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Saturday Morning News

How Should You Prepare For Tax Season?

Aired February 10, 2001 - 9:17 a.m. ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.

KYRA PHILLIPS, CNN ANCHOR: Well, back down here on earth it's tax season. You probably have received your W-2s, all your tax packets, so you better not procrastinate.

Well, joining us now from New York is Evan Snapper. He's a senior manager for the accounting firm Ernst and Young, and he's a specialist in debt management, tax strategies, and retirement planning.

Boy, I wish you lived here. We could all talk to you right now, Evan.

EVAN SNAPPER, ERNST AND YOUNG: Exactly.

MILES O'BRIEN, CNN ANCHOR: All right, let's talk about the basics right now. What should we be doing right now to prepare for tax season?

SNAPPER: It's an administrative function right now. I think it's gathering your information, getting it all organized. When you're ready to sit down and actually put pen to paper, you want to have everything in order. You don't want to be running around. So right now, when the things come in the mail, all the tax forms, put them in one place where they're easy to get to.

I also would recommend taking out last year's return. That's the best starting point. Look at all the different items you had last year and make sure that that information is here, so when you do sit down and start writing, you don't realize, Well, I'm missing a 1099 from one of my bank accounts.

So right now, just kind of take it slow, get ready, and just gather your information carefully.

PHILLIPS: I know I sort of put everything in separate envelopes. I actually do that throughout the year. I can't believe I'm that organized, but it helps a lot.

What do you think...

SNAPPER: That's a great idea.

PHILLIPS: Hey, thank you, all right. Maybe I can make money off that. Biggest mistake that people make?

SNAPPER: It's funny, one of the biggest ones is, they put their Social Security number incorrectly, invert a number, don't add a Social Security number, forget one for a child who they're trying to claim a credit for. It used to be math errors, but most people are now using the computer software, so the math errors have decreased. And now it's just wrong numbers that seems to be the biggest one.

PHILLIPS: I guess it would be a good thing if you put someone's Social Security number that's getting a lot of money back, right?

SNAPPER: It's a nice try...

PHILLIPS: All right, let's talk about investments. Now, you don't like to have taxes to be the basis of a new investment, do you?

SNAPPER: Not at all. You got to look at the whole picture. Taxes is one point of an investment decision. You have to take it into account. But it shouldn't control your investment decision. I have clients who are -- hate taxes so much, they'll take an investment that will pay them 3 percent tax free rather than a 10 percent taxable investment, just from the point of it.

PHILLIPS: Now, I know guidelines change a lot on what you can write off and what you can't, you know, can and cannot write off. How do we find out what's new this year, maybe something I didn't know about last year that I could write off this year?

SNAPPER: There are a lot of good tax guides out there, the Internet's a very good place. Ernst and Young actually, my firm, has a very nice tax guide. There's a lot of information out there. I would recommend looking at the instructions for the form also. They're not quite as clear as some of the private tax information, but they're -- all the information is there if you take your time and read carefully.

PHILLIPS: Evan, do you recommend filing online?

SNAPPER: I do, actually. I file my own return online, I find it easy. There's a nice record of it, you can print it out, keep it on your hard drive. And the IRS gets it much quicker, and there's no worrying about it getting lost in the mail.

PHILLIPS: All right, before we let you go, quickly, Bush's tax plan, how's this going -- is this good, bad? What effects do you see?

SNAPPER: I think it's very good, actually. I think, you know, for many years we've been paying very high tax rates, especially at the upper income, which account for most taxes paid. So scaling it back a couple of percentage points, I think, is a good idea. It may help spur the economy.

PHILLIPS: Evan Snapper with Ernst and Young, thank you so much, sir.

SNAPPER: Thank you.

PHILLIPS: All right.

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