Rounding up paperwork and other information while preparing for ‘tax time’ is a yearly chore that can’t be ignored whether you’re completing your tax return yourself, or gathering documentation ready for your tax advisor or accountant to do it for you.
In order to get the job done as efficiently as possible and comfortably meet the IRS (Internal Revenue Service)deadline for submitted tax returns, ensure you have everything required to hand.
For even a small business the paperwork required at tax time can be plentiful; from simple receipts for the odd sandwich or coffee to official business related documentation such as 1099 formsthere’s often a lot to gather together.
The better your record keeping and organization of papers and documents, the easier it will be for your advisor to help; also, the reduced time for them wading through your paper trail could result in a lower bill for their services.
What do you require?
Tax return for the previous year – to use as a reference for the new tax year, your previous year’s tax return will be useful to your tax advisor or accountant.
Older tax returns can help in that you may qualify for some deductions this year that were actually entered in the previous year’s return.
Wage slips and other proof of income – if you’re employed full or part time, you’ll require the W-2 form showing what you earned and paid in taxes for the year.
If you’re self employed or doing some ad hoc work ‘on the side’ you’ll have received 1099 forms to record income over a certain level, so have these to hand.
Other proof of income – any other income should be accounted for, such as social security or unemployment, and others such as sales of investments recording the gains or losses as appropriate.
Investment paperwork – a record of how your investments performed through the tax year is important to determine if you need to pay taxon any gains, or whether tax may be deductible on contributions to certain types of investment such as a 401 (k) or IRA (Investment Retirement Account) or any brokerage accounts you may have.
Expenses receipts – important to enable your advisor or yourself to calculate the amount of income you can offset against your tax liability.
Receipts, and thus allowable expenses, will vary depending on your business; your advisor can help determine what expenses are allowable in your case but you’ll need the relevant evidence.
For businesses or the self-employed,anything from a shop bought coffee when meeting a client to a capital expense such as new computer equipment would be offset against income for tax purposes,so all receipts and purchase invoices need to be grouped together by type and be readily to hand.
For individuals either employed or self employed expenses can also run to a long list and could include some of the following:
- Property taxes paid
- Expenses relating to selling or buying a property
- Medical expenses
- Tuition and education fees
- Charitable contributions
- Work-related training or education expenses
For self employed people working from home, don’t forget utility bills covering the previous tax year so your advisor can calculate what percentage of these can be used to offset your income for use of home as an office.
Resolve to make it easier next year
If you find getting your affairs together for preparation of taxes a time consuming paper chase, then maybe next time pledge to be more organized.
This can be achieved fairly easily by ensuring paperwork is filed simply and efficiently so making it easy to access; receipts filed away by type every week, or at least monthly, will help as will checking what the latest tax legislation is as things can change.Finally, if you haven’t already got one, hiring a tax advisor or an accountant to help prepare your tax return and to ‘checkin’ with at least a few times a year is well worth while.