There are ways to save money on just about everything we buy. If I really want to get a car for less money, I don”t buy one with leather seats, sun roof, and built-in WiFi. If I want to save money buying a house, I don’t buy one with a 4-car garage. If I want to save some money on college, I go to a community college first, then a state university, not a private college.
Of course, not getting the extra stuff must be balanced with what your needs are. If I need a truck to pull a horse trailer, I need to be willing to spend the extra $4-5 thousand to get a diesel engine. If I have two vehicles, a boat, a motorcycle, a golf cart, and a huge riding mower, I should probably spend the extra money to get a 4-car garage.
So how does this help me save money on getting my taxes prepared? Basically, the things and activities you do during the year have an effect on what it costs to have your taxes prepared. If you want to save money on tax-preparation, don’t do these things:
- Don’t have your own business. Having your own businesses requires a Schedule C and usually a Schedule SE to be prepared. This includes income from the business as well as expenses.
- Don’t buy equipment for your business. Buying equipment requires Form 4562 and that requires a depreciation schedule.
- Don’t own rental property. Having rental property requires a Schedule E for all rental income and expenses, as well as depreciation of the rental property itself.
- Don’t buy and sell stocks. Stock trading requires a Schedule D and Form 8949 with the purchase price and the selling price of each transaction.
- Don’t be a day-trader. Each stock trade must be included on the tax return. The more trades, the more time it takes to enter all the transactions.
- Don’t have a farm or ranch. A farm or ranch requires a Schedule F which documents the income and expenses of each property.
- Don’t have oil & gas royalties. Each oil & gas royalty property is considered rental property and must entered on Schedule E.
- Don’t take Education Credits due to tuition & education expenses. This requires a Form 8863.
- Don’t claim Earned Income Credit. This requires Schedule EIC and Form 8867.
- Don’t give goods to charities such as Goodwill. This requires a Schedule A, and if more than $500 is donated, a Form 8283 is required.
- Don’t deduct medical expenses, mortgage interest, property taxes, or cash donations. These require a Schedule A.
If you want to save money on tax-preparation, DO these things:
- Be organized. Have everything in neat order and grouped together by type of information.
- Keep all the receipts at home and just give the tax-preparer a summary of the receipts.
- Have a business financial statement ready for the tax-preparer. Adding everything up, and categorizing all the expenses saves time.
- Have all your tax information marked clearly as to what it is and how it relates to your tax return. For example, of you have 1099s for rental property, mark which rental property this 1099 pertains to.
- If you have been given an organizer to complete, fill it out completely and answer all the questions to the best of your ability. There are questions on the organizer which may not mean much to you, but could be important in filing your return correctly.
- Read completely any correspondence you get requesting additional information. Don’t skim the letter, then only answer the first question, while ignoring the next four. All that information in important.
- Keep good and complete records concerning business mileage, income, and expenses.
- Inform your tax-preparer of any changes for the year BEFORE the tax return is prepared. For example, don’t wait until after the return has been prepared that you inform the preparer that you sold that one rental property.
The price you pay for tax return preparation is pretty much a combination of the cost of equipment and time required to complete the return. You, as a client, don’t have much influence over the cost of equipment, you have more control over the time spent preparing the return. Some forms just automatically take a certain amount of time no matter what shape the information is in. But if there is a lot of adding, sorting, grouping of your information, that adds to the time required.
I’ve used some irony here to get my point across. Obviously, the more complex your finances, the more complex, and expensive, your tax return will be. Hopefully, you have gotten some ideas that you can use.