How many tax preparers have heard this time and time again, or something very similar to it from a current or potential client? If I had a penny for each time these words were spoken, I would be in the financial stratosphere as Bill Gates and Warren Buffet.
If you’ve never thought about how the process actually works, here’s the process for you to really consider that it’s just more than putting in a bunch of numbers.
1. The personal client brings in what is supposed to be all of their paperwork, signs an engagement letter for the tax preparer to draft your tax return, and then reviews any missing information.
Did you remember all of your W2s, 1099-MISC forms from customers, 1099-B forms (proceeds, from stock broker or barter exchange transactions), any inheritance to report, 1099-DIV forms (Dividends and Distributions), 1099-INT (interest paid), 1098 forms (mortgage interest), moving expenses that were work related, job search expenses, charitable deductions, student loan interest, child-care credit, state tax paid, mortgage refinancing points, college tuition tax credit, energy-saving home improvements, as well as other potential deductions? Finally, if this is a new tax preparer you’re working with, you are often requested to bring your prior year’s tax return.
2. The business client brings in what is supposed to be all of their paperwork, signs an engagement letter for the tax preparer to draft your tax return, and then reviews any missing information.
Did you remember all of your 1099-MISC forms from customers, 1099-K forms (credit card payment and third party network transactions), 1099-INT (interest paid), a listing of all of your assets (including those bought and sold during the fiscal year), copies of all of your payroll report forms, copies of your fiscal year Profit and Loss and Balance Sheet reports, information on transportation expenses, information on home office expenses? Finally, if this is a new tax preparer you’re working with, you are often requested to bring your prior year’s tax return.
3. The tax preparer gathers all of this information, puts it into a folder/file, and begins sorting out the information, review all of the paperwork and makes the appropriate notations as to what figure goes into what line on the tax return, and then makes sure that the numbers are correct based upon the amounts provided by the client.
4. More often than not, information is potentially missing, and therefore the client needs to be contacted to be questioned about certain information submitted or lack thereof. This could be based upon deductions taken the prior year so due diligence must be made to avoid having a higher tax liability than what’s necessary. Thereby delays the preparation time which is dependent upon the communication time with the client. After the information has been verified, it goes back into the que to complete process when there’s a break in the order of tax returns. Once the initial return has been completed finally, a review of the tax return is made to verify if any other potential deductions have been overlooked and the numbers on the submitted paperwork actually match the tax return form.
Understand that because the US Tax Code is 71,684 pages long, tax preparers are charged with making sure that they not only understand everything in this behemoth, but also that your tax return complies with all of the rules in it.
5. Usually a third round review is then completed by another person in the office to verify that everything is accurate and that there are no potential errors which could severely offer red flags for audit purposes.
6. Finally, the client is contacted by the tax preparer with a specific date/time to review the return for any questions or concerns, and then likely electronically filed immediately after. Usually within 7 calendar days, the IRS will either accept or deny the return for processing. If the return is accepted, notification is sent to the client as well as a notice of any tax refund or payment which is due. If the return is denied, the tax preparer must review the errors noted by the IRS and resubmit the tax return for processing.
It’s more than just pressing a button or putting in a bunch of numbers for your taxes to be completed accurately these days. If you’re ever interested in learning first-hand what goes into the preparation of a tax return, visit a “tax school” that are being offered currently, just to see the very bare bones of what you must learn before even being let loose on someone else’s return, let alone your own. You’ll understand why everyone has their own specialty, including you.
About Our Show Advisor: Dwayne Briscoe is the founder and owner of Bookkeeping-Results, LLC. Dwayne began his company in January 2007, based on the foundation to educate small business owners and bookkeepers who use QuickBooks®. Working as a full-charge bookkeeper and trainer in a variety of industries for over 15+ years, he is a certified Pro Advisor with 5 certifications, including Enterprise Solutions and Point of Sale. He is also an instructor at Brazosport College in Lake Jackson, where he teaches basic accounting, QuickBooks®, and basic payroll, along with hosting his own private classes.
Bookkeeping-Results, LLC has focused more on quality and not quantity for their clients, by paying attention to the details. Through regular continuing education participation, as well as exploring additional ways of “thinking outside of the box” to help expand people’s knowledge of their own financial well being, it’s important to focus on not only saving the client money but also making the client money.