Try as we might, when April rolls around, the scramble begins. Panicked taxpayers call their panicked accountants and the frantic preparation of tax returns begins. Most of the time this is stressful for everyone involved but it doesn’t have to be that way. A lot of the frustration is on the client’s part. This comes from not understanding what exactly the accountant is looking for, and I don’t blame them. The tax code is incredibly dense and complex and it’s hard to know what to give your accountant. However, I aim to at least give you a good understanding of what your accountant needs to do your taxes.
The Tax Organizer
This could potentially be the most important of all tax documents to give to your accountant. Usually in January or very early February your accountant will send you a tax organizer. This document is fantastic because it is split into sections that correspond to different forms that you may see on your return. It’s a dense document but most of the items won’t apply to you, so don’t feel like you must have an answer for every page. Also, most accountants will tell you that there’s no pressure to fill out the organizer. However, if you take the time to fill it out then you could save money on tax prep fees. Not to mention the reduction in frantic emails coming from your accountant in Early April.
1099’s
1099 forms are the paper forms that you will most likely receive from your bank, a home sale, your broker, or a casino if you were so lucky. You should receive these forms when you get your W-2, so be sure to save it and send a copy to your accountant as soon as you get them.
W-2
Form W-2, this should ring a few bells for most of you. This is the form that you receive from your employer stating what you made, and what was withheld from your paycheck. This includes taxes and any other items like 401K and other contributions taken out of your gross paycheck.
Rental Profit and Loss
If you have a rental unit, or units that you need to report on for taxes, be sure to ask your property manager for financial statements. These financial statements will most likely have the same information that will go on Schedule E of your tax return. If your property manager will not provide a profit and loss statement for whatever reason, then keep track of the expenses and income. This includes your mortgage, property taxes, repairs, improvements, and any other expenses you incurred with your rental unit, or units.
Business Statements
If you have a small business be sure to give the financial statements to your accountant. What your accountant needs to do your taxes are the balance sheet, income statement and the general ledger. Also, you might want to send an email or some sort of indication that you have reviewed the documents and they are accurate to the best of your knowledge. Also keep copies of all receipts and give bank statements to your accountant so they can verify that the business cash is correct.
K-1’s
This is the form that you receive when a partnership, or corporation, that you’re apart of, files their taxes. This form has your personal share of all the income and deductions from that business. You should start to receive these forms by March, so be sure to get these forms to your accountant, right away.
Identification Information
Kind of self-explanatory, but if your accountant has no idea who you are, they can’t prepare your taxes. Be sure to have all identification information ready or you know, fill out the client organizer.
Any Medical Bills and Charitable Contributions Made
With passage of the Tax Cut and Jobs Act of 2017 more and more people take the standard deduction. This means that less people itemize (about 10%) which means that the standard deduction provides more of a benefit than itemizing would. However even though your medical bills and charitable contributions may not matter for your federal return, there may be some benefits to your state tax returns.
In Summary
In short what your accountant needs to do your taxes is basically proof for all income, expenses, and deductions that you see during the year. However, like I stated filling out a client organizer will greatly speed up the process of preparing your tax return. Communication is key and hopefully being prepared for tax season will solve many potential headaches in early to mid-April. As always if you’re looking for an accountant, I run a firm that specializes in helping small businesses owners. If you’re interest visit my contact page or call 208-615-5314.