Make CroftonLiving Your Home

Joyce Obear is a Certified Public Accountant (CPA) specializing in tax preparation, tax planning and consulting for individuals, businesses, trusts and estates.

She can be reached at 301-858-1992 or e-mail jobearcpa@comcast.net
because "Taxes Shouldn't Be A Bear!"

TAX PREPARATION CHECKLIST
January 2008
By Joyce Obear, CPA

It’s that time of year again – tax time! As we all know, time is money, and whether you use a tax preparer or prepare your tax return yourself, having all of your information organized will save you time and money. Below are tips for gathering the information needed to prepare your 2006 tax return.

1. It’s in the Mail
Everything that comes in the mail marked “Important Tax Information Enclosed” should be opened, reviewed for accuracy and placed in your 2006 tax return folder. These documents include W-2’s, 1099’s, 1098’s, K-1’s, and charitable giving statements.

2. Get Real
Did you buy, sell or exchange any real estate during the year? Did you refinance any mortgages? Did you take out a home equity loan? The HUD-1 Settlement Sheets from any of these transactions may contain allowable deductions and should be included in your tax documents. Once your return is completed, be sure to file the Settlement Sheets in your permanent files.

3. No Kidding
Do you have children? Be sure to have their Social Security numbers handy. If you have child care expenses, make sure you obtain the provider’s Employer Identification number or Social Security number, address and the amount that you paid them in 2006. If your children are in college, keep track of the amount paid for tuition and any interest paid on student loans that are in your name.

4. Take Stock
Did you sell stocks or shares of mutual funds? You need to know when you purchased these investments and your basis (purchase price plus reinvested dividends). If the information is not included as a supplement to your 1099, call your broker and ask for the information. Because of the privacy laws, your paid preparer cannot call your broker and obtain this information without your written authorization. Also, many mutual funds may not know their exact earnings until March 15, 2007, so even though you received a 1099 in February, it may change in March. A few dollars will not matter, but any change more that $5 could generate an IRS notice. If you have a significant portfolio, you may want to wait until the beginning of April to file your return.

5. The Tension of a Pension
Are you covered by a pension plan or 401(k) at work? Did you make any contributions to your pension plan, 401(k) or IRA’s? Did you receive any distributions from your pension plan, 401(k) or IRA’s? Provide this information to your tax preparer.

6. Feeling Charitable
Keep track of your non-cash charitable contribution receipts during the year. Attach an itemized list of what was given to the receipt and use this list to determine the fair market value of the contribution. This is an area where the rules are becoming more strict. Only donations in good condition or better are allowable for a deduction.

7. Getting Down to Business
Did you start a new business in 2006? Did you acquire a new or additional interest in a partnership or S corporation in 2006? Unless you really know tax law, these are areas that I recommend using a professional to prepare your return.

Now that you have all of your information together, do you prepare your return using “off the shelf” software, go to a national tax chain or do you find a Certified Public Accountant (CPA)? In Maryland, CPA’s must pass a rigorous two-day examination, adhere to strict ethical and professional standards, and, beyond college, complete 80 hours of continuing education every two years to be certified by the state. Boxed software and chain tax preparers do not have to meet these standards. Additionally, most IRS notices are generated in July or August in the year after the filing date for the return. At that point the local office of the chain preparer is closed and your boxed software is on your old computer. Your CPA will be able to retrieve your file in under a minute. Never underestimate the service and value of the CPA.