Guest Minda Cutcher: Getting Prepared to File Your Tax Return

Hi, Friends.

How's your year going so far? We've been busy, keeping out of trouble. 

Minda Cutcher is a financial advocate for seniors in the San Jose area of Northern California. She gave us information that was very helpful when we were helping Terry move.

Minda's website has a lot of great information about her services and some articles of interest on her blog page. With her permission, I'm posting one of her articles as taxes may be on your mind.

"One of the things I do for clients is help them gather and organize documents needed to prepare their income tax return, or to provide to their tax professional. With April 15 on the horizon, I thought it might be helpful to do a little refresher on the basic documents needed for taxes, especially as it applies to seniors.

Since nearly 60% of taxpayers use professional help to prepare their taxes, I’ve also included some information about the different types of tax professionals, and resources where seniors can get free tax advice and return preparation.

Tax Documents

Hopefully, after my last two blogs about managing critical documents, you’ll be able to assemble these rather quickly.  Everyone’s tax situation is different, so you may find you need additional documents to the basic ones listed here. A good place to start is by looking at your return for last year.  Check with your tax professional if you have any questions or concerns.

• Income statements, including W-2s, 1099s, 1099-R, Form SSA-1099, Form RRB-1099, 1099B. These statements are supposed to be sent out by February 1. If you have misplaced your SSA-1099, you can request another one using your online social security account.
• Documents related to the purchase or sale of a home, such as closing costs, etc. Some moving expenses or modifications to a home to make it safe and accessible for an elderly person MAY be deductible as well.  Gather the receipts, and check with your tax professional.
• Receipts for any tax deductible expenses, donations, etc.
• Records of deductible mileage, for example a log of miles driven for medical purposes or volunteer activity for qualified charitable organizations.
• Medical bills – receipts for co-pays from doctors, dentists and other medical professionals; In home care agencies or private pay caregiver costs; patient portions (responsibility) for hospital stays, prescriptions, medical supplies, prescription eye-wear, hearing aids, etc.
• Health and/or long term care insurance premiums – don’t forget if your parent is living in an assisted living or skilled nursing facility some or all of their “rent” could be deductible as a medical expense
• Auto registration statement (a portion of your fees may be deductible)

Choosing a tax professional

The best type of tax professional for you – Enrolled agent, CPA, or Tax Preparer (see each described below) – depends on your particular situation.

Enrolled agent. Enrolled agents are licensed to practice by the federal government (“enrolled”) and authorized to appear on behalf of the taxpayer (“agent”) before the IRS. Enrolled agents advise, and prepare tax returns for individuals, partnerships, corporations, estates, trusts, and any other entities with tax-reporting requirements. Enrolled agents earn their license by passing a comprehensive tax code examination, or by having worked at the IRS for at least five years in a position that regularly interprets and applies the tax code and its regulations.  Additionally, to maintain their status, Enrolled Agents are required to complete 72 hours of continuing education, reported every three years.  Prior to being licensed, Enrolled Agents must also go through a rigorous background check by the IRS.

CPA. CPAs are licensed by state boards of accountancy and may or may not specialize in taxation. CPAs have completed a course of study in accounting at a college or university and have passed the Uniform CPA Examination. They must also have met the experience and good character requirements set by their state board of accountancy, and must comply with ethical standards and continuing education requirements to maintain their active CPA license. Like Enrolled Agents, CPAs have unlimited representation rights, which means they may represent their clients on any matters including audits, payment/collection issues, and appeals.

Tax Preparer. Unlike Enrolled Agents and CPAs, non-credentialed tax preparers have only limited representation rights for their clients.  As of January 1 this year, only tax preparers who have completed an 18-hour voluntary program –the Annual Filing Season Program – will have any representation rights at all. Participants who complete the program, which includes a 6-hour federal tax law refresher course with test, receive an Annual Filing Season Record of Completion from the IRS and are included in a public database of return preparers.

Free tax resources for seniors

Volunteer Income Tax Assistance (VITA) and Tax Counseling for the Elderly provide free help for low-income taxpayers and taxpayers age 60 and older to fill in and file their returns.  AARP (American Association of Retired Persons) also offers free tax assistance at their Tax-Aide sites, located across the country.

Whomever you choose, keep these things in mind:

1. Check their qualifications. All paid tax return preparers must have a Preparer Tax Identification Number (PTIN). This is a number issued by the IRS that tax preparers must renew and pay a fee for annually.
2. Check for disciplinary actions and license status via the Better Business Bureau, state board of accountancy or IRS Office of Professional Responsibility (Enrolled Agents).
3. Review the entire return with the person who prepared it before signing it. Be sure you understand everything. Ask questions if you don’t.
4. Be sure that the person you hire to prepare your return signs the tax form and includes their PTIN. This is required by law.
5. Remember that you are legally responsible for what’s on your return even it if is prepared by someone else."

I hope this information is useful for you. Please check on Minda's site for additional articles. 

Best wishes,

Marcia