Whether you are new or highly experienced in the tax preparation business, you will find that following proven procedures yields the best results. Avoiding mistakes is basically mastered with two steps.
The first element is completion of Registered Tax Return Preparer training and annual tax continuing education. This provides the knowledge and retention of details required to operate an efficient tax practice.
However, a tax preparation business also requires implementing a process that makes greatest use of the details learned. By anticipating potential tax deductions and asking questions of taxpayers, opportunities are revealed to provide the highest value of tax service.
A proven path to this achievement is having a tax preparation checklist. The list should contain several essential items. Tax practitioners who inquire of every client about measures like the following will maximize the quality of their professional efforts.
Remembering to ask taxpayers if they searched for a job in the past year has never been more important. Whenever people look for work in their current professions, potential tax deductions exist. These costs are part of miscellaneous itemized deductions. They are limited to the part exceeding 2 percent of adjusted gross income. That is why capturing as many as possible is critical. Other miscellaneous itemized deductions include tax preparer fees, convenience fees incurred when paying income tax by credit card, and investment fees. With job search costs added to the mix, a taxpayer may have enough total deductions to exceed the 2 percent hurdle.
A similar situation exists with medical expenses, which must exceed 7.5 percent of adjusted gross income before any are deductible. An efficient paid tax preparer remembers to obtain costs for out-of-pocket health insurance premiums – such as those paid by a worker for coverage of non-working family members. Also part of the medical expense category is Medicare Part B coverage and an age-adjusted amount of premiums for long-term care policies.
For self-employed taxpayers over age 65, Medicare Part B premiums count as part of the self-employment health insurance adjustment to income. Health insurance costs for the self-employed are deductible without the income limit imposed on other medical expenses. This deduction is available to any sole proprietor, partner, LLC member, or S corporation shareholder.
For self-employed proprietors or independent contractors, a sub-step is added to the tax preparation checklist. That is, self-employment tax is now calculated on income that is reduced by the amount of self-employed health insurance costs.
Methodical processing of these steps usually results in substantial tax savings for many taxpayers.
IRS Circular 230 Disclosure
Pursuant to the requirements of the Internal Revenue Service Circular 230, we inform you that, to the extent any advice relating to a Federal tax issue is contained in this communication, including in any attachments, it was not written or intended to be used, and cannot be used, for the purpose of (a) avoiding any tax related penalties that may be imposed on you or any other person under the Internal Revenue Code, or (b) promoting, marketing or recommending to another person any transaction or matter addressed in this communication.
