February, 2004 Tax Tip
Effectively Preparing for Your Tax Return Interview
It is that time again for most of you to get together with your tax professional to have your 2003 returns prepared. In this month’s Tax Tip I will share some thoughts with you on how to make the tax preparation process as productive an experience as possible, both in reducing preparation costs and in maximizing the tax savings potential in your returns.
1. Verify data on W-2's, 1099's, 1098's, and other information documents provided to you in January. Errors have been known to occur in the amounts, social security numbers and other information reported. If there are any discrepancies between what is reported and what your records show, advise your preparer. In particular, if you made a year-end mortgage payment that is not reflected on the 1098, be sure to tell your preparer so he or she can make the appropriate adjustment. The same applies if dividends, interest, and other payments are reported to you that you did not receive in 2003.
2. Organize your data!!! The time you save the preparer will result in a lower fee to you as most preparers charge by the time spent!!
3. Provide the following to your preparer:
• Dates of birth and social security numbers for you and your dependents
• Profit and Loss Statement and Balance Sheet for your proprietorship(s)
• Settlement statements for all real estate transactions
• All IRS and state taxing authority correspondences
• If using a different preparer this year, a copy of your 2002 returns and, if applicable, depreciation schedules
• All documents that may have tax import, including W-2’s, 1099’s, 1098’s; K-1’s from trusts and estates, partnerships (including LLC’s), and S corporations; broker statements; and all explanatory materials provided with these documents
4. • Document the dates and amounts of all quarterly federal and state estimated tax payments made for year 2003
5. • Have documentation to support all business expenses. For business auto, provide business and total miles. Also categorize car expenses (e.g. gas/oil, repairs, insurance, registration, etc.) If you purchased or leased a car provide the sales or lease contract
6. • Travel and entertainment expenses require the date, place, amount, nature, names of those present, business connection, and business purpose. Each record must be prepared contemporaneously with the occurrence of the event. Documentary evidence (invoice or receipt) is required to support any lodging or meal and entertainment expenditure of $75 or more
7. • Due to a beneficial change in the 2003 tax law, if you sold property, including securities, in 2003 be sure to provide your preparer with the date of sale, as the capital gain rate was reduced from 20% to 15% for most sales occurring after May 5, 2003. Another beneficial provision increases the first-year bonus depreciation deduction for 30% to 50% for qualified property acquired after May 5, 2003, so let your preparer know the dates you acquired any business property.
8. • If you moved to another state during 2003, you will need to show all items of income by the source state from which earned. In this regard items of interest and dividends are generally attributable to the state of residency when received
9. • Tax law requires that you maintain a receipt or other acknowledgement for any gift to charity of $250 or more
10. • Remember that an IRA or SEP is available until April 15, 2004 for the year 2003
11. • Be sure to ask lots of questions if your preparer doesn’t!! My clients who have worked with me know that I ask many questions to probe for items that might save you money or trouble.
Heeding the above advice will help to ensure that you will file the most accurate returns possible. I would welcome the opportunity to work with you on your 2003 returns.
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