Top earners: Six reasons to start your tax prep now
The complexities associated with tax returns, for those who are top wage earners with a multitude of financial interests, go far beyond what any tax software package or “burn and turn” tax consulting company can provide. The ability to identify opportunities and reduce tax obligations, all within the framework of ever changing tax codes, takes time and perseverance. It also requires a professional who will be able to coordinate an individual’s personal financial goals with their business goals.
If you’re a corporate executive or a successful entrepreneur, here is why you need to start your tax returns now:
o Peace of Mind: This is by far the most important reason to start early. Well organized people should already know in general what to expect come April but to fine tune their expectations is a huge stress reliever. Keep in mind that just because the return is completed does not mean that it needs to be or should be mailed before the due date.
o Do Not Miss Deductions: With a draft of the return in hand you a better ability to become comfortable with the overall picture off the return. You need to look at the big picture to explore whether or not you have included all legitimate deductions on the return and make sure that your file has all of the required IRS documentation.
o Bullet Proof the Return from IRS Audit: With a draft in hand you have the ability to review the return from the perspective of what would happen if the IRS selected your return for audit. Many deductions and descriptions of items can increase your IRS audit risk. Spend the time before the return is filed to minimize these IRS audit triggers.
o Tax Software Allows Easy Changes: Use estimates for 1099’s for purposes of a draft tax return. It is expected that 1099 Forms will again be issued late and may be corrected after they were originally issued. Do not trigger an IRS audit by not including the finalized 1099 numbers on your return. On the other hand it does not make sense to delay a draft of the return until you have the final numbers.
o Review the Finished Product: The importance of becoming comfortable with and reviewing the finalized return cannot be over emphasized. The ultimate responsibility for the tax return is yours. The IRS looks to you as the responsible party. Make sure that you feel comfortable with the return before it is sent in.
o 2012 Tax Strategies: Most tax professions expect to see major changes in the tax law for 2012. With Health care Tax Law changes and the potential increase in tax rates you need to be prepared to act quickly when and if the law changes. When you have a solid draft of the return in hand it gives you a baseline in which to make decisions.
Nobody enjoys the tax season, but getting a head start on things will make your tax outcomes all the more satisfying.