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All too often, I see clients filing amended tax returns or extending their returns due to the incorrect or incomplete information that they provided to their CPA. This month’s newsletter provides some tips on how, when, and what to communicate with your tax advisor.

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Communicating with your CPA

To help your CPA get the most accurate picture of your finances, consider taking the following steps:

Tax forms: Ask your financial advisor how many tax forms you should expect to receive and by when they will be issued to help ensure that you’re sending a complete picture to your CPA.

  • Forms 1099 are issued for all non-retirement accounts to report income from dividends, interest, capital gain distributions, sales of securities, advisory fees, etc.  You will not be issued a 1099 for a retirement account unless you withdrew money or transferred money from that plan during the year.
  • Form 1099-R is issued when distributions are taken from a retirement plan, or when a rollover from one retirement plan to another has taken place.
  • Form K-1 is issued to report partnership, S Corp, and Trust income.  It is not at all unusual for Form K-1 to be issued in mid to late March.

Retirement-Plan Contributions:  One of the biggest mistakes I see clients making is not telling their financial advisor when their adjusted gross income increases and not telling their CPA that they’re making Roth IRA contributions.  Reinforcing the caution, Towson-based CPA, Michael Burke, said, “This is very important because contributions to all types of IRAs may be limited or disallowed based on adjusted gross income and other factors.  This is especially important for high-income earners, married couples (regardless of their tax filing status), and anyone who is covered by an employer-sponsored retirement plan.”

Keep in mind that if you contribute to an IRA and it is subsequently determined by your preparer that you were ineligible to do so, you could be required to withdraw the contribution or face potentially significant penalties for excess contributions.

Ask your financial advisor if you made contributions to the following types of retirement plans: a traditional IRA, Roth IRA, 401(k), 403(b), or small-business plan such as SEP or Simple IRAs.  If you did make retirement contributions, make sure to notify your CPA.

Provide your CPA with Everything Tax Related:  It’s better to provide you CPA with your tax documents than you providing him/her with your own figures.  Because it’s possible that you’ll provide the incorrect data, many CPAs will only work directly from the original source documents.

Also, make sure to provide anything that seems even remotely tax related to your CPA.  If s/he doesn’t need it, that’s okay, but you don’t want to miss a possible deduction or skip out on paying the IRS their due.  This is especially important when it comes to information reported to you on Form 1099 or other similar types of tax forms.

Inaccurate information or missing information can result in a correspondence audit from IRS and/or your state.  IRS systems will match the information reported on tax forms (such as your Form 1099) to information you report on your tax return.  If there is a discrepancy between the information contained in IRS systems and your tax return, the IRS could issue a correspondence audit letter seeking the payment of additional tax and interest.  It may take more than a year before the IRS issues a letter to you about the discrepancy, during which time interest on underpaid taxes accrues.

Worse yet, you may also need to file an amended state tax return to correct any discrepancies from your federal taxes.  Even if you don’t owe additional taxes to the IRS and/or your state because of the correspondence audit letter, the process to resolve the discrepancy can be very stressful, require additional expense to get your CPA involved, and can take significant amounts of time to resolve.

When to Start: Start your tax preparation right away.  You’ll want to gather your tax forms, charitable donation receipts, and other important tax documents first.  Many tax return preparers prefer as much information from you as early as possible so that the majority of your return can be completed by the time you receive the final Forms 1099 from your investment company.

Tax preparation can be a lengthy process.  As someone who works through this process with clients annually, Michael Burke, CPA, suggests, “Keep[ing] in mind that your CPA needs time to prepare your returns, follow up with you for missing or incomplete information, and to provide you a draft return to review before it can be filed.  After you determine that your return is complete and ready to be filed, your preparer will then need time for you to provide signed authorization forms to allow him/her to electronically file your returns.”  Of course, all this happens during a time when your preparer is helping many other clients with similar filings.

Even though it seems that Forms 1099 and other tax-reporting documents reach us later and later each year, the April 15th deadline does not change.  Getting everything s/he needs together and delivering it at the same time in February or early March will go a long way to helping ensure that your taxes are prepared on time.

Complete and organized records provided to your CPA on time will also help to minimize your tax preparation fees.  Many CPAs won’t start your taxes until they have all the necessary information, and many will set deadlines for receiving all materials to insure a timely filing of your tax return.  If the deadline is not met, extension requests may be necessary.  Although an extension will allow additional time to file your returns, all taxes must be paid in full by April 15th.

