Here's What You Need to Do Before Meeting with Your Tax Preparer This Year

January 26, 2017 • 8 min read
Guest Author

By William Perez, Enrolled Agent

It’s that time of year. Your tax return needs to get done. Before meeting with your tax accountant, it’s helpful to pause and consider not only what needs to get done but also how you would like to work with your accountant.

A basic small business tax preparation checklist involves three tasks. Before meeting with their accountant, all small business owners should: anticipate the accountant’s questions, gather the documents your accountant will need, and draw up a list of questions you have for the accountant.

Since the tax return reports information about the income and expenses of your business, it requires finishing up any bookkeeping for the previous year. You’ll need to generate the reports and organize the documents your accountant needs.

But which documents are those? The standard profit and loss and balance sheet reports might not contain all the data your accountant needs to know. This is where a tax organizer comes in handy. An organizer is a template questionnaire—it asks all the technical questions that an accountant is likely to ask in person. With the help of an organizer, you can hunt down the answers to the more technical questions and have your documents the accountant will need before the meeting. That will make your meeting with your tax accountant more productive—and more efficient.

Once you’ve answered the questions in the organizer and gathered all the documents, make a list of questions and issues you want to discuss with your accountant, including your expectations for how the accountant works with you. This gives you an opportunity to focus your time on the issues and questions that are most important to you and your business.

Working with your accountant

Do you prefer to communicate by email? Or do you prefer to meet in person for a face-to-face conversation? Do you want to drop all your stuff off? Or do you want to upload all of your tax documents to a shared drive in the cloud? Do you expect your accountant to get your tax return finished in a certain time frame?

Communicating any preferences or expectations upfront helps to build a solid working relationship with your accountant and avoid unpleasant surprises.

Finish the bookkeeping

Your accountant will need reports summarizing the income and expenses of your business, including any equipment purchased and tax payments made during the year. Your accountant may even need to know about health insurance and other benefits you offer employees. The key to all of this is bookkeeping.

At minimum, you should have the following reports prepared from your bookkeeping data before meeting with your tax accountant:

  • Income statement (also called a profit and loss statement)
  • Balance sheet

These reports should cover the entire tax year, which is January 1 to December 31 for businesses that have adopted the calendar year as their tax year.
You may need to generate additional reports from your accounting data. Depending on your specific situation, you
may need reports that

  • List all the assets and equipment purchased during the year;
  • List any equipment or assets that were sold, scrapped or disposed of during the year;
  • List estimated tax payments paid to the Internal Revenue Service and state tax agencies during the year;
  • List payments made to independent contractors;
  • List shareholders or partners and how many shares or what percentage they own;
  • Detail the compensation paid to each shareholder or partner;
  • Detail any investments received from shareholders or partners;
  • Detail any dividends or distributions paid to the shareholders or partners; and
  • Detail any loans received from or advanced to shareholders or partners.

Use a tax organizer

How do you know what data to gather and organize?

This is where that organizer comes in handy.

An organizer is a questionnaire that accountants give their clients. It’s a multi-page document (either hard copy or a PDF file) that asks the same sorts of questions your accountant might ask in person. Some questions will be technical questions with yes or no answers. Other questions will ask for numbers and data.

By working through the organizer, you can gather just the right data and documents needed for the tax return. For example, organizers typically ask business owners to detail each purchase of business assets. If you purchased new assets for the business, then this data would be relevant to the tax return. The organizer will ask you for the date of purchase, a description of the asset purchased, and the cost of the asset. Then, you can generate the relevant reports from your accounting software or pull the data needed from receipts and invoices. And if no assets were purchased? Then this section of the organizer won’t be relevant, and you needn’t to spend time hunting down the data.

Not only does an organizer make the gathering data process more thorough, it also helps when you review the prepared tax return. You can go through the tax return line-by-line, page-by-page, comparing what your accountant put on the tax return to what you wrote down in your organizer. This kind of cross-checking you allow you to spot discrepancies or nuances. And now you can ask your accountant detailed follow-up questions.

