Happy New Year!!! For most people the change from December 31 of year 2012 to January 1 of 2013 is just an excuse to have a big party and drink champagne. But for many CPAs and accountants it's the signal that a fast paced few months of increased revenue is about to begin. Old accounting years end and new accounting years begin. Books of account are closed and reopened. Non accountants begin waiting for their tax documents to come in the mail so they can prepare and file their 2012 tax returns.
Are you looking for someone to prepare your taxes? Planning on using the same person or organization as last year? Doing your own taxes with a program either purchased or on line? Is this your first year to file your own taxes? What to do???
Any of these choices are fine. Recently I saw an ad on TV, which will be prevalent for the next few months and then die away until next year, from a rather large national tax preparation firm asking for clients to bring in the last three years of tax returns. The ad suggests that there may be an error on the prior years' returns that, once rectified, would yield large tax refunds missed by the previous preparer. And that might be true. It occurred to me that this request for prior tax returns might need some explaining.
Is this usual practice? Yes, it is. I always want a new tax client to bring in the previous three years tax returns for my review. Do I think the prior preparer has made a mistake or missed something? No, not really. There are a lot of things I'm looking for when I review a new client's tax returns. Read on to see what I hope to discover.
First of all I'm looking to see what the client reported for the last three years so I can continue in the same manner. No need to upset the IRS with changes that don't need to be made.
Second I'm looking for anything that might be missing. If interest was reported from a certain bank in prior years and there is no interest from that bank now, I want to ask about it. It could be the account was closed and therefore no interest income for the current year or it could be the tax payer forgot to bring in that 1099. I also want to check to see how certain items such as installment sales and depreciation were handled. The list is long and extensive and I won't try to list everything here.
So, if you are going to a new preparer or to a preparer you've used before, it's always a good idea to bring along the previous years tax returns. Some preparers might not need that since they will be keeping everything on file and can find it themselves. I'm that way. A continuing client doesn't need to bring in the previous years tax returns because I keep copies and look back on them if I need to answer a question.
Why only three years? Why not four or five or ten? There is a statute of limitations on taxes which means after three years the tax payer can't make any changes and neither can the IRS. After all, if no error has been found in three years, it probably won't be found.
Am I also looking for errors that might help my new client to receive more money from the government ? Yes, I am. Do I always tell a client about these? Yes, I do. Do I always suggest that the client act on receiving these refunds? No, I don't and in the next blog I'll tell you why.
Remember if you have an idea about a blog topic, let me know. I'm here to respond to what my public wants to read.
No comments:
Post a Comment