When to File: Although you’ll want to start your tax preparation as soon as possible, you may want to wait until at least mid-to-late March to hit send on filing your taxes to help avoid filing an amended return.  An amended return could be necessary if you receive a corrected 1099 from your investment company, receive a delayed tax document from a financial company, or find some additional tax information (such as a donation receipt).

Prepare Today for Next Year:  Keep a list of the items your CPA asks for and keep that list somewhere so that you’ll be ready to provide that again next year.  Also, it may help you to prepare for the current tax year by reviewing the prior year’s tax return.

It’s ideal if your CPA provides a checklist to ensure you provide everything and that you update your CPA with any changes you made during the year (including quarterly estimated tax payments, IRA/Roth IRA contributions, new self-employment retirement plans, mortgage refinance, home purchase/sale, retirement, birth of a child, change in marital status, change in dependent eligibility, etc.).  Each set of circumstances is unique, so consult with your CPA about your specific situation.

Implementing the Advice: While you don’t have to implement what your CPA recommends, know that your tax picture might not improve the following year if you don’t  (i.e., withholding adjustments, contributions to pre-tax retirement plans, estimated tax payments, contributions to 529 college savings plans, etc.).

You may want to have a three-way call with your CPA and financial advisor to ensure that your advisors are all on the same page.  This could help get all the information to your CPA that s/he needs while helping you take steps to plan for future years.  This is also potentially a good opportunity for your advisor and CPA to establish a good working relationship with your wellbeing in mind.  Your CPA and/or advisor may be required by law or professional ethics to have you sign a consent form to allow for direct communication between them, and they may also charge a fee for this type of service.

The opinions voiced in this material are for informational purposes only and are not intended to provide specific advice to any individual.  This information is not intended to be a substitute for specific individualized tax or legal advice. We suggest that you discuss your specific situation with a qualified tax or legal advisor.


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Office News

Our transition to becoming a Registered Investment Advisor has been a “grass is greener” moment for us.  We feel that TD Ameritrade was a great choice as a custodian due to the wonderful service we’ve received and how much clients seem to like their technology, statements, and of course, lower costs.

A HUGE thank you to our clients for making the transition with us (especially given the end-of-year timing) and for their continued support, trust, and confidence.

Office Closings

March 27th & 28th: 

I will be out of the office for two days to attend a business-coaching forum.  While I will periodically check email, Heidi will be in the office both days.  If you have an urgent, account-related need and cannot reach someone at the office, please call TD Ameritrade at 1-800-431-3500.

Just a Reminder

We are always accepting donations for the local animal shelters – toys, tennis balls, collars, leashes, food, cat litter, cardboard trays, office supplies, cleaning supplies, towels, mats, washcloths, etc. We will accept donations Monday-Friday between 9am & 5pm.

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Elise is starting to learn about secrets.  In December, I took Elise Christmas shopping for Heidi.  Elise was so excited about the giftthat she told Heidi all about it when getting ready for bed.

In February, Elise and Heidi went out for a while.  Elise barely made it in the door before yelling down the hall that she bought me a gift: a duck (I’m now being told the duck is communal property; we’ll work on the concept of giving later).


After a few discussions, Elise seems to be grasping the concept of secrets.  Pretty much every day of the week leading up to my birthday, she asked us if it was Saturday with a look of eagerness to get something off her chest.  We’ve also witnessed Elise telling her “buddies” (her stuffed animals) secrets.

Speaking of aging, Fenway and Roxy are also getting old…which makes us very sad.  This month, we’ll be taking Fenway to the vet to have several teeth removed.  I guess his bark will have a little less bite going forward.

Despite some physical signs of age, the two of them are still puppies at heart.  With February’s warm weather, we were able to take longer walks through the park and hikes through the woods.  It’s safe to say that squirrels throughout Baltimore still fear Fenway and Roxy.

I hope you enjoyed this month’s newsletter.

Best Wishes,

Woody Derricks, CFP®cfp for gay couples in Columbia, cfp for gay couples in McLean



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Available by Appointment in Alexandria & DC

As a Registered Investment Advisor (RIA), Partnership Wealth Management is committed to providing our clients with financial planning and wealth management services to help them make the most of their investments. At Partnership Wealth Management, we have a long history of working with the LGBT community. Among the many services we offer are financial planning and estate planning strategies for gay and lesbian couples. Financial planning is an important part of preparing for the future; contact us today to get started.

Certified Financial Planner Board of Standards Inc. owns the certification mark CFP® in the U.S., which it awards to individuals who successfully complete CFP Board’s initial and ongoing certification requirements.

2809 Boston Street, Suite 509

Baltimore, MD 21224