Don't let tax time throw you for a loop

Jeremy Nachtigall • Mar 20, 2021

It’s that time of year again and fortunately, for a lot of people, the date to file your Federal Income Taxes has been pushed to May 17th. This should give us all ample time to gather and organize our documents for your tax preparer/accountant, or will it? The mere thought of going through what seems like endless pieces of paper is what prevents most of us from just doing it.


My clients rely on me to go through all of the paper to find what's important and in some cases, prepare their tax returns. In this particular case, I was tasked with putting together a file for my client’s CPA. 

I went to her house to pick up her documents and upon review, the documents I received from my client ranged from bank statements, to brokerage statements, from utility bills to insurance EOB’s and receipts, lots of receipts. It’s no wonder why people don’t want to do this. The whole process is overwhelming because there is so much confusing and unnecessary paper.
I’ve compiled a checklist of documents that you will need to bring with you to your tax preparer so your tax season will be orderly and stress-free.


Personal documents

  • Photo ID
  • Social Security Cards, Social Security Number verification letters, or Individual Taxpayer Identification Number assignment letters for you, your spouse, and any dependents
  • Birthdates for you, your spouse, and dependents on the tax return
  • Bank account and routing number or a voided check for direct deposit of your refund
  • 2019 tax return (if you have it) for this year’s ‘lookback rule,’ which states that if you earned less in 2020, you can use either your 2019 or 2020 income on your taxes—whichever one gets you the most money back.

 

Income


Employment Income

  • W-2 form(s) for all jobs last year (your employer(s) will have sent you this by January 31st)


Self-Employment Income

  • 1099-NEC and/or 1099-K
  • Records of income not reported on 1099 forms
  • Records of expenses including receipts, credit statements, etc.
  • Record of estimated tax payments


Retirement Income

  • SSA-1099 form for Social Security benefits
  • 1099-R for pension/IRA/annuity income


Unemployment Income

  • 1099-G for unemployment benefits

 

Other sources of income

  • 1099-G for refund of state/local income taxes
  • 1098-T for scholarships/fellowships
  • 1099-R for disability income
  • Income or loss from the sale of stocks, bonds, or real estate
  • Income or loss from rental property
  • Alimony received
  • Statements for prizes or lottery/gambling winnings
  • Interest and dividend statements from banks
  • Records for any other income


Expenses


You may be able to claim tax deductions for some of the expenses you have. These deductions reduce the income you are taxed on. Bring documentation for all of the following expenses you have.


  • Retirement contributions, including a 401(k) or IRA
  • State and local taxes you’ve paid
  • Mortgage statements and property tax bills if you are a homeowner
  • College tuition (1098-T) and student loan statements (Form 1098-E)
  • Childcare expenses, including provider’s address and federal tax ID number
  • Receipts for charitable donations
  • Medical and dental bills
  • Records for supplies used as an educator

 

Other Tax Documents or Notices


  • IRS Notice 1444 and/or 1444-B for your Economic Impact Payments (also known as stimulus checks)
  • Form 1095-A if you had coverage through the Health Insurance Marketplace
  • Documents from the IRS, Health Insurance Marketplace, your state tax agency, or anything that says “IMPORTANT TAX DOCUMENT”


Some Daily Money Managers will handle your tax preparation, from gathering the documents to actually filling the return and are insured to do so via an endorsement to their E&O insurance policy. If you are using a Daily Money Manager to do your taxes, make sure they have the “tax preparer” endorsement which allows them to:


  • Prepare tax returns;
  • File tax returns with appropriate taxing authorities;
  • Correspond with taxing authorities concerning clients’ tax returns;
  • Calculate final or estimated tax payments;
  • Monitor tax refunds; and
  • Provide consultation or training in connection with pre-packaged or on-line income tax preparation software.


Pick a day, carve out some time, gather your documents, review your checklist and deliver them to your tax preparer. A lot of tax preparers use portals to allow their clients to digitally submit their documents. This is a relatively easy process, as you don’t have to leave your house but be prepared to spend a little time in front of your printer. If this seems like a lot to you, that’s because it is. Now add 15-30 pages of unused paper. You know it needs to be done. We’ll do it for you.


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