Organizers ask specific questions. Here’s an example of a typical question found on an organizer: Do you have a written accounting procedure of how expenses are to be treated for non-tax purposes? If yes, please provide a copy. Asking specific questions like these makes it easier to find the right information needed for your tax return. You can circle or highlight any question that you do not understand and can make notes explaining details you remember.

If your accountant doesn’t automatically provide you with an organizer, you can ask your accountant for one organizer customized to your business. Or you can download an organizer designed specifically for businesses from the San Gabriel Valley Chapter of Enrolled Agents.

Issue information returns

Prepare and issue any 1099 forms to independent contractors and W-2 forms to employees before meeting with your tax accountant. Why? Typically, clients meet with their accountants between February and April. But the deadline for filing W-2 and 1099 is the end of January. Your bookkeeper or accounting software can help you prepare and file these forms.

Consider providing your tax accountant with an extra copy of the W-2 and 1099 forms you file. The IRS asks directly on the tax return whether all 1099s have been filed. By providing your accountant with a copy, you are helping them perform their due diligence.

Bring any letters from the tax agencies

If you or your business has received letters from the Internal Revenue Service or state or local tax agencies, bring those along to your meeting. Your accountant can help you figure out what the letters mean, and help you respond to the government’s requests.

Bring a copy of last year’s tax return

Helping with the tax forms, courtesy of Dwight Sipler/Wikimedia

Having a copy of last year’s return is really useful. There could be information on last year’s tax return that is relevant for this year. If you’re working with a new accountant, looking over the tax return gives him or her a quick way to get to know your business. Sometimes there may be errors or things that just stand out and deserve a closer look.

Although it may seem like going a bit overboard, consider bringing copies of the three previous tax returns. Why? Businesses have up to three years to claim refunds of overpaid federal taxes. That means if there is a mistake on your 2015, 2014, or 2013 tax returns, those mistakes can be corrected and the IRS can refund you any overpayments—as long as the corrections are filed with the IRS within three years of the original filing deadline.

Make a list of questions

Jot down a bullet list of questions to ask your accountant. Group similar questions together, and rank them by priority.

Having a list of questions keeps your tax meeting focused on the issues most important to you. And it will help you budget your time during the meeting. Your accountant can glance over your list of questions to figure out which topics will take more time to discuss, and which can be quickly answered.

Consider sending your questions to your tax preparer ahead of time. That way your accountant can do any research in advance and come to your meeting with answers prepared.

Not sure what to ask? Consider asking questions such as:

  • How do my revenue and expenses compare to my competitors?
  • Have I properly classified workers as employees or as independent contractors?
  • Is my entity or legal structure tax-efficient compared to other alternatives?
  • Are there any audit risks you see in my data?
  • What improvements can I make in how I track my financial data? Is my accounting system right for me?
  • What are my options for setting up a retirement plan for myself and my employees?
  • What is my business worth?

Benefits of bringing the right documents

Gathering the right data and documents and making a list of the questions helps your accountant quickly focus attention on the specific needs of your business. This makes the annual tax meeting more productive and reduces the amount of time it takes your accountant to prepare your tax return.

Bringing the right documents also helps reduce your audit risk. That’s because your accountant can review your documents to verify you are eligible for a tax deduction. And your accountant can alert you to documentation that is missing or incomplete and which could put you at risk if the IRS audits your tax return.

The very process of gathering and organizing your financial data means you have taken a step forward in being proactive about your taxes. And this cultivates a feeling of confidence: you are more confident in the data, because you know where the data comes from and how it got on your tax return.

To stay organized and confident about your small business taxes, make sure you bookmark the IRS’s Tax Calendar for Businesses and the Self-Employed. You can even get reminders sent to your email through the IRS’s RSS feed.

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