Your accountant wants to help you file your taxes, but they need your help to make the process go as smoothly as possible.
This is why it’s a great idea to make yourself into a client that your accountant loves to see. Not only will you help lower your accountant’s stress levels by being a model client, but you’ll make your own tax season easier and less personally stressful.
So what can you do to make sure your accountant is always happy to see you? Here are the steps you can take to become their favorite client:
Make Sure You Have the Right Accountant
You’ll need to make sure that your accountant is someone who can help you with the specific tax issues you face.
Start with an understanding of the certifications you may encounter. To be a Certified Public Accountant, or CPA, your accountant must have met the educational requirements, passed the Uniform CPA Examination, and met your state’s licensing requirements. An Enrolled Agent, or EA, is a tax practitioner who is federally licensed to represent taxpayers before the IRS. CPAs, EAs and tax attorneys are all authorized to practice in front of the IRS, meaning they can help you handle audits or negotiate with tax collectors on your behalf.
Even with the proper training and licensing, not every CPA or EA will be the right accountant for you. Ask if your accountant is familiar with the specific tax issues that apply to your situation. For instance, if you’re a snowbird who spends the winter in another state, you will want to make sure your accountant is comfortable handling the tax requirements for both of your states of residence.
We all know the cliché of the taxpayer who shows up to their accountant’s office on April 14 with a shoebox full of crumpled receipts and tax documents. Being that client is sure to send your accountant heading for the hills.
Luckily, the same thing that will make your tax preparation easier will also lower your accountant’s blood pressure: a simple organizational system.
For most taxpayers, a three-folder system will suffice. Create one folder for each of these categories:
Whether you are still working and drawing a paycheck or retired and living off of your investments, you will have income statements to bring to your accountant when it’s time to prepare your taxes. Having a folder to collect this information will help you keep track of every penny. In addition, adding a cover sheet where you manually record what you earn as it comes in can help you check the accuracy of official documents, such as Social Security and pension statements.
Expenses and Deductions Folder
This will replace your shoebox of disorganized receipts. Start by creating separate files within this folder to represent each category of expenses or deductions, such as business, charitable donations, childcare and medical expenses. Doing this kind of organization of your receipts will help ensure that you don’t miss any necessary receipts. It will help you avoid those head-scratchers when you can’t remember why you saved a specific receipt.
This will be where you save annual statements from your investments, distribution records, notices of dividends and capital gains and losses, and records proving tax-deductible contributions to retirement accounts.
If you’re not already organized when tax season rolls around — and even the most methodical among us has found papers that aren’t in their proper home — then do not expect your accountant to do your organizing for you. Make sure you come to your meeting with your information as well organized as you can get it.
Remember that your accountant is a tax code expert, not a professional organizer.
As you review the three folders described above, you’ll want to identify the taxes you’ve paid throughout the year, whether that’s in the form of regular deductions, quarterly or estimated payments, or real estate and property tax payments. (And bring copies of last year’s federal and state tax returns for reference, as needed.)
Know What Tax Issues May Affect You
Your accountant does not expect you to know every deduction and tax strategy that could apply to you. However, if you are unaware of how your overall life circumstances may affect your tax liability, it’s tough for your accountant to help you find the best strategies for your situation.
This is especially true post-pandemic since the federal government and many workplaces instituted a number of rule changes that can affect your taxes. Taxpayers in 2021 will need to consider the following tax issues before meeting with their accountants:
The Child Tax Credit
If you are raising children under the age of 17 (including grandchildren, if you are their legal guardian), you may be eligible for the refundable child tax credit. This tax credit was expanded from $2,000 per dependent to up to $3,600 per dependent in March 2021 as part of the American Rescue Plan. Since this tax break is refundable, if the child tax credit reduces your tax bill to $0, it is possible you may receive a refund for any portion of the tax credit left over after it has zeroed out your tax bill.
Recipients of the child tax credit also received half of the credit as an advanced cash payment of up to $300 per month from July to December 2021. You may also be eligible for a tax credit on child and dependent care costs.
