As I work on the “paperwork” sent in by clients, I realize that we need to talk more about what a tax preparer wants — and does not need — to see.
One long-term client really seems to enjoy the safe electronic file exchange portal. He sent me a group of files that include Excel spreadsheets, Word documents, PDF documents, and .jpg images of receipts. Wow! What a collection!
I appreciate his thoroughness, but… Sending your tax preparer all of your raw information is like bringing in a shoebox of a year’s worth of receipts and dumping them on your accountant’s desk.
In the prehistoric, pre-electronic days, we always had a few clients who would bring a shoebox of some type and have us go through the receipts, statements, and tidbits. They’d ask us to organize their records, and we were happy to do that.
We’d have a junior team member, a bookkeeper or new accountant, create spreadsheets and pick out the data that would be needed on a tax return. This work was straight-forward, and the billing rate for the task was on the low end.
But, today’s electronic data dump is worse than the old shoe box! Because of the different types of documents mixed in the upload, we are finding that the traditional horde of bank statements, 10-99’s, payment records, and detailed detritus also has global instructions/questions that require attention from a stakeholder or other high-level professional in the firm.
This means that I can no longer take the shoe box and give it to a bookkeeper for data entry. Instead, I have to open all of the documents, sort them, and answer the questions or follow the instructions sent in by the client. Sure, I can turn over the receipts and routine things to record, once I’ve identified them. Unfortunately, the time I spend with my sorting hat on can be significant!
Happily, you can keep down the time we spend on the documents you give us (and therefore reduce your eventual cost).
Here are some ideas on how to curate the collection of financial information you send us.
- Send a master list of what you’re uploading and why. If you have a Word document with questions/directions/comments call it out so that the senior person on your tax preparation team will read it first.
- If you want us to organize your finances and produce a summary of things like investment profits, business expenses, partnership returns, we are happy to do that. Most clients do the summarizing work themselves because they naturally track their financial positions, but if you rather not spend the time and energy doing that tracking, we are delighted to do it for you. (We are especially delighted if you send us the raw information well before the tax deadline day!)
- If you have organized your finances yourself and have a summary of your income and deductible expenses, do NOT send in the receipts and statements. Keep the information you’ve processed and recorded with your tax records in case the IRS has questions in the next few years. But, if you send raw documents to us, it’s hard for us to simply ignore them. So, we will wonder, worry, spend time, and also possibly double count the numbers you already recorded.
- We do want to see the forms that the IRS gets from people you work for, financial institutions, and invest in. These are form like W2’s, 1099s of all flavors, K1’s, 1098’s, etc.
Technology has made it easy to share documents with your tax preparer. It’s simple to upload a lot and let the accountant sort it out! But, we read everything that is sent to us, so if you’re sending things because you’re thinking you’d rather be safe than sorry, you’re really asking us to spend more time on your return.
So curate your collection of records. Show us only the really good stuff!