Every March taxpayers start digging through receipts, nervously checking the mailbox for 1099s that haven’t arrived yet, and trying to remember exactly how much they gave to their nephew’s charity walk-a-thon.
Procrastination makes for a jittery tax payer. But have you ever thought about what it does to your tax preparer?
Molly Mccluskey, writing for US News and World Report, spoke with 3 certified public accountants and asked them what they wish clients knew about paying taxes not just in April, but year-round.
Waking up in the middle of the night in a cold sweat about your 401(k) contributions? Wondering if your $40,000 swimming pool is fully tax-deductible? Has reading too many finance blogs by people with no training sent you into a panic? If this is you, calling your CPA to walk you through your concerns is a great idea – in November.
Making that call in mid-March? He or she is not going to be of much help.
There are two reasons placing a late call to your tax guru is doomed to fail. First, you’re most likely not their only client, and as anxious as you’re feeling, your CPA is feeling it too, multiplied by everyone who has walked through their door, called or emailed. Second? Making large financial decisions in March isn’t going to have much of an impact on this year’s filing.
“Don’t call or walk into my office in the middle of tax season and ask about the best retirement account to open. If you had come to me in August, I could have told you,” says Stephen Kahn, a CPA in private practice in Alexandria, Virginia. “We can go over that when it’s not tax season, but if all your other paperwork is running late anyway, my first priority is getting your return filed. If you let me off the phone, I could do more taxes.”
Annette Nellen, a CPA and professor of accounting and finance at San Jose State University, says that type of planning goes beyond retirement accounts. “Please ask for my tax advice before you do the transaction. The tax law is not always logical or unforgiving,” she says.
And there’s no going back once a mistake is made, such as taking out a loan with nondeductible personal interest rather than deductible mortgage interest or some other category of deductible interest, or if you made a large charitable contribution that was not properly documented or appraised.
There’s a fine line between flooding your accountant with too much information, but more often than not, you haven’t sent enough. In such cases, speed is of the essence, and having your accountant chase you down for additional paperwork or to answer repeated questions can slow the process drastically.
“Don’t ask your accountant why they need stuff,” Kahn says. “With Roth IRAs, for instance, we need to know your contribution history. If you’re a new client, and you only sent this year’s [contributions], we’re going to come back and ask for past years. It’s going to happen. Please just send it. We’re not asking for sheer curiosity.”
Nellen says she often encounters a similar roadblock with charitable contributions. “If you make a charitable contribution of cash or non-cash items worth $250 or more, you must have documentation from the charity before the return is filed that states that you made the donation, the amount and whether you received anything in return,” she says. “Without this statement, even a canceled check or website receipt won’t be enough.
But perhaps that need for thorough documentation is most apparent in this year’s reporting for the Affordable Care Act. “When meeting with your tax return preparer, you should bring proof that you and everyone claimed on the return had health insurance (minimum essential coverage) for all 12 months of 2014,” says Jeffrey Porter, a certified public accountant and principal of Porter & Associates in West Virginia. “If you purchased health insurance on the marketplace, you should have received a Form 1095-A to provide to your preparer.”
Porter points out that more than 800,000 incorrect 1095-A forms were issued last year, and encourages everyone to double-check the website to see if they should have received a corrected Form 1095-A.
Your CPA most likely isn’t a miracle-worker, no matter how good he or she may be. If you owe the IRS, you owe the IRS. Getting angry with your CPA isn’t going to change that, and it may make them not want to work with you again next year.
“When you show up at my office for the first time, and you owe the IRS a lot of money, don’t ask, ‘Isn’t there anything we can do about it?’” Kahn says. “I couldn’t help you plan because you just showed up last week.”
The best route? Get through this tax season, take a deep breath and reach out to your CPA again in late May or early June, after he or she has had time to decompress from the chaos of spring filings. At that point, you can discuss your financial goals and challenges and make a plan.
But don’t be a stranger. If you wait until next March to call your CPA again, it might be too late.