CPAs, just like many service experts, charge an hourly rate. You can help cut down on how much time your CPA needs to spend on your taxes by doing a lot of the prep work individual taxes yourself. For example, it’s going to take much longer for a CPA to sort through a box stuffed with slips of paper than a tidy spreadsheet of expense breakdowns complete with scanned receipts in case of an audit.
What you can and should do depends on your tax situation. Are you a freelancer and do you have just one full-time employer? Are you a small business owner? Do you have a penchant for donating a lot to charity?
As your tax situation gets more complicated, or as your income rises, your tax prep work will become a little more complex, too. However, here’s your cheat sheet checklist to take care of before the New Year. Your CPA (and your bank account!) will thank you for getting this done early.
- Organize, organize, organize. Ideally, you’ve been doing this all year, but if you dropped the ball, then right now is the time to pick it back up. There’s not one system that’s right for everyone, but you should find one that works for you. Maybe you like QuickBooks, Excel or another software system. Ensure all your invoices are in one easy-to-navigate system. Break down expenses into business travel, office expenses, quarterly tax payments, payroll, business transportation and any other key payments you make.
- Schedule a CPA appointment now. If you wait until the first of April (or even March!) to schedule a meeting with your CPA, you might not be able to get an appointment, or you might feel rushed. If you’re organized, you can meet with your CPA in January and be one of his or her first clients. If you don’t have an established CPA, you can’t wait any longer – it’s last call to get on their books for 2015 returns.
- Reconcile your accounts. Your bank’s records need to match your own for every single transaction (yes, even that coffee that counted as breakfast when you were at that overseas conference). This is especially important for freelancers and small business owners, but also for anyone who travels for business.
- Compare quarterly tax statements. If you’re one of the many Americans who makes quarterly tax payments, it’s judgment day. Check what your payments were and double-check to see if that’s what they should’ve been. You should have a solid idea of your revenue for the year, which means you can calculate how much you’ll owe the IRS. There’s one more quarterly tax payment due for 2015 (which is in January 2016) and you want to try to break even. If necessary, you may need to adjust your holiday budget to make that last payment.
- Get a head start on W9s. If you pay contractors or subcontractors more than $600 per year, they need to provide a W9 before starting work. However, if they never filled one out, you can try to get a retroactive document in place. Your CPA will need them in order to send out 1099s. Otherwise, you can’t write off their payroll and they won’t have an effective way to alert the IRS about their work.
The best way to get and stay organized is to work with a CPA throughout the year. Remember: They’re not just lifesavers come April • a great CPA can help you maximize profits year-round.