The New Year is a time to set goals, establish resolutions and learn ways to improve yourself during the next 12 months. While the majority of resolutions tend to be fitness or financial related, involve learning a new skill, or establishing a new habit, we’d challenge you to consider adding one more to your list- commit to be more organized when it comes to filing your tax return.
Admittedly this doesn’t sound very “sexy”, but by following a few simple steps you can save yourself a lot of time and stress as this year’s April 18th* tax filing deadline approaches.
Step 1- Create a Folder
Create a 2016 tax folder so that as you receive relevant documents they can be consolidated in one place. This “folder” may be digital, physical, or a combination of both. Keep it where you will see it and remember to add documents as you receive them. It will only take a few seconds now and you’ll save yourself from searching for them later.
Step 2- Ask Yourself a Few Financial Questions
A formal tax organizer isn’t necessary. If you can answer “yes” to any of these questions below, you should expect to receive a tax document in the mail to include in your folder:
– Did you collect salary? (Expect to receive your W2(s) the first week in February)
– Did you perform contract work? (Expect to receive 1099-Misc in early February)
– Do you have bank and/or brokerage accounts? (Expect 1099s)
Don’t expect these until mid-February, and don’t be surprised if you get a revised version in March.
– Do you receive royalties? (Expect 1099s from payors)
– Are you invested in any publicly traded or private partnerships? (Expect K1s)
– Did you take a distribution from a retirement plan? (Expect 1099-Rs from all custodians)
– Did you collect Social Security income? (Expect a 1099-SSA)
– Do you have a mortgage on your home? (Expect a form 1098 from your lender)
– Did you pay interest on any education loans? (Expect a Form 1098-T)
– Did you have health care coverage? (Expect a Form 1095)
Step 3- Ask Yourself a Few Purchase and Tax Questions
If you can answer “yes” to any of the questions below, make sure to include this information in your folder:
– Are you self employed, own/operate a farm-ranch, or own rental property?
If so, make sure you have a record of all income and related expenses;
remember to include business miles and any large purchases that will need to be depreciated.
– Did you pay property taxes?
Don’t forget to include taxes paid on investment, mineral, or 2nd home type properties.
– Did you make any large purchases that you paid sales tax on? (e.g., new car)
– Did you donate to charity? (cash and non-cash, e.g., Goodwill)
– Did you make estimated tax payments last year?
– Did you pay any daycare expenses last year?
– Did you buy or sell a home last year (Include closing statements on both the buy & sell)
If you’re unsure and you answered “yes” to any of the above last year, we recommend that you call or email the individual who prepared your 2015 tax return. That person should be able to help you customize your list of what to expect. You can also get this information by looking at your prior year return, but we recognize tax forms can be confusing so a quick email now, in January, may save you time.
Step 4- Consider How You’ll Send Your Information
As we move towards a more paperless/digital society many of the documents you receive will be electronic. In prior years emailing these documents has been the primary method of exchange; we do not encourage this practice. Instead include copies on a thumb drive, or upload through a secure online client portal (Williams, Steinert, Mask and the majority of CPA firms have this available for client use).
We recommend waiting until you have the majority if not all your documents before sending them to your CPA so that your tax preparation can begin. This will allow the professional to more efficiently prepare your return, and should lower you cost.
Step 5- Congratulate Yourself
After you’ve successfully gathered all your tax items and provided them to your CPA it’s time to take a break and wait for your preparer to do their job. How does it feel to move Tax Organization onto your completed goals list?
Have a question? Let us know! Email us at firstname.lastname@example.org.
*The filing deadline to submit 2016 tax returns is Tuesday, April 18, 2017, rather than the traditional April 15 date, due to the 15th falling on a Saturday and the following Monday – Emancipation Day- being a legal holiday in Washington, D.C..