Prepare for the Tax Preparer to Save Money

Tax Day falls on my birthday. This year, I'm giving myself the gift of a tax preparer.

Last year, in the days leading up to The Big Day, I locked myself in the home office. I emerged bleary-eyed from staring at a computer screen and mentally exhausted from climbing my way through an avalanche of paperwork and receipts. I also was hopped up on caffeine and paranoid — did I miss anything? Did I forget to carry a “1”? Was my hair on fire?

Yes, I waited until the last couple of weeks to file my return. I'll admit it. I hate doing my taxes nowadays, so I avoided it as long as possible.

It wasn't always this way. When I was a full-time employee, I'd file form 1040EZ as soon as my W-2 arrived. But since becoming a full-time freelancer, taxes and forms have become more complicated. As the 1099s arrived in my mailbox, I tossed them into a folder, putting off the inevitable. “We need to do our taxes,” said my husband. I know, I know, I thought. Next week.

Well, Tax Day/my birthday is a few weeks away. And because of upcoming travel plans, my personal Tax Day is effectively two weeks sooner. I could either stress out about getting my taxes filed (and not just about the deadline, but about being accurate, too), or I could join 49% of you and pay a pro to handle it for me.

Waiving the white flag
According to a,, and MSN Money online poll, 48% of you do your taxes by hand or with software. That was what I've done with every return so far. It's cheap (or even free), and the process is simple if your tax returns aren't complicated.

But this year I'm going to try hiring a tax preparer. Why the change (besides procrastination and an upcoming trip)? Here are my reasons:

  • I'm probably overpaying. I'm paranoid about being audited. Last year, there were a couple of deductions I might have been able to take, but I wasn't 100% sure, even after reading up on it on the IRS site. I erred on the side of caution and probably paid too much. (My shiny, new-to-me accountant also will review last year's taxes, so we'll see if that was the case.)
  • Audit assistance. If I do get audited, I like the idea that I'll have an expert on my side. I've never had to deal with an IRS audit, but if it's anything like the time I dealt with a worker's compensation claim, I know I don't want to go it alone.
  • The tax preparer might pay for himself. If I am overpaying, it's possible that the tax preparer will pay for himself by lowering my tax bill. Also, I'd rather work for a few hours writing or editing and hand that cash over to the accountant than toil through tax preparation.
  • Long-term planning. Another confession: I only think about taxes when I have to file. But that's not wise for long-term planning, so I'll also consult the accountant about ways to structure my freelance business to save money in the future.

Basically, I want to focus on my business and eliminate the stress of doing taxes myself.

Saving money by saving the tax preparer's time
I found a tax preparer using these tax tips from Richard Barrington (GRS is still my favorite personal finance resource, even if I am on staff now!). After checking the accountant's credentials and a free consultation phone call, I set up an appointment.

But my work isn't done. I could show up with a stack of papers and a shoebox full of receipts, if I want to pay for the time he'll need to sort through the mess. My tax preparer knows this all too well, which is why he provided a guide to speed up the preparation process — ways to save him time that will save me money. I've expanded on that list using other sources, and came up with the following 12 documents, numbers, and data to organize, locate, or calculate before you meet with your tax preparer:

  1. A copy of last year's tax return, including the state return, if applicable.
  2. Original W-2s, 1099s, 1098s, and K-1s (make copies for your records).
  3. Birth dates for you, your spouse, and your dependents.
  4. Do you want your refund deposited directly into a bank account? Have your bank account routing number and account number.
  5. Do you pay for childcare? Provide the Social Security or Employer Identification Number for all child care providers for Form 2441.
  6. Did you sell shares of stock or a mutual fund? Have the following: Date acquired, number of shares acquired, purchase price, and sales commissions and fees, adjusted by reinvented dividends and stock splits.
  7. Did you invest? Bring a copy of your broker's year-end tax report that shows interest, dividend earnings, and proceeds from sales of securities. Also bring copies of any booklets they mailed you, which can include information on income from government obligations that can be used to prepare state tax returns.
  8. Did you earn interest at a bank or credit union? List each bank and the amount earned.
  9. Did you donate items, donate money, or give time to a charity? First, check the status of the charity on the IRS database. If you donated items to charity, have the following: name of the charity, city, date of donation, description of items donated, estimated total paid for the items, estimated value of the items. If you made charitable contributions by cash, check, or credit card, you need to tally the total amount contributed. If you volunteered your time to a charitable organization, have a record of your mileage and out-of-pocket expenses.
  10. Did you buy or sell a home in 2011? Bring a copy of the settlement or closing statement.
  11. Do you own a house and pay your property taxes yourself (not thru escrow)? You'll need to provide the date(s) they were paid.
  12. Do you have rental property or are you self-employed? You'll need a detailed list of income and expenses. If your 2011 business receipts really are in a shoebox, organize them by category, or use accounting software to do the same thing. Many preparers provide tax organizers to help you gather numbers and documents.

Sources: James R. Kay, CPA; Consumer Reports; Generation X Finance;

Whew. It's still a lot of work, especially if you haven't been diligent about record-keeping. It took me a few hours to locate everything I need and organize it into a file folder (with colorful paperclips and brightly colored sticky notes — obviously requirements).

I'm feeling prepared for the tax preparer, but I'll be sure to report back about the experience for those of you on the fence, along with any hot tax tips I might glean. (Hmm…”hot stock tips” sounds exciting while “hot tax tips” falls flat. The IRS has zero sex appeal.)

For me, this year April 17 will just be my birthday. And if you're still doing your taxes at the eleventh hour, I sympathize. Join me afterward for some cake.

Readers, can you add to this list? What other ways can you prepare and organize to minimize tax preparer fees?

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