Accountants call them "shoe-box people" - clients so disorganized that that they file everything financial under Reebok.
But bulging boxes mean more than a long night for tax preparers; they also mean a higher tax-prep fee because of the time it takes accountants and their staff to sort through the mess.
Consumer Reports Money Adviser recently asked CPAs and enrolled agents - individuals who are qualified by the Internal Revenue Service to prepare federal tax returns and to represent clients before the agency - what sends them round the bend and boosts their fees.
Anyone who relishes throwing cash at a tax preparer can feel free to use the tactics listed here. Otherwise, avoid them to save money and the tax preparer's sanity:
¢ Schedule an appointment for early April. Many accountants will simply turn clients away if they cut it too close. But even those who can get an appointment will create stress for themselves and add to the risk of mistakes and overlooked tax savings. It's best to see a tax preparer in February, shortly after the Jan. 31 deadline for companies to send out employees' W-2 earnings forms and 1099s, the forms that show investment and other miscellaneous income.
¢ Pile on those receipts. A tax preparer is not an auditor and doesn't need to see every receipt for business expenses, charitable contributions and other deductible costs. Instead, bring a list of those items organized by category - for example, home office, rental property and charity.
¢ Do nothing in advance. Being unprepared wastes time, which costs money. Open any envelopes with the words "tax information" or "tax documents" before the appointment, and sort the contents by category. When there are several income documents, group them into subcategories: W-2s and 1099s, for instance. Tax preparers charge extra if they have to make copies, sort papers and check for duplicates and missing expenses.
¢ Don't bother with cost basis. Someone who can't find the cost basis of investments sold last year and assigns the task to the tax preparer may pay hundreds of dollars extra. Cost basis is the purchase price of the securities plus transaction costs such as commissions or transfer fees. Paying capital-gains tax on the difference between the cost basis and the selling price is required, so the higher the cost basis, the less tax is owed.
Brokers or financial advisers should send 1099-B forms summarizing all sales. But if there are no original receipts available or if the investment was a gift, it is necessary to find the purchase information to determine the cost basis. Depending on geographic location, expect to pay a professional at least $100 an hour to figure out cost basis. An alternative is trying low-cost, do-it-yourself software.
¢ Don't look back on the financial year. Preparers say their clients often find new deductions or old deductible expenses just by combing through day planners, appointment calendars and check registers. In doing so, someone might remember driving to the next county to help a charity rebuild a house. That mileage is deductible at 14 cents per mile. Paying someone to fix a computer used only for a home business or subscribing to a job-related publication might also be deductible.
¢ Don't look forward, either. Consumer Reports Money Adviser editors stress that envisioning what's coming up is just as important as looking back. Planning to withdraw money from a retirement account, starting a new business, drawing money from a home-equity line of credit or speeding up mortgage payments, and selling property are changes that will have an impact on what will be paid over the next year and during tax-season 2009.
Moreover, scheduling time to talk about long-term goals, such as retirement and estate planning, provides a chance to prepare corresponding tax strategies. Setting up a long-term plan that looks past April 15 at least gets the wheels in motion.