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3 Steps Toward a Productive and Painless Tax Filing Season

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By this day every year, most advisors are sick of taxes. Even if you don’t prepare returns in your practice, you likely have been busy helping your clients gather and provide to their CPA all the documents the accountant needs to prepare and file your clients’ returns. However, this may well be a good time to remind your clients of what they should be doing all year—and what they shouldn’t be doing—to ease the tax preparation burden for everyone.

Since the government shutdown delayed the start of the tax filing season this year to January 31, individuals had 10 extra days to get their tax documents in order before they could begin to file. However, despite the extra time this year, many of your clients still find tax filing confusing, time-consuming and burdensome. 

The key is to not look at tax filing as a mountain of monetary reportage, but rather a personal recap; a comprehensive snapshot of all the events that comprised the previous year of your client’s life. Life events like getting married, buying a house, having a baby, or starting a new business have a huge impact not only on a personal life but on a financial life too. So every year, it’s time to tell the IRS all about the eventful year your client had. To help make your clients’ lives easier (and yours), here are some key considerations to pay attention to when filing this season and next and the one after that and… 

Step 1: Gather the Correct Forms

Tax filing involves a lot of paperwork. Even if your client’s tax situation isn’t complicated, there’s still documentation that the IRS demands.  By the end of January, every employee should have received a Form W-2 showing wages earned, the amount taxable and the amount withheld. Independent contractors should receive Form 1099-MISC showing gross earnings for the previous tax year. For self-employed individuals, this step requires a bit more work to track down and organize all receipts and documentation for business-related expenses. 

Aside from earned income, the IRS is also interested in any other assets a taxpayer may own. Interest earnings are documented on Form 1099-INT. For more advanced investors, Form 1099-DIV should be received for each stock, mutual fund, or money market account. If a client uses a broker for investing activities, reports on the proceeds from broker transactions will be summarized on Form 1099-B. 

After collecting all the income-related documents, it’s time to begin gathering any and all deductible costs that will help trim your client’s taxable income. The most commonly overlooked deduction for taxpayers is the deduction for interest paid on a home mortgage for a primary residence and/or vacation home. Lenders will issue homeowners a Form 1098 specifying the amount of deductible interest paid. Charitable deductions are also frequently overlooked but can be beneficial in reducing taxable income as long as a receipt for the donation can be provided.

Step 2: Decide on the Proper Method of Filing
After the hunting and gathering of tax documents is complete, the next step is to determine the most effective method of filing to accommodate each client’s current tax needs. More than ever before, the IRS is encouraging tax filers to e-file either through free or paid self-preparation programs. The major benefit to e-filing is that the tax return is likely to be processed quicker, allowing for an issuance of any refund check sooner. Choosing to have a refund directly deposited is typically the fastest way to get a refund, as the IRS sends out direct deposits earlier than they mail out refund checks.  

Alternatively, many investors prefer to use the assistance of a tax preparer. If a client does pay someone to prepare her return, the IRS urges that the decision be made wisely. Taxpayers are legally responsible for what’s on their tax return even if it is prepared by someone else. So it is important to choose carefully when hiring an individual or firm to prepare your return.

For the 2013 tax year, the IRS specifically reminded taxpayers that they should use only preparers who sign the returns they prepare and enter their IRS Preparer Tax Identification Numbers (PTINs). While this kind of assistance can provide a taxpayer with increased knowledge and insight, it’s important to use a legitimate and trustworthy professional to prevent fraudulent activity.

Step 3: Protect Against Tax Fraud

While imitation may be the sincerest form of flattery, there is nothing flattering or sincere about identity theft. Identity theft occurs when an unauthorized individual uses another person’s identifying information, such as their name and Social Security number, to commit fraud. Under tax-related identity fraud, an unauthorized individual fraudulently files a tax return in the victim’s name and claims the refund.

Left untreated, the fraudulent tax return can cause a host of issues for the victim, including improper penalties, interest owed, and inability in future years to claim credits that the taxpayer is otherwise entitled to receive.

The IRS has reported that around 1.5 million fraudulent tax returns were filed last year using stolen identities, and more than $3.6 billion worth of fraudulent tax refunds were claimed and paid. While stopping refund fraud related to identity theft is a top priority for the tax agency, tax filers can be proactive when it comes to keeping their records safe. 

Taxpayers can be vigilant about protecting their personal information in the following ways:

  • Promptly retrieve tax documents like W-2s, 1099s or other tax forms that come by mail
  • Shred financials documents before discarding them
  • Never give out personal information, especially a Social Security number over the phone or on the Internet, unless you are aware exactly who is receiving it and for what reason
  • Protect personal computers by using firewalls, anti-virus software, and frequently changing passwords for Internet accounts.

The most important point to remember is that the IRS does not initiate contact with taxpayers by email or over the telephone to request personal financial information.  All IRS communications with taxpayers are conducted through the United States Postal Service and are easily verifiable. 

Possibly the simplest way of protecting your personal information and avoiding tax fraud is to file early and avoid giving unauthorized individuals the opportunity to file a fraudulent return and collect your refund.

Aside from the added protection against tax fraud, the benefits of assembling and organizing your tax documents early are bountiful. Not only will getting organized early give you plenty of time to properly file your taxes, the time, anxiety, and in many instances, money saved will ultimately turn the tax filing process from a dreaded chore to a manageable, almost enjoyable endeavor.


Material discussed is meant to provide general information and should not be acted on without professional advice tailored to individual needs.

See more tax planning tips from our series, 21 Days of Tax Planning Advice, on ThinkAdvisor, including:


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