You may not know whether you are eligible for these kinds of deductions or credits, and your accountant may not know to ask you about it. This quiz from AARP can help you determine which child care tax credit issues may affect your taxes, so you can talk to your accountant about them.
Tax Breaks and Deductions for Older Taxpayers
Age has its privileges, including some specific tax breaks from the IRS. Making sure you know about these potential tax breaks and deductions before meeting with your accountant will help you save money and make your accountant’s job an easier one:
- Catch-up contributions: Retirement savers over the age of 50 can contribute more money to their tax-deferred retirement accounts. Specifically, your annual IRA contribution limit is $7,000, instead of the $6,000 limit for those under 50, and your 401(k) contribution limit is $26,000, $6,500 higher than the $19,500 limit for younger savers. Contributing up to the maximum to your tax-deferred retirement accounts reduces your taxable income.
- Standard deduction for 65+ taxpayers: If you’re 65 or older, the IRS increases your standard deduction. For married couples filing jointly under age 65, the standard deduction is $25,100, but for those over age 65, the standard deduction is increased to $27,800. When you know that there is a higher standard deduction on the other side of this important birthday, then you can make sure to alert your accountant to the change.
- Required Minimum Distributions (RMDs): The IRS requires retirees to start taking a minimum annual distribution from their tax-deferred retirement accounts as of age 72. But prior to 2020, RMDs kicked in as of age 70.5. This means retirees may have a little extra time to let their tax-deferred retirement accounts grow before they have to start taking distributions.
Covid-19 opened up opportunities for remote work. For some workers, that meant a chance to move to a different state from the one where their employer is located. If you took the opportunity to relocate while working the same job remotely, your move could affect your state taxes. That’s because you may owe taxes in the state where your employer is located in addition to your state of residence. Letting your accountant know ahead of time that you may have a somewhat complex state taxation situation will be a major help to them. It will give them a chance to brush up on each state’s tax requirements before tax season descends.
Handling an Early Distribution
The CARES Act of March 2020 allowed retirement account holders affected by Covid-19 to make an early withdrawal from their tax-deferred accounts. The law waived both the 10% early withdrawal penalty and the mandatory 20% tax withholding for tax-deferred retirement account withdrawals made prior to December 31, 2020. But anyone who did take such an early withdrawal will still need to pay taxes on it. The IRS will allow you to spread out those taxes over the 2020, 2021 and 2022 tax years.
If you took a CARES Act early withdrawal, you need to make sure you let your accountant know the details to help ensure you’re up-to-date on paying those taxes. Making sure that withdrawal doesn’t fall off your radar will save both you and your accountant some unnecessary heartburn.
You and Your Accountant: A Love Story
Treating your accountant as a partner in your tax preparation rather than as the person you hire to “deal with it” will go a long way toward making you a favorite client and reducing your own tax season stress.
By doing your homework before you meet, you’ll be better prepared to answer questions and fill in any information gaps that your accountant needs to complete your taxes accurately.
And remember: The right accounting and tax professional can be a personal and financial resource to you all through the year, not only at tax time.
Do you use a tax accountant to file your taxes each year, or have you tried doing it on your own with a retail or online tax prep package?
How was your experience? Let us know in the comments below.
My brother died 4/24/21 leaving no will. I am his only blood relative. He has a lot of money and a house in Fla. Worth approx. 400,00 .to 600,00. I have an accountant figure my taxes How will I go about dealing with his taxes.
For some people who may not be able to afford an accountant to do their taxes, there are volunteers in the VITA (Volunteer Income Tax Assistance) program that may be available in your area. There is an income limit, I believe for 2021 it is $58,000, and a few other limitations. It’s worth looking into for some.
I purchased tax software before and messed up. Had to have a tax accountant file an amendment. Will not try to do myself again.
I am assuming this article is for the 2021 tax return to be filed in 2022. I believe under your paragraph on Standard Deductions the amount shown for 65+ years old is incorrect. You show $27,400 (for married couples filing jointly), but the 2021 “1040 and 1040-SR Instruction” booklet shows $27,800 (on page 33). I believe $27,400 was for the 2020 tax year.
