Tax time is historically one of the most dreaded and worrisome times in our year. As the April 15th deadline approaches we are consumed by the fear of taxes and the Internal Revenue Service. How can we get through this time of year? What should we be doing? How can we free ourselves of the overpowering doom that overcomes us with each tax season?
We should first recognize that a tax return is just a compilation of all our financial dealings for the year. Here we record and mark down in history the money we have made for the year, where we have spent it and where we have lost it. Even when you have a professional prepare your return, you should still be able to locate and follow each entry to its origination. Always know that no one knows the path of your finances more than you, not even your tax preparer. Remember it is your signature that makes those forms, truth. Your signature is your bond, use it wisely.
To begin to verify the return you should gather all documents and information used to prepare the return. Then begin the tracking of all your line items starting with the first line, here is an example:
Both you and your spouse work and received w-2’s (income reporting documents) from your employer’s. Your w-2 says you made $50,000 and your spouse’s reports $40,000. The line on your tax return that asks for all w-2 wages should be $90,000.
You should proceed through the 1040, 1040ez or 1040a line by line tracking each number and verifying that it is correct.
Next you should dispel any concerns you have over any numbers. What I mean by this is that if you come across a number that you can not link to something easily, you should not file this return until you go over the line item with your tax preparer. Ask them where the number came from and why it is being reported there. They should very easily be able to rid you of concern and show you the path that this number took to arrive on your tax return. When their explanation is complete and you agree you should move forward to the next line. If you have concerns or doubts to the validity of the number, then you should continue to voice your concerns until you are satisfied or the number is removed. Do not file a return with questions, you may need to verify the information through the audit process and you should always be secure with your numbers.
Once your return is fully acceptable to you, you should sign and date it, along with your spouse if you have one. A copy of this signed return should be made and filed in a permanent place, where it can be easily accessed when needed. With the copy you are retaining you should also file away all pertinent documents. Pertinent documents would be anything that contains a number used on your return such as a 1099int, which records interest paid to you by banks. Should you maintain any personal forms that you track taxable information on, such as mileage, medical expenses, or charitable donations, you should file these as well.
When you file the above scenario when filing your taxes you will find that you can rest at ease knowing your return is a document that you can sign your name too in good faith. This will eliminate any stress you may feel later if your return is audited. You will know your numbers to be true and accurate and your file will back you on this and streamline the audit process. Consider these steps a future time saver and money retainer, especially when you calculate the large costs for an Internal Revenue Service audit for the unprepared and unverifiable return.