How to File a Bulletproof Tax Return
Do you ever worry about your taxes? It’s almost human nature for working adults to sometimes wonder if you filed an accurate return last year. And, if you own stocks, bonds, or have multiple sources of income, then filing can get complicated pretty fast. What’s the most efficient way to make certain your annual, or quarterly, tax documents are filled out exactly right? Part of the solution is hiring a CPA who specializes in personal taxation (most don’t, so shop around), but there’s a lot you can do on your own to keep prices down and still send in a bulletproof document each year. Here’s a summary of the steps to take.
Review Prior Returns
Pull the past three year’s filings from your personal file or ask your preparer to send them to you in an encrypted email. If you only have the prior two years, that’s fine, but it’s better to have three. Make a small spreadsheet that lists income, deductions, taxes owed (or amount of refund), and a list of the schedules you used in the submission. You want to highlight this data and show it to the CPA you hire to help you get the documents you need and have everything in perfect order.
Hire a CPA to Fine-Tune Your Strategy
Getting your personal finances in good shape means making an investment in professional services. In this case, you’ll want to hire a CPA (certified public accountant) for a consultation and review of your financial documents. The best way to pay for the expenses is to take out a personal loan from a private lender. That way, you can use the CPA’s services as much as you want for about two months but remember to keep track of every hour the accountant bills you for. You want a thorough review of those prior returns to make sure they don’t need to be amended. Plus, if your income rises or falls by a lot within a three-year period, be ready to document and explain the reasons for those changes. In the event you’re audited, it’s imperative to have written proof of income changes, expense increases, and changes in deduction amounts.
File Early and Pay on Time
Whether you send documents to the government annually or quarterly, let your paid preparer know that you wish to send the packet(s) in at least two weeks in advance of the legal deadlines. If you owe a balance, pay it ahead of schedule as well. Crafting a bulletproof return means covering all the bases and perhaps overpaying by a slight amount when there’s a need to make estimates.
No matter how many documents you attach to the basic form, and regardless of what the total page count is, never file via hard copy. Even though it’s still a legal way to submit your financial paperwork and taxation forms, avoid doing so because it just slows down the entire process. The other major advantage of e-filing is that you not only get rapid confirmation that your return has been received, but you will receive credit for payments immediately. And, if you’re due a refund, it will hit your bank within a few business days. If you want to save the most on your taxes consider how saving time is also saving you money.