Copyright (c) 2010 Tom Wheelwright
This is the time of year when tax returns are on people’s minds. It’s also the time of year when I get asked how you know you are with the right tax preparer.
There are questions I always ask someone when they are wondering if their tax preparer is right for them.
This week, I’ll share the first one which is:
What Steps Are Taken to Verify Your Tax Return is Accurate? Have you heard of the term “GIGO”? It stands for Garbage-In-Garbage-Out and unfortunately it is commonly used in the tax preparation industry. It refers to the following situation:
Information is provided to the tax preparer that is wrong, either knowingly or unknowingly The tax preparer uses the information “as is” and does nothing to verify the information is correct The end product – the tax return – is not accurate
I see this most often with accounting software, such as QuickBooks. The taxpayer hands over a copy of the QuickBooks file and the tax preparer uses that to prepare the return. However, there is no discussion about the accuracy of what is in the QuickBooks file.
Filing an inaccurate tax return can result in audit, penalties, interest and additional tax!
This is why this question is so important!
Individual Tax Returns v. Business Tax Returns
With individual returns, much of the information is provided via legal forms, such as W-2s, 1099s and 1098s. These forms provide a certain level of reliability that the amounts are accurate.
However, with business returns, almost all (if not all) of the information is based on the accuracy of the recordkeeping. Now, I have seen the records of hundreds of businesses and the accuracy varies from very accurate to not even close to accurate – and this is true whether or not the recordkeeping was performed by a bookkeeper.
Isn’t Verifying the Accuracy of My Information Part of the Tax Return Preparation?
It is often assumed that verifying the accuracy of your information is part of your tax return preparation, but it isn’t.
If your tax preparer is not going to verify your business return numbers, then you need to be very confident that your recordkeeping is accurate (and just because you use a bookkeeper does not necessarily mean it is accurate).
If you are not confident your recordkeeping is accurate, then you should have your tax preparer take a few extra steps to verify the accuracy.
Your tax preparer will charge for these extra steps, but it is well worth it to make sure the numbers used on your tax return are accurate.
How Do I Know My Information is Being Verified? In order to verify your business recordkeeping, your tax preparer needs additional information. This additional information is used to verify that the amounts reported in the recordkeeping match up and make sense.
While this process may not uncover all errors, it does provide a certain level of reliability and provides the tax preparer with a sense of how accurate the recordkeeping is.
The additional information requested usually includes:
Year end bank statements Year end credit card statements Year end loan statements Purchase or sale documents if your business purchased or sold assets Organizational documents Prior year tax returns Ownership changes
If your tax preparer is not asking for this information, then odds are, your tax preparer is not verifying your information and is relying solely on the records you provide.
see this most often with accounting software, such as QuickBooks. The taxpayer hands over a copy of the QuickBooks file and the tax preparer uses that to prepare the return. However, there is no discussion about the accuracy of what is in the QuickBooks file.
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Taxpayers have two options when filing a federal or state income tax return. Taxpayers can have their tax returns professionally prepared or they can prepare their own taxes. Whatever tax preparation option an individual chooses, it is likely they will have a number of tax questions. To find the answer to a tax question many taxpayers research and review general tax information.
Since each state has different tax laws and tax forms, taxpayers looking for tax information are encouraged to contact their local or state government. Many local county officials may be able to answer common tax questions or point taxpayers in the right direction if they are unable to help. The majority of state tax officials can be contacted by obtaining a phone number from the Internet. In addition to using the Internet as a way to obtain contact information, many taxpayers may also be able to find valuable state tax information on the Internet. The majority of states have a website that is related to state taxes. It is not uncommon for a number of these tax websites to offer tax tips and other valuable state tax information.
Since the Internal Revenue Service (IRS) taxes individuals and businesses nationwide in the same way, it is often easier to obtain tax information from them. To obtain valuable tax information from the Internal Revenue Service (IRS), taxpayers are encouraged to visit the website of the Internal Revenue Service (IRS) which can be found at http://www.irs.gov. Many taxpayers find the website extremely helpful when looking to obtain tax information. Individuals can download tax forms, learn about updated tax laws, find a list of common tax deductions, and more. Individuals with a tax question about their federal tax return are encouraged to check out the “most frequently asked questions and answers” section.
