Reading Your Tax Return
- projectdoneangie
- Feb 5, 2012
- 3 min read
Please do not blindly sign your tax return without first reviewing the numbers and asking a few questions. Most people have someone prepare their annual tax return, I know I do. I am not a tax expert so I rely on my CPA for current tax rules and loop holes. CPA’s study tax law changes to stay up to date on how to keep more money in our pocket. I know I have to pay my fair share; I just don’t need to over pay. Ever!
The accuracy of the return depends on the accuracy of the information provided. I track my income and expenses in QuickBooks and balance my bank statements each month. I want to ensure that all of my information is entered and tracked from receipts, bank statements to Credit Card statements and Auto loan statements; as well as any asset purchases and/or new loans.
The numbers that I provide are the numbers that are used by my tax preparer to calculate my tax rate. These numbers also determine if I have enough expenses to offset my income or if I have a balance to pay. I calculate my numbers with a P&L and a Balance Sheet. These reports condense my financial story into a useable format for tax preparation.
When the tax return has been completed and returned to me, I compare my numbers to the tax form numbers for accuracy. Since I travel a lot to client appointments, I also want to make sure my mileage is accurately recorded and that my home office deduction has been accounted for.
I have seen many clients and friends just sign what is sent to them without any sort of review since they are unclear as to what
they are looking at. It only takes a few minutes to review and understand where the numbers came from before signing. Get familiar with your numbers and if you have any questions at all, your CPA should be able to explain what the numbers mean. If they can’t answer your questions, or take your call, it is time to move on and find a new certified accountant. If they can’t help you now, what about during an audit? You want someone you can trust on your team; someone who is familiar with your history and someone who is reliable. If you are lucky enough to have a bookkeeper, you have another ally because they helped you pull the annual numbers together and will be able to help you read them correctly.
You might find a CPA with big ideas on how to save you lots of money or someone who is pretty aggressive with the numbers and gets you a large refund every year. This is great for you now but if you can’t tell where the numbers came from to support these large refunds, you could be in trouble down the road. Not all CPA’s are created equal. If your CPA uses big accounting words that you don’t understand and can’t talk to you on a person to person level, this could be a red flag that it is time to move on. A CPA needs to be able to talk to their clients and answer any and all questions.
My CPA is pretty conservative so I know that I am protected and I don’t have to worry about any untraceable numbers on my return. I don’t have the time or the patience to deal with IRS letters requesting additional information or an audit. The world is moving pretty fast and I don’t have time for stressful detours! The first step is the hardest. Get some help reading your return for the first time and next time you can help your CPA save you money.
I am here to help and answer any questions that you have. You can subscribe to my blog for future information or send me a message on my Facebook page at http://www.Facebook.com/ProjectDone which I will gladly answer. If you feel that you need additional help, you can contact me by email and we can set some time aside to get your numbers to work to your advantage!
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