Now that your 2010 tax return is complete, you can take a break from all the stress – or can you? In the case of taxes, out of sight, out of mind is not a good strategy. Although your 2011 tax return is not due for another year, there is no better time than now to start the preparation process.
If you work with a tax professional, here are a few questions you should ask now to ensure a better experience next year.
1. What can I do to avoid owing money to the government?
This is a question you must ask if you owed money to the IRS along with your 2010 return. There is no reason to continually come up short and get hit with a bill every tax season (or a tax penalty if you owed a lot this year).
If you owed money, you may have claimed too many allowances. In this case, you need to make an adjustment on your W-4 form. Remember, even though you are entitled to a certain number of allowances, you are not required to take them. Your tax professional can offer advice on changing your allowances and taking advantage of other tax saving measures.
By letting the government withhold more money, you decrease you chance of owing money, while increasing your odds of getting a refund with your final return. Keep in mind, however, when more money is withheld for taxes, you’ll receive less in your paycheck.
2. How can I find additional deductions and credits to increase my chance of receiving a refund?
Believe it or not, many people never take advantage of deductions and credits. Instead, they rely on the standard deduction because it simplifies the filing process.
Before you assume that the standard deduction will be right for you once again, ask your tax professional for advice. You may find that you will be better off taking several deductions rather than relying on the old standard.
On the other hand, credits are a different thing entirely. Since these must be taken advantage of throughout the year, it is extremely important to ask your tax professional for a list of available credits for 2011. Once you have that list, you can figure out which ones will work for you over the course of the next year.
3. How much do I need to pay quarterly to avoid an underpayment penalty and owing money next year?
If you are self-employed, you are responsible for paying quarterly estimated taxes to the IRS, as well as your state and local agencies.
While the process of paying quarterly taxes is not overly complicated, it can be difficult to make an accurate payment. This is particularly true if your income changes from month to month.
Ask your tax professional to prepare “quarterly payment coupons” based on your past year’s income. At the very least, this will give you an idea of how much you have to pay if your income remains in a similar range.
4. Did you see anything in this year’s return that I could do better next year?
Although your tax professional puts a lot of time and effort into your return, personalized advice isn’t automatically part of the deal. However, if you ask for it, most will be happy to oblige.
There is nothing wrong with asking your tax professional for advice. Ask if there is anything anything you can do better next year. Did you make any glaring mistakes that could have been avoided?
You may be surprised at how much information you can get when you open up and ask for help.
5. My filing status will change – what should I do?
If you know your filing status will change this year, it is essential that you get advice from your tax professional.
I found this out the hard way. When I got married in 2010, I failed to change my status from single to married. As a result, we ended up paying $5,000 more than we should have during the 2010 tax year. Sure, we were able to file an amendment and get a refund, but we should have avoided the issue from the very beginning.
Even if your tax situation stays the same from year to year, the IRS makes changes that will affect you. Your tax professional is a great resource who can assist with far more than just filing your final return. Don’t hesitate to ask questions and get as much help as you can throughout the year.
By asking the five questions above you can begin to organize and prepare for your 2011 tax return. This may sound like a lot of work right now, but you will be glad when April 2012 comes around.
What questions do you have after filing this year? Please share in the comments below.