John – Thanks for pointing this out. We’ve just updated it.
Do i need a accountant we live off social security but also have annuities we will need to use
I was gratified that I checked out your list here and recommendations and I give myself an A+ – I should be my CPA’s favorite client…. and still, no matter how excellently I organize and prepare for his work with me, with impeccable records, it still costs me $1,000 a year to file my taxes as a 77 yr. old single, self-employed in a “social service” occupation – categories don’t change from year to year – he just has to plug this year’s numbers in and hit “send”
This is such a racket…. unconscionable, really. But what do you think the chances are that we will ever get to go to a “Flat Tax” for Federal income tax and a VAT tax for sales tax? Eliminate the IRS – and cut all the B-S….????? Not on your life! And it’s people like me who are the “victims” of this….
You might want to shop around. There could be many Enrolled Agents who would do a good job for less than $1,000….. and include year-round support too.
I have never done my own tax return.
I have a tax accountant and they saved me a lot of frustration because the I R S said I owed money and I did not
Thank you so much for this article! I am an Enrolled Agent and I have found that the majority of taxpayers have no idea what that is. They assume that only a CPA can help them with a complex tax issue.
…. People need to realize that an EA SPECIALIZES in taxes, as opposed to a CPA, who may handle many different accounting issues. As you said, you need to be sure the person is able to handle your unique situation.
…. Hopefully your tips on organization will be taken to heart👍
What is the standard deduction for a single person over 65?
We use a CPA I’ve had for over 25 years! She’s great and the head partner in her firm. She’s retired, but comes back each year to help with taxes. We’ve also used her for financial advice, since we are a “late in life” marriage and have rather complicated taxes. She makes our lives so much easier.
I checked the over 65 Standard Deduction for Married Filing Jointly and it’s $27,800, not $27,400 as stated in your article.
Larry – Good catch. We’ve just updated this.
All original forms 1099 showing income should be provided. They include taxable transactions
My husband and I use the volunteer AARP tax preparers in our community. Fortunately, most of them are repeaters, doing taxes in the same place each year, so we have gotten to know them. They do an excellent job.
I also would not go to a box-store preparer because I once had an employee who “borrowed” SSN’s to take out loans, and after she left my employ she was hired by a commercial tax company. Due to employment laws I was not allowed to call her new employer to alert them. A thorough background check on her would have told them.
Good advice and I will use it!
I have a spread sheet that I update monthly or sooner if necessary. If I purchase a big ticket item I enter the sales tax right away a make a copy of bill for my tax folder. I enter each charitable deduction when I do my bank statement each month, BoA sends copies of all cashed checks. I get total prescriptions for year on line from Blue Cross as well as medical. I can if I want match this with my credit card from BoA since they itemize my expenses at the end of the year. Merrill sends me my statement. DOD and Social Security send 1099’s and I am ready for the accountant. Oh I have extra with held so I am never surprised with owing.
I actually work for a CPA doing taxes. These are very good tips and hopefully people will read and take these tips to heart.
Have used same tax person since 1986. He does answer questions on phone if I have them thruout the year. Have always been organized & ready for him on our appt. No different since he moved & we have been doing on phone for several yrs now. Even before pandemic!
I am a retired enrolled agent. Enrolled agents are tested by the IRS and given an EA designation if they successfully pass the exam. If the test is as difficult as it was in 1993 it is difficult. Enrolled agents as CPAs and attorneys have to take CPE yearly and on an ongoing basis.. I personally would not go to a box store tax preparer because they train for a mere few weeks. They depend on the computer and as the saying goes garbage in garbage out. So if you have more than a W-2 and maybe dividend income and interest I would choose a real professional.
Please don’t lump all ‘box stores’ together. I work for one and there are 2 very competent Enrolled Agents in my office and more in the local district.
Thanks for pointing out that raising some dependents can affect one’s taxes. I’m thinking about hiring an accountant for tax prep in the future since my lifestyle would surely change as I grow older and decide to settle down. Getting professional help for managing my finances will ensure the future of my family someday.