxes.  Some of you engage a tax preparer.  That tax preparer may be an individual with no credentials but years of experience.  That preparer may work for a tax prep chain. They may be an enrolled agent or they may be a CPA.  Regardless of who prepares your tax return, here are some tips to help that process go as smoothly as possible.

  1. Review your 2012 return and make sure you have 2013 forms for every line item.  If not, resolve any discrepancies before sitting down to do your taxes.
  2. Do you have new tax reporting forms such as:
    • W-2 for a new job?
    • Form 1099 for Interest, Dividend, IRA, Annuity or Pension Income?
    • Social Security Statement?
    • 1099 for sale proceeds on the sale of investments and the related cost basis?
  3. Has your marital or dependent status changed?  If so, make sure that you have correct dates of birth and Social Security numbers.
  4. Have you made any contributions to an Individual Retirement Account or ROTH IRA account?  If so, document the amounts and dates they were made and for which tax year.
  5. Do you have your deductions separately summarized and receipts available?
    • Monetary Charitable Gifts?
    • Have you refinanced or taken a home equity loan? You will need the settlement sheet and use of the funds.
    • Non-cash Charitable Gifts?
    • Non-reimbursed Charitable and/or Medical Mileage?
    • Medical expenses including such items as doctors, dentists, optical, prescriptions, long-term care?
    • Medical Insurance Premiums paid on an after-tax basis?
    • Real Estate Taxes
    • Mortgage Interest Paid?
  6. Have you refinanced or taken a home equity loan? You will need the settlement sheet and use of the funds.
  7. What  about estimated income tax payments? If you have made any, you will want to indicate the amount paid and the dates made and for which tax year.

Some of the most common mistakes that may hold up a return or cause a “letter” audit include incorrect reporting of estimated tax payments and failing to report sales transactions.  Typically, when working with a preparer, they may suggest estimated tax payments and prepare the vouchers for you.  You may assume that they have that information and will enter it.  Not so. Always confirm what you have done, especially if you have changed the amounts suggested.

For sales transactions, the IRS will know the gross amount of the sale but not always the cost basis.  If you have a loss and think the IRS won’t care if you report it or not, you are wrong.  You have to report most sales.  Personal losses, for which we receive no deduction, such as a sale of your clothing at a garage sale would not have to be reported.

Getting yourself organized for someone you engage to prepare your taxes will certainly help if you are paying by the hour for the service. That way, you are spending your money on their expertise and tax planning strategies rather than opening your envelopes and organizing your papers.  The more times you have to go back and forth with your preparer, the more time your preparer will have to take to do your return.  The benefits of good tax planning can far outweigh the cost of the tax return and that’s where you should want your preparer to spend their time in lieu of organizing your documents.

These are questions you can ask your preparer:

  • Are you charging for your time or for the form?
  • When you do my tax return, will you review tax planning and tax saving opportunities for me?
  • Do you need copies of my receipts or can I summarize them?
  • What are your credentials? Are you a CPA or Enrolled Agent or are you at a firm that requires a review by a CPA?
  • How many years of experience do you have?

Bottom line – the time you put into organizing your tax information is money in your pocket. The time you let a professional review tax planning strategies may be as well. Tax laws are getting more and more complicated every year.  Make sure you are not missing anything or missing out on anything! Email me at lsiebert@valleynationalgroup.com or at www.yourfinancialchoices.com for more information or additional questions.

Be proactive, not reactive, and make the best of your choices.

IRS Circular 230 Disclosure: To ensure compliance with requirements imposed by the IRS, we inform you that any U.S. federal tax advice contained in this communication, including any attachments, is not intended or written to be used, and cannot be used, for the purpose of 1. avoiding penalties under the Internal Revenue Code or 2. promoting, marketing, or recommending to another party any transaction or matter addressed herein. Valley National Financial Advisors is the marketing name for Valley National Group, Inc. and its affiliates. Securities offered through Valley National Investments, Inc member FINRA, SIPC, 1655 Valley Center Pkwy, Suite 100, Bethlehem, Pa 18017 (800) 383-8297.