Wednesday, February 4, 2009


I feel your pain. now that you are receiving all those "IMPORTANT TAX DOCUMENTS" in the mail, you are thinking about filing your tax returns. Suddenly you feel the anxiety pressing down on your chest like a pallet of bricks. You said you were going to do it. You planned on doing it. You didn't do it. Now, you're convinced that there's a large green monster wearing an IRS T-shirt hiding in your closet. Trust me; I know your pain. Last year, after you got your bill from your tax professional, you promised yourself that you would get organized this year. You said to yourself "next year I'm going to get on top of this". I hear these very same statements from dozens of clients every year. Sadly, it's the same several dozen of clients that repeat this behavior year after year. To many of my clients, I am known as "Father Tom". They regard me as their financial priest. They come to my confession booth every year knowing exactly how much and when they have sinned. They come hoping for absolution and redemption mixed in with a little penance. I usually close my annual homily to the sinners like this: "go forth and sin no more". I do my best; but, I'm only human.

I've assembled some ideas to help you in your quest to get better organized for your tax professional. Your mantra is, and always should be, "Organize, Organize, Organize"!


  • If you own a business, there is nothing more critical than having your income and expenses summarized accurately and coherently for your tax professional. Bookkeeping is not as arduous a task as it used to be since the advent of personal computers and easy-to-use accounting software. QuickBooks Pro is a popular program that is easy to use. You can pick up the hang of using this application by watching tutorial videos on YouTube. Your tax professional probably offers training and consulting services for this program. This program is so incredibly versatile. I'm constantly amazed by the enhancements that Intuit adds to the application every year. A business owner can use this program to invoice customers, accept credit card payments, print checks reconcile bank accounts and connect to online banking applications. The feature that I appreciate the most is called the "Accountants Review Copy". The application allows you to create a carbon copy of your accounting data to share with your tax professional. The review copy allows the tax professional to make corrections and adjustments to your data which can be merged with your "live data "at any time allowing you to continue to conduct your business.
  • You receive monthly statements from your bank, credit card merchant service and business credit card companies. The statements all provide valuable information to you and your tax professional. You should definitely save all monthly statements of this type .
  • If you're like most businesses, you may have one or more installment loans with your local bank. Most banks provide annual statements documenting the annual interest paid on the loan and the balance of the loan at the close of the year. These statements are incredibly valuable as they corroborate the information contained in your accounting data.
  • Treat your tax professional as a trusted, valuable resource to your business. He or she needs to know just about everything about your business to prepare a complete and accurate return on your behalf. I encourage clients to discuss significant events in their business from the previous year. Significant changes in sales, employee layoffs, sales of business equipment all provide valuable clues to the accuracy and completeness of your accounting data.

  • To help you get your personal finances in order, consider personal accounting applications such as Quicken and MS Money to organize and categorize your income and expenses. Consistent use of these apps keeps you in touch with your spending habits. You'll probably be shocked about how much you spend on take-out food and drive-thru coffee.
  • If you use your personal automobile for business, you should keep track of your mileage using a mileage log. These books are inexpensive and readily available at office supply stores like Staples. In order to use business travel expenses as a deduction for your tax return, you must maintain a log to support the business use of your car. If you use your car almost exclusively from business, I usually recommend to clients that they acquire two or three gasoline credit cards. The use of the credit cards corroborates information in a mileage log and also provides a 12 convenient monthly statements which document where, when and how much gasoline you purchased.
  • Try to avoid the use of cash to pay your potentially tax-deductible purchases and expenses. Receipts are easily lost. If you lose a receipt credit card statements and bank statements provide an independent record of your purchases. Relying more on your credit cards and debit cards also makes your accounting task much less burdensome. The bookkeeping applications I mentioned previously provide convenient vehicles for reconciling the statement activity to your records.
  • When you go to Staples to purchase your mileage log, please resist the temptation to purchase a Dome Accounting Ledger. Low cost is the attraction to these types of bookkeeping systems. These books are very time consuming to maintain and generally do not provide useful information for yourself or your tax professional.
  • Ask your tax professional for a tax organizer. Almost all software used by CPAs and tax professionals include a customized document that organizes your previous year tax return into logical categories. The document will frequently include a questionnaire which is designed to give your tax professional clues about events and/or transactions which may have some bearing on the outcome of your current year's return. Take the time to follow this document meticulously. Using this document as a guideline to gather information will result in significantly improved quality of information that you give your tax professional and thereby lower your taxes.
You'll receive a small gift from your tax professional in exchange for all your hard work: lower fees.

Thomas Hicks is a Certified Public Accountant working in Brewer, Maine. For more information or to contact Tom, click here.

Photo credits: Joey Harrison, The Daily Hamster

No comments: