I know, Thanksgiving is coming and then Christmas, you don’t want to think about taxes right now. Taxes are for winter and cold. But this is a good time for tax planning.
This is a good time to look at how your life will change in 2012 and make adjustments so that you pay the least amount of taxes. Having a baby in 2012? You can change your withholding to give you a little more in your check. On the opposite side, a child leaving home may mean you need to have more withheld to cover your increased taxes. If you talk to your tax pro before you retire, you might not get a nasty surprise later.
And it’s not too late for 2011. You can still look at maximizing your deductions. If you’re close to itemizing deductions, it may be better to pay all your real estate taxes in 2011 instead of splitting the payment. If you’re planning a special charitable contributions, your might want to see if it will do more good in 2011 or if waiting to 2012 is a better idea. And don’t forget an IRA contribution to help your 2011 tax return.
But I really want to mention a different kind of tax planning, it won’t change your taxes but it might save you a little money on your tax prep fee. If you have a return which is labor intensive, you should talk to your tax pro and see if any of the work can be done now. The return can’t be completed but how about all the collating, totaling receipts and matching sales to purchases?
Every client is different. Some bring me in the totals of their deductions (business or personal) and others just bring in a bag of receipts for me to sort and total. And I find myself wishing that I had some of time from the summer in March. Since I can’t horde time, I’ve convinced a few clients to bring me their documents early (summer and fall) so that I can begin working on the support work. For example, one day trader brings me in their monthly statements. The brokerage house only gives a list of sale trades with the 1099B. The cost is in the trader’s monthly statements showing all their trades. They bring the statements in over the summer and fall; I can match purchases and sales on a spreadsheet to import into the return later. When I get everything else for the return, all I have to do is maybe one month of statements and their return. The hours of basis work is mostly done. I have small businesses (farms) that bring in their receipts to break out by category and input onto a spreadsheet now. They don’t want to hire me to do bookkeeping but this lets me work at my convenience not when I’m swamped with other returns. Once my tax software is here, a very lucky client is bringing all his W-2Gs for me to input and scan. This lets both of us to double check and make sure that none are missed.
What does the client get from this? After all, I still have to do that work so that I can do the return. If someone works with me, I’m much more likely to work with them on pricing. The return is completed faster. They don’t hear the phrase, “I’ll have to extend this return.” And surprises are caught sooner when they are easier to fix.
If you have a labor intensive return, check with your preparer and see if they want to get a head start on what you have. They may not this year because it’s getting to holiday and tax school season but it could be an option for 2012.