What Steps Are Taken to Minimize Your Taxes? When most people hear this question, they usually wonder, “Isn’t my tax preparer already doing everything possible to reduce my taxes?”
Of course, everyone would like to assume their tax preparers are doing everything possible to legally reduce their taxes, but that is not a safe assumption.
Here are just a few things to look for to determine if your tax preparer is taking the steps to minimize your taxes.
Are missing deductions identified?
When I meet with a new client or prospect, I always review their prior tax returns. More often than not, there are deductions missing. When I ask the new client or prospect about the deduction, their answer is something along the line of “My prior tax preparer/CPA didn’t tell me I could deduct that!”
There are 2 ways for a tax preparer to most effectively identify missing deductions.
The first way is to ask you questions. Questions have the ability to reveal opportunity when it comes to tax savings.
The second way is to look at your books – both your business and personal books. Your books report where your cash goes and that is key to identifying possible deductions.
It is the combination of using both of these techniques that is most powerful in identifying missing deductions.
If your tax preparer is not asking you questions and is not asking you for your business and personal books, then odds are they are only using what you give them and there’s a strong possibility deductions are being missed on your tax return.
This concept gets back to your tax preparer asking you questions. If your tax return preparer is not asking you questions, then odds are they are not trying to identify the most favorable (yet accurate) way to claim your deductions.
Are future tax saving opportunities identified?
Tax return preparation should not only be about getting the numbers on the form and filing the return. The tax return preparation process is a great tool to identify future tax saving opportunities.
We have developed a checklist that we use with every tax return we prepare to make sure we are identifying the ways a client can further reduce their taxes in the future. We then share these ideas with our clients.
Read my next report with one more question you should ask your tax preparer – this is another important one because it relates to your audit risk!