Tax preparation consists of the processes of organizing financial records, calculating tax liability, and completing/filing tax returns required by authorities in accordance with prevailing codes and deadlines.
Preparation May Include:
- Assembling W-2, 1099, and other income-related statements
- Claiming eligible deductions, credits, exemptions to lower tax burdens
- Reviewing prior year returns and responses to ensure consistency
Example:
An accountant assisted a small business owner with tax preparation by inputting income and expense data into compliance software.
Takeaways:
Thorough tax preparation helps avoid errors and interest/penalties. Online tools and preparers ease complex tasks but require quality checks. Self-preparation demands ongoing training in tax law changes. Proper records substantiate positions facing potential audit scrutiny.