Questions your Tax Preparer should be Asking YOU!

Contributing Authors, Kenneth Hoffman and Ivy Fivey

We are often asked what questions someone should ask their tax preparer to make sure they've got the right tax preparer.  We think the questions a tax preparer asks are far more important! Here are 3 questions you definitely want your tax preparer to ask you.

Question #1: Can You Provide Additional Information to Support Your Numbers?

Your tax preparer should absolutely be questioning your numbers. The term  GIGO" (Garbage-In-Garbage-Out) is unfortunately commonly used in the tax preparation industry. It refers to the following situation:

- Numbers are provided to the tax preparer that are wrong, either knowingly or


- The tax preparer uses this information "as is" and does nothing to

verify the numbers are correct

- The end product - the tax return - is not accurate

It is not safe to assume that your tax preparer is verifying your numbers. This is why this question is so important. Some numbers are provided via legal forms, such as W-2s, 1099s and 1098s. These forms provide a certain level of reliability that the amounts are


However, most business and investing activity is based on the accuracy of the recordkeeping so verifying the numbers is extremely important. In order to verify your business numbers, your tax preparer needs additional information. This additional information is used to verify that the amounts reported in the recordkeeping match up and make sense. This additional information may include settlement statements, bank statements, credit card statements, loan statements, purchase or sale documents,

organizational documents, prior year tax returns and ownership documents.

While this process may not uncover all errors, it does provide a certain level of reliability and provides the tax preparer with a sense of how accurate the recordkeeping is.

If your tax preparer is not asking for this information, then odds are, your tax preparer is not verifying your numbers.

#2 Can You Provide Personal Books (Financials)?

Your tax preparer should be looking for deductions you may be missing.  An effective way to do that is to look at your books - both your business and personal books. While it is common practice for businesses to keep books, it isn't common for individuals to keep personal books. Personal books report where your cash goes and that is key to identifying possible deductions.

If your tax preparer is not asking for your personal books or not recommending that you keep personal books, then odds are they are only using what you give them and there's a good chance deductions are being missed on your tax return.

#3 What is Your Role in Your Business or Investing Activity?

While the first 2 questions gather the numbers to report, this question determines the best way to report them. 

Taxpayers, particularly business owners and investors, usually have options when it comes to how income or deductions are reported. Suppose a taxpayer has an expense that could qualify either as an investment expense or a business expense.

Why does this matter if the expense is deductible either way? Because not all deductions are the same. 

An investment expense is classified as a "Miscellaneous Itemized

Deduction." This type of deduction has limitations which result in only a portion (usually a very small portion) being deductible. And if you are in AMT (alternative minimum tax), it usually makes your AMT situation worse. 

A business expense does not have the limitations that are imposed on miscellaneous itemized deductions. Plus, business expenses can potentially reduce your self-employment income. While both classifications are accurate, the impact on how much tax is paid is much different.


In this case, the tax results are much better if the expense is reported as a business expense. Understanding the taxpayer's role in their business and investing is the key to determining whether it can be reported in this favorable way.

Your role in your business or investing is a significant factor in determining the options available to you. When your tax preparer understands your role, then your options for reducing your taxes are much greater.

Every business is unique, so if you need assistance in setting up any of your systems, procedures, or need further clarification on any of the topics discussed, please call us at (407) 922-0918, or email us at today!  We provide peace of mind, proactive attention, and area-specific expertise to help our clients achieve success!