The easiest way to keep your tax preparation costs down is to make it more straightforward for your preparer to complete your return and stay informed of your tax situation.
Effective Ways to Keep Tax Preparation Fees Down
#1 Turn your information in early
When preparers have more time to complete the return, less items may be missed, and it provides a clearer time for them to provide a high-level review. Upload your documents to your preparer as they become available. W2s, 1098s, and some 1099s will be available by early February.
#2 Don’t wait for your package to be complete
If you can send in 80% of your documents and note that you will provide the missing documents as they are available or the date that you expect them.
#3 Be responsive
When preparers ask questions, answer as quickly as possible. When the questions are fresh in the preparer’s mind, they can quickly update your return. Additionally, respond when they ask for additional information, either provide the information requested or a date when it will be available. When preparers have to follow up multiple times for the same request, it can add to your preparation costs.
#4 Have a pre-season or year-end planning call
These pre-emptive calls will quickly lay out changes that have occurred during the year which will provide insight into your transactions and what documents are needed or missing when preparing your return. Staying on top of your tax situation year-round can help reduce the amount of work needed during tax season. These regular check-ins can request information needed at the time of the transaction rather than trying to gather the needed documents during tax season.
#5 Provide clean financial statements
For self employed individuals (Schedule C) or rental properties (Schedule E) – providing financial statements that have been reviewed or prepared by a bookkeeper keeps preparation fees down because there are less questions to ask or changes to make. A summary of activity provided by the client (like completing the Schedule C or E organizer page) is much easier than a list of all transactions made throughout the year that a CPA would need to comb through and summarize. Also, making changes to financial statements after providing them adds to the cost of the return preparation since all of the work papers, tie outs, and the return itself have to be updated when a change is made.
#6 Note significant activity
Letting your CPA know that you made a new investment, sold a previous one, bought or sold property, moved, relationship or family updates, or other big changes will allow them to ask for the proper documents ahead of time. Even better, reaching out to your CPA ahead of these transactions may allow them to suggest tax saving strategies or structures prior to these events.
#7 Review your credits and deductions
Knowing which credits and deductions you are eligible for can lower fees. Turning in information for deductions you are not eligible for can increase preparation time. A CPA can guide you if you are unsure.
#8 Stay informed of tax law changes that will impact your situation
Read newsletters or social media posts provided by your preparer and stay up to date with the general news and IRS news releases. Knowing how your situation may be affected by changes and discussing them with your preparer will allow you to make necessary adjustments.
Final thoughts
Overall, staying organized, providing complete information, avoiding last minute preparation or changes, and working with a CPA year-round can help avoid surprises, additional charges, and make the overall tax preparation as smooth as possible. Reach out to your tax preparer as early as possible to start planning and get ahead of the game.
Aura Advisors is a boutique tax consulting and compliance firm working with start-ups, emerging growth companies, and affluent individuals. Making it safer for good people and good companies to continue to do good things.