Every year, from now until April 15th, there will be endless articles about how to get ready to visit your CPA. I even considered writing one, but after seeing how many were out there, I decided that something else would be more valuable to my readers, an article telling them how to pay their CPA less this year.
I come from the school of thought that I want to pay and treat service providers well. From the waitress at my favorite lunch place to the guy that fixed my chimney, I believe that if I treat them well and I am willing to pay a fair price for their service, whatever it is, they will take better care of me and do a better job for me than the person that haggles for every last penny. This doesn’t always hold true, but I believe that over time, I come out way ahead using this approach. However, this doesn’t mean that I want to pay more than I need to get the job done.
1. Organize Your Records. At least put them all in the same place when they come in the mail. I have a file cabinet that I use. When I open the mail, if there is something tax related in it, I throw it in my tax folder for that year. That’s the minimum.
If you are like most people, there are several things going into your tax return. Maybe you have a W-2, and there is one for your spouse, some interest from a savings and checking account, maybe a side thing where you sell yard sale treasures on E-bay, you went back to school, so there is tuition and amazon.com receipts for books, and you paid for daycare for the kids. That is a fairly common number of different situations that your CPA will have to analyze separately. Divide everything by category. You can use a paperclip, envelopes, manila folders, I don’t care. Otherwise, you have to pay your CPA’s hourly rate to sit in their office while you divide it up together.
***Bonus points. Summarize it. Add up all your receipts by category and write it down. Sure, if your CPA is any good, they will double-check everything you write down any way. It still saves your CPA time, which in turn will save you money.
2. Bring it All the First Time. Since you are organized from Step 1, this should be a complete no-brainer. But every year people forget to bring everything needed to complete their tax returns. This means their CPA has to look at their file several times, normally over the course of several days or weeks. There were days where I looked at 15-20 different client files individually. If your return goes to the bottom of the pile for a week, your CPA will have to spend time remembering what was going on and where to pick back up with your return. That extra time is extra money out of your pocket.
3. Be Prepared to Tell Your Life Story. Ok. I don’t need all the details. But having a new baby, going back to school, switching jobs, having unexpected surgery, buying a new house, or any number of other life situations that have changed in the past year can affect your tax situation dramatically. Most CPAs will try to ask questions that they think would be relevant. It can save you time and money if you are willing to tell about your life and any big changes from the beginning.
4. Talk to Us Year Round. Your CPA can do so much more for you than simply prepare your taxes each year. If you have an unusual situation come up or just need some advice, call us. Most CPAs won’t charge for a quick phone call. If it’s something bigger, I’ve seen many situations where an hour or two of planning has saved thousands in taxes. Also, year round communication helps your CPA anticipate and prepare for special issues that will need to be addressed during your tax appointment. Again, saving your CPA time and your money.
***Bonus Points. Offer to take your CPA to lunch. It doesn’t always work, but I’ve done this successfully many times with professionals when I need advice, but don’t want to pay their hourly rate. You get to ask unlimited questions for an hour or so and develop a better relationship with your CPA, all for the price of a couple burgers.
5. Financial Education. I realize that only a few sick, demented people will actually choose to keep up with the tax code and all it’s changes every year. I can say that since I’m one of them. But having a basic understanding of finances in general will help you make better financial decisions throughout the year and to communicate with your CPA whenever that time comes. A little investment in yourself can pay rewards for a lifetime.
Any other tips or suggestions? Let me know in the comments.