Helping clients gear up for tax preparation not only makes things easier on them, but also makes things go smoother on your end. The process begins long before December 31st.
The sooner you begin educating your clients, the better—and it doesn’t stop there. Along with education comes motivation. Tax preparation is something many people avoid. What they don’t realize is ongoing organization will make things easier in the long run.
Here are three building blocks for a (pre) tax preparation strategy. Advise clients to put a system in place beginning with these simple steps.
Open Your Mail
This might sound sarcastic, and perhaps it is just a little bit so, but truth be told, more people than you might think set aside mail without opening it. Why???
Whether it’s avoidance, trepidation or procrastination, they pile it, file it or throw it away inadvertently. If it’s a piece of junk mail or a direct mail marketing piece it’s not that big a deal, but when mail containing useful information or tax forms is tossed, it could spell disaster at tax time.
Advise your clients to open every piece of mail they get. They can do it standing next to the recycling bin and toss unimportant papers and envelopes as they go along. As long as they take their time, they can be sure to keep what’s important, including 1099s, W-2s and other important tax forms.
Storage is the next step. In some cases a manila envelope will due, in other cases, a file folder. As long as they keep everything together they’ll be organized at tax time.
Think About Filing Status
As you know, this can change from year to year. It’s a good idea to encourage clients to think about how they are going to file before their appointment. Unless you have a newsletter or do regular relationship management via email, send a mass email to clients reminding them to think about any life changes that might effect their filing status. Being recently divorced, having a child or having one or more children set out on their own will effect the number of dependents.
Be Ready for Extensions
Some clients are not prepared for the complexity of filing and feel overwhelmed with tax preparation. Because most people are afraid of the IRS, they panic. Reminding clients that if necessary they may file a six-month extension, will bring some relief and give most the extra time they need to prepare. A form 4868 is filed and clients pay an estimate of what they think they will owe while you work toward an October 15th deadline.
In a perfect world, this would solve everybody’s problems and we’d all live happily ever after. But as tax preparers we don’t live in perfect worlds. Some clients neglect to pay taxes for one or more years, and the IRS comes calling. Depending on how many years have passed, penalties can be exorbitant.
Step in to help with an Offer in Compromise (OIC).
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