How You and Your Clients Can Prepare for Tax Return Season

Another tax return filing season is about to kick off. Are you and your clients ready? Here are several things you can instruct them to do and how you can put your own house in order.

Dec 10th 2019
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Another tax return filing season is about to kick off. Are you and your clients ready? Here are several things you can instruct them to do and how you can put your own house in order.

What Your Clients Should Do

Hopefully, the days of having clients dump a shoebox with a mishmash of records and receipts on your desk are long gone. Nevertheless, you should explain to clients that you can better help them if they help you. The following are several suggestions:

  • Collect All the Necessary Tax Documents: This typically includes an array of W-2s, 1099s and other forms. Have your clients review these documents to check if they are accurate. Notably, they should verify the basis used to determine the tax ramifications of any securities transactions.   
  • Check Social Security Information: It is critical to provide correct Social Security numbers on personal tax returns. Your clients should verify these numbers. Assuming that the numbers are accurate is a classic mistake and could lead to dire complications. This only takes a few minutes -- do it.
  • Organize Financial Statements: Once you have all bank and investment statements in order, it will be easier to trace the origin of funds for various purposes. For instance, it may be determined that a bank deposit constituted a tax-free gift rather than earned income. Also, brokerage statements might show a tax loss carried forward that can be used offset capital gains realized in 2019.
  • Organize Business Records: Similarly, self-employed individuals and small business owners often play fast-and-loose with their recordkeeping. Make sure that expenses can be substantiated through receipts and other documentation. Traditionally, the IRS pays extra attention to travel expenses, including deductions for business use of vehicles, so detailed recordkeeping in this area is a must.
  • Guard Against Tax Scams: During this time of year, people often receive phone calls, emails and/or text messages from individuals claiming to represent the IRS or an affiliated organization. Dismiss these imposters and report them on the IRS website. In particular, don’t respond to phony phone calls or electronic messages. The IRS never contacts taxpayers this way. 

What You Should You Do

There’s more to being prepared for tax filing season than storing snacks and other goodies for late night sessions. Take the following steps:

  • Get Organized: Just like your clients, organization is a key element. Review your best practices and procedures and make any tweaks you deem to be warranted before your clients descend on you in waves.  Make sure that cyber security systems are in place to protect both client data and your internal information.
  • Refresh Your Memory: It’s the second year of tax returns following the biggest piece of tax legislation in decades. Become more comfortable with all the changes in the new law plus other significant developments during the past year. For instance, you should be clear about the rules for claiming the qualified business income (QBI) deduction for pass-through entities and sole proprietors.
  • Understand the Technology: Get a firm grip on how the technology works including the use of tax software. Become comfortable with interfaces and other the aspects of preparing your returns. Most important, have a game plan if any technological glitches occur. It’s easy to be frustrated by breakdowns and valuable time could be lost. You don’t have to be an IT expert, but you shouldn’t be a complete novice, either.
  • Set the Schedules: Consider that firm members also have a personal life. Factor this into your guidelines for office operations during this hectic time. Allow enough flexibility for your staffers to do their jobs well. For example, you might set up one day a week when everyone works for home or give each employee personal time off on the schedule.
  • Don’t Panic: Granted, things can get crazy during tax return season, especially as the April 15th deadline approaches. At times, you and your staff may be overwhelmed. Remember to focus on the end goals. Strange as it may seem, it might also help to divert your attention with some mundane tasks before you get back to the grindstone.

These are just some practical ideas to consider in your preparations. Find out what works best for you and your firm.  

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