Tax preparation can feel like navigating a maze, especially for small business owners juggling countless responsibilities. When your CPA asks for your prior year's tax return, it might seem like just another piece of paperwork. But here’s the thing: It’s not just a formality—it’s a critical step in ensuring your current year’s return is accurate, consistent, and optimized for your financial situation.
The IRS often requires information from your prior year's return to verify numbers and ensure consistency. For example, if you claimed a home office deduction or reported a net operating loss last year, your CPA needs that data to prepare this year’s return correctly. It’s also a key part of quality control, helping to catch discrepancies or missed opportunities that could cost you money.
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| Why does my new CPA need my prior year tax return? |
| What if I don't have a copy of my prior year tax return? |
| How does this benefit me? |
Your CPA isn’t just being nosy—they’re making sure your tax return is accurate, compliant, and optimized for your financial situation. Here’s why your prior year tax return is so important:
The IRS often requires details from your prior year's return to ensure consistency and accuracy. For example:
Without last year’s return, your CPA might miss critical details that could lead to errors or even an audit.
Comparing last year’s return with this year’s helps catch discrepancies or missed opportunities. For instance:
This step is especially important for small business owners, where even minor errors can have significant consequences.
Certain items carry over from one year to the next, and your CPA needs last year’s return to account for them. These include:
Missing these carryovers could mean leaving money on the table—or worse, triggering an IRS notice.
Don’t have a copy of your prior year tax return? No worries—there are several ways to get the information your CPA needs. Here’s what you can do:
If you can’t find your prior year's return, you can request a tax transcript from the IRS. A transcript summarizes your tax return and often provides enough detail for your CPA to work with.
How to request a transcript:
What’s included in a transcript:
If you’d rather not handle the transcript request yourself, you can authorize your CPA to access your tax records directly from the IRS.
How it works:
This option is especially helpful if you’re short on time or prefer to let your CPA handle the details.
If a transcript isn’t available or doesn’t provide enough detail, your CPA can work with other records to reconstruct your prior year's information. These might include:
While this approach takes more effort, it can still provide the information your CPA needs to prepare an accurate return.
Providing your prior year tax return isn’t just about checking a box for compliance—it’s a strategic move to maximize your financial health. Think of it as giving your CPA the full picture of your financial journey. With last year’s return, they can spot trends, identify opportunities, and ensure your current year’s return is as accurate and optimized as possible.
Here’s how it helps:
Your CPA uses your prior year's return as a baseline, which saves time and reduces errors. With last year’s numbers in hand, they can quickly identify what’s changed and focus on optimizing your current year’s return. For example, if your business structure or income sources haven’t changed significantly, your CPA can streamline the process by referencing last year’s return for consistency.
By reviewing last year’s return, your CPA can identify opportunities you might have missed. For instance:
This step ensures you’re not leaving money on the table.
Consistent, accurate reporting lowers the chances of IRS scrutiny. By cross-checking last year’s return with this year’s, your CPA can catch discrepancies or inconsistencies before they become problems. For example, if your income or expenses fluctuate significantly, your CPA can ensure the changes are properly documented and explained.
Your prior-year tax return isn’t just a formality—it’s a cornerstone of accurate, optimized, and audit-proof tax preparation. By providing it to your CPA, you’re not just meeting IRS requirements but taking a proactive step toward financial success.
For small business owners, maintaining good records and understanding the process can make all the difference. It ensures continuity, maximizes deductions, and minimizes the risk of errors or audits. And when you work with a trusted CPA, you can rest assured that your taxes are in professional hands.
At DiMercurio Advisors, we specialize in helping small business owners confidently navigate tax season. Whether you’re unsure about your prior year's return or need help with the entire process, we’re here to help. Let’s turn tax season from a headache into an opportunity to strengthen your financial foundation.