The Planner's Perspective: Don't Assume Your Tax Documents Are Accurate

Paul Morrone |

By Paul Morrone CFP®, CPA/PFS, MSA

There is a common misconception among taxpayers that just because their tax documents were generated by their employer, the government, or a financial institution that the facts and figures presented on those documents are complete and accurate. Any seasoned tax preparer will tell you that this is far from the case, and in fact, it is not uncommon for there to be material errors in the documents that you receive that can adversely affect your return. It is important to remember that while these documents may be printed by computers, there is generally a human element somewhere in the process of inputting, summarizing and submitting the data which leaves plenty of room for mistakes.

For these reasons we always recommend having a tax planning conversation with your accountant at least once before December 31st. These conversations provide valuable insight and increase their ability to effectively prepare your return, identify planning opportunities and spot errors in the documents that you receive. It may be something as obvious as missing cost basis information on a securities transaction, or something as subtle as having the wrong box checked on your W-2, all of which can significantly impact your return and maybe even your tax bill. Looking over your tax documents in detail, and asking your preparer questions, may help you to better identify errors that previously would have been undetected.

Additionally, the tendency for a taxpayer to receive inaccurate information further reinforces the need to maintain organized records of your income and expenses each year. These can help to substantiate your assertion that an error exists and allow you to make specific reference to dates/times/events/etc. that will ultimately result in the documents getting corrected more quickly. Furthermore, if an error is found in one year that was pervasive and existed in previous years (but was undetected), you will be able to reference the source documents originally used to prepare the return to file an amended return for the affected tax year(s).

So what happens if there is an error? Luckily, you have options, and your accountant may be able to guide you depending upon your specific situation. It may as simple as manually correcting the information as it is entered into your return or may involve you contacting the appropriate institution to request corrected statements. While the latter may be cumbersome and result in your return being put on extension, it may be necessary to ensure consistency between what is reported to the IRS and what is reported on your tax return.

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This information is not intended to be a substitute for specific individualized tax advice. We suggest that you discuss your specific tax issues with a qualified tax advisor. LPL Financial and US Wealth Management do not offer tax advice or services.