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Welcome to Tax Season: Ways to Reduce Tax Preparation Fees

February 23, 2017

Following are some ways to reduce your tax preparation fees. Some of these will also simplify your life.

  • Publicly traded partnerships (“PTP”) send K-1s that can be upwards of ten pages causing additional preparation fees. Some PTPs that send K-1s late can cause an extension to be filed. Tip: If the income from the PTP is a relatively small amount, you can file your return using an estimated amount and “true it up” on next year’s return. True up means adjusting the next year’s K-1 amounts for the difference between the amounts reported the previous year and the actual amounts. If your investment is significant to your total worth, then the additional delays and preparation fees would not be a major issue; otherwise perhaps you should consider not making or maintaining PTP investments.
  • Hedge funds with 30 page K-1s will likely force you to extend, file returns in multiple states and pay a lot more in tax preparation fees. If you make significant investments, then the additional delays and preparation fees would not be a major issue; otherwise then perhaps you should consider not making or maintaining these investments.
  • Additional information for hedge funds and partnerships: Out of state partnerships that do not file with your state might cause you to not be permitted to e-file in your state. IRAs, Roth IRAs and other tax sheltered accounts that have these investments can cause a tax from these otherwise tax sheltered accounts. It is important that you check with your tax advisor before making such investments; better yet, skip them in these accounts unless they represent substantial positions.
  • Foreign stocks with withholding cause extra forms to be included in your return. If you have a few of these it will take some unraveling when the info is transferred from your brokerage or mutual fund statements possibly causing additional fees.
  • The children of clients with college children working summer and vacation jobs could possibly receive W-2s from two or three states. Usually many of these tax returns might not be required to be filed, but if there is withholding tax, they would need to be filed to receive the refund. Occasionally the tax preparation fees are greater than the refunds. To eliminate unnecessary tax returns, your children should report that they are exempt from withholding on Line 7 when they complete the W-4 for their employers; this will eliminate the withholding and possibly the need to file returns for those states. If it is later determined that a return will need to be filed and that a tax will be due, there might be some penalties but they would likely be minimal amounts.
  • Be organized. When you submit your information organize it in a logical order, answer all questions on the organizer and explain unusual transactions or questionable items. Anticipate how the preparer will react to what you are providing and whether it is clear.
  • Submit complete information. Otherwise additional calls, extra handling and delays will ensue.
  • Respond promptly to tax preparer requests for additional information.
One Comment leave one →
  1. 6hawthorne permalink
    February 23, 2017 10:00 am

    Hi Ed Thanks for the list Bob Nagler

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