Tax preparation classes are another great way for taxpayers to learn valuable tax information. The majority of tax preparation courses begin in September; however, they can start as late as December. Taking a tax preparation course is likely to cost a small fee; however, many taxpayers feel it is a wise investment. Many tax preparation courses teach individuals how to accurately prepare their own taxes; however, they also offer advice on maximizing tax deductions and other tax credits. Tax preparation courses are often advertised in local newspapers and they tend to fill up quickly; therefore, individuals interested in taking a tax preparation course are encouraged to sign up for the course right away. http://www.taxhelpdirectory.com/taxpreparation/
Obtaining valuable tax information is the best way for taxpayers to accurately prepare their tax returns. Why make a mistake on your tax return that could prevent your tax return from being processed or causing a delay in your tax refund when it is so easy to be prepared. Use the above mentioned tax information resources to make the tax preparation process more manageable and less stressful.
Gray Rollins is a featured writer for the TaxHelpDirectory.com. To learn more about tax information, and tax returns, please visit our site.
If your major interest is information related to the Virginia income tax or any other such as Iris 2008 tax tables, internal revenue service form 1040, federal individual income tax or income tax return form 1, this article can prove useful. If you own your own business or have not been deducting enough from your paychecks each week, you will probably owe some income taxes when tax time rolls around. This is never fun, and if you do not have the money in your checking account immediately, you might be tempted to pay the taxes with your credit card. A word of advice: You don’t do it. How much did you pay as taxes – You can estimate how much you paid as taxes the previous year, and how much more or less will you be paying this year? You can do this by getting the details of the previous year’s personal income tax returns and comparing it with your present income tax. All information in this regard are found in form 1040; line 62, which also give detailed information on your total tax liability for the year. Basically, “insolvent” means that you have a negative net worth — that is, you “owe” more than you “own.” As a result, most debtors do not have a tax liability on the canceled debts, simply because most debtors are insolvent! It usually comes down to home equity. If you have enough equity in a home (or another property) to outweigh the total of your liabilities (debts), then you have a positive net worth, and will likely have to pay taxes on the forgiven debt amounts. However, most of the people in serious debt trouble have a negative net worth, and are therefore insolvent. The way it works is that you can offset the canceled debt up to the amount by which you were insolvent at the time you did the settlement. Many people forget that they can get more information about any subject matter, be it Virginia income tax information or any other on any of the major search engines like Google. If you need more information about the Virginia income tax, go to Google and be more informed. Normally, tax relief works through a process where tax authorities review the ability of a taxpayer to pay taxes based on information regarding the person’s income and assets. A tax relief is granted if it’s found that the recovery of a certain tax is unreasonable because asset values have significantly decreased. However, tax authorities grant a tax relief only if the taxpayer’s request for relief is based on a valid reason as defined under law. Tax relief is also granted under special circumstances. In the case of taxes on inheritance and gifts, a relief can be granted if it’s found out that the value of the assets received has significantly reduced. But, as critics puts down, taxes on wealth can actually cause inefficiency by discouraging wealth producing economic initiatives. Also, the revenue generated by imposing taxes on wealth may not be that productive as the theory suggests. The wealthiest form only a small percentage of the population and by nature they are adept at avoiding taxes while remaining themselves within the contours of law. There’s also a good possibility that you may not be required to pay taxes on your forgiven debt if you can prove that you were “insolvent” at the time you settled your debt(s). In order to be classified as insolvent you need to have a negative net worth. In other words, you would owe more money than you’re actually worth and your liabilities would exceed your assets. We were thrilled to know that many people found this article about a Virginia income tax and other us corporate income tax rate, states with no income tax, and even income tax return Bangalore helpful and information rich.
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