Now that we have a new year, it is time to start thinking about what you need to do getting ready for this so it doesn’t turn into a stress-filled experience.
What should you do to get ready?
The first thing you probably want to do is pick up an organizer from a local office supply store, with at least five pockets to organize your paperwork. The organizer will make it easier to sort the documents by their category to make it easier to prepare a return. You will want to put the documents into the folders based on the following categories:
- Income received
- Statements from banks and brokers
- Statements from government
- Receipts for expenses
- Receipts for donations
By organizing your documents and receipts this way, it will make it easier for the preparer to complete the return in less time, usually resulting in a smaller bill.
Now that you have your organizer set up, you now have to go through your paperwork. So put on some good music and start looking for the following:
Records of income. You want to look for your W-2s, any statements from banks, brokers, renters, and customers. If you run your own business, you want to make sure that you have all the 1099-Misc that was sent to you. Not every customer will send you one, but check their total against your records, and be able to explain the difference.
Any Information about expenses that may help reduce your taxes. This would include receipts from childcare providers (including provider’s tax identification number), mortgage interest statements, donations to your church, costs incurred in seeking a college degree or taking courses to acquire or improve job skills, receipts for medical care. Additionally, you will want to make sure you have proof of payment of medical insurance premiums covering your children.
You will want to find any correspondence from government entities. This would include any receipts of sales taxes paid, as well as receipts for property tax payments. Additionally, you may have received a 1099-G, which shows how much was received in unemployment insurance benefits.
Any documentation of any amounts contributed to an IRA.
Lastly, look through your bank statement for items that may be income, or for amounts spent that may be deductions. Find the paperwork related to these transactions, and show them to your accountant to find out they are deductible.
By making sure you have all this information, you should have not only the amounts to include on your return, but the documentation of those items in case there are any questions down the road.
Next, you want to review your financial results for your business to make sure it is complete, so it is easier to complete your business’s tax return. The best thing to do is make sure you reconcile your bank account, which will point out any items you missed which need to be included in your financial records.
Lastly, if you don’t prepare your own return, make an appointment with your CPA. They tend to get busier as April 15th gets closer, so by getting to them early, they will have more time to analyze your situation, put together a return, and do so some tax planning for the coming year.
While you meeting with your CPA, keep in mind that they may ask you some strange questions. It’s how they make sure your return is complete and accurate. The more complete the return, the less trouble you will have with the IRS.
Preparing your tax return can be a bit of a hassle. However, if you start early, you will be able to make sure your information is complete and there are no issues with your return. If you have any questions about the preparation of a tax return, talk to a tax professional.
Peden Accounting Services in Manassas wishes you, your business, and your family a prosperous New Year! Call them today for all of your accounting and tax needs.
