Preparing tax returns, whether for a business or an individual, is a collaborative process that depends on the relationship between the taxpayer and their team of advisors. A strong, productive partnership with a team you trust can streamline the tax season, increase efficiency, and potentially yield more favorable financial outcomes. This article outlines the process of working with your advisory team to prepare your tax returns and how each step can strengthen the professional relationship and lead to improved results.
Building a Strong Relationship with Your Advisory Team
An active, trusting relationship with your financial advisors is fundamental to successful tax preparation. This partnership is built on the following foundation:
- Maintaining transparency: Disclosing all relevant financial information, regardless of perceived importance. Comprehensive disclosure enables thorough analysis and builds trust.
- Engaging in regular communication: Extending interactions beyond tax season. Inform your team about significant financial changes throughout the year to facilitate proactive tax planning and demonstrate value for their expertise.
- Seeking clarification: Requesting explanations for any unclear aspects of the process, including procedures, documents, terminology, or technology. Engaged clients who seek understanding often make better financial decisions.
- Heeding professional advice: Considering the team’s recommendations on financial management and strategy. Receptiveness to expert advice can lead to improved financial outcomes.
- Offering constructive feedback: Communicating effectively about the collaboration’s strengths and areas for improvement. Open dialogue fosters a partnership that evolves to meet changing needs.
- Respecting professional commitments: Recognizing the team’s schedule, particularly during peak tax season. This consideration reinforces a positive working relationship.
The following steps in the tax preparation process are designed to streamline and optimize the filing process, ensuring both accuracy, efficiency, and a satisfactory experience for all involved.
Step 1: Choose the Right Team
Selecting a team of tax advisors well-versed in corporate, partnership, trust, estate, and individual tax laws is crucial. The ideal team should possess experience in handling various financial situations and knowledge of specific tax issues relevant to the client’s circumstances. Compatibility in expertise and communication style establishes the foundation for a strong, long-term professional relationship.
Step 2: Gather Necessary Documents Early
Timely provision of documentation demonstrates respect for the team’s time and workload and enables efficient and thorough work. Initiate the collection of necessary documents well in advance of the filing deadline.
For businesses, essential documents include:
- Financial statements:
- Balance Sheet
- Income Statement
- Trial Balance
- General Ledger Detail
- Payroll records (W-3 and officer/owner W-2s)
- Fixed Asset Additions and Disposals
- Business expense receipts
- Loan documentation to confirm year-end balance
- Bank statements to confirm year-end balance
Individuals should gather:
- Income documentation (W-2s, 1099s, Schedule K-1s)
- Confirmation of Estimated Tax Payments paid
- Deductible expense information
- Mortgage interest statements
- Charitable donation receipts
- Education expense records
- Retirement account contribution information
Step 3: Maintain Open Lines of Communication
Effective, year-round communication is essential. Proactively discuss timelines, deadlines, and any significant changes in business or personal circumstances. For businesses, this may include new ventures or shifts in revenue streams. For individuals, major life events such as marriage, home purchase, or career changes are pertinent. Regular updates allow the team to provide timely advice and identify tax-saving opportunities in advance.
Step 4: Address Technology and Software Issues Early
For users of accounting software or other financial tools, it is important to address potential issues early in the process. Ensure your team is familiar with the systems in use or provide necessary training and access. If your team uses technology you are not familiar or comfortable with, address your needs as soon as possible by asking questions or requesting training. This proactive approach prevents last-minute complications that can delay filing or lead to other mistakes.
Step 5: Make Key Tax Decisions Collaboratively
Involving your team in important financial decisions allows you the best chance to maximize their expertise. For businesses, this may include discussions about asset depreciation or R&D expenses. Individuals might consult on retirement contributions, timing of income recognition, or making contributions to a donor advised fund. Collaborative decision-making not only optimizes the tax situation but also deepens the professional bond through shared financial goal setting.
Step 6: Stay Informed About Tax Deadlines
Awareness of key deadlines is crucial in the tax preparation process. While your team will likely provide reminders, taking the initiative to learn and track these deadlines yourself shows that you are an engaged and responsible client. Start by familiarizing yourself with the key dates, such as the April 15 deadline for individual tax returns and the 15th day of the fourth month after your fiscal year-end for corporate returns. Communicate with your team about any additional deadlines for filing extensions or estimated tax payments or submitting specific forms. By staying on top of these due dates and discussing them regularly with your team, you ensure that all involved are aligned toward a shared goal and that the tax return process moves forward smoothly. Active cooperation significantly reduces the risk of late filings and potential penalties.
Step 7: Review the Return Thoroughly Before Filing
Allocating time to review the prepared tax return is essential for ensuring the accuracy of your financial reporting. During this review, pay close attention to key elements such as income, deductions, and credits to confirm they have been correctly reported. Verify that all sources of income are accounted for and that deductions, like business expenses or charitable contributions, are accurately documented and claimed. Additionally, review any calculations for tax liabilities, refunds, and estimated payments to ensure they align with your expectations. If you notice any discrepancies or have questions about specific entries, address them promptly with your team before filing. This thorough review process is a critical step in ensuring tax compliance and minimizing the risk of errors.
Step 8: Plan for the Future
Post-filing, schedule a review with your advisory team. Utilize this opportunity to assess the process, identify areas for improvement, and set goals for the coming year. This forward-thinking approach demonstrates commitment to ongoing financial management and consideration of the team’s role in long-term financial health. Whether filing business or individual tax returns, the process should be viewed as an ongoing collaboration rather than an annual event. Fostering a strong, year-round relationship with your tax advisors and adhering to these structured steps ensures that tax returns are not only accurate and compliant but also aligned with broader financial goals. This partnership approach transforms tax preparation from a necessary task into a valuable opportunity for financial review and strategic planning.
For more information on the tax return process, contact your financial advisory team.
John Hadwen is a Principal at ARB. He specializes in providing individuals and businesses with comprehensive tax compliance and consulting services related to closely-held business, manufacturing, construction & real estate, and professional services firm taxation. Prior to joining ARB, John was a Tax Principal at a large, regional CPA firm.
