Tax Prep Checklist

Even the most knowledgeable tax professional can’t complete your income tax return correctly and quickly without all the information they need. Yet every year, countless people sit down opposite their accountant and answer, “I don’t know,” or, “Can’t you just plug a number in?” to questions about income and expenses. Most professionals will smile and politely say no.

The reason tax preparers can’t just take your word for amounts or use their own judgment to fill in a number is that they are both professionally and civilly responsible for what goes on your tax return. If they knowingly enter false or unverifiable information, they may be subject to penalties, fines, and possible loss of their professional licenses.

If you’re like the majority of Americans who turn to a professional for tax preparation, chances are you’re doing it because you want to make sure you have the smallest tax bill or largest refund possible. The best way to achieve that goal is to have all the information and documentation your accountant will need ready to go. It’s also a good idea to have an idea of what questions you should ask to help ease your tax burden, both now and for the coming year.

Identification

When you show up for your tax appointment, you should have photo ID such as a driver’s license or military or student ID with you. ID is necessary because tax preparers are supposed to verify your identity so they can be sure you’re not an identity thief looking to steal a potential tax refund.

You should also bring Social Security cards, or at least the numbers, for each member of your household. This ensures that your return will not be rejected by the IRS because the Social Security number for your son or daughter is off by one digit.

You should also bring along a voided check if you want your tax refund to be directly deposited into your checking account. Reciting your routing and account number from memory may be impressive, but greatly increases the chances of a mistake. If the IRS sends a refund to the wrong account, it can take six weeks or more for them to straighten it out and get your refund to you.

Finally, if you have changed your name due to marriage, divorce, or for some other reason, be sure to bring along documentation indicating the change. This will help in the event your return is rejected because your new/old name does not match the name associated with your Social Security number. If the tax preparer needs to address the matter with the IRS, having the documentation on hand will save time.

Proof of Income

Bring documentation for all your earned and unearned income, including:

  • W2: You should have received one for each job you worked during the year. Employers are responsible for getting them to you by Jan. 31. If you have not received one by then, contact your employer and request it be sent immediately. Tax preparers can’t use your year-end pay stub.
  • 1099: These will be sent to you by anyone whom you did work for as an independent contractor.
  • 1099-INT: Any bank, credit union, or brokerage account that paid you more than $10 in interest is required to send you one of these.
  • 1099-R: You will receive one of these if you withdrew any money from a retirement account, such as a 401(k) or IRA.
  • 1099-G: These are issued for certain types of government payments, such as unemployment.
  • 1099Div: If you received any dividend payments from stocks or other investments, you will receive this form.
  • 1099B: These are issued by your stock broker for any stocks you sold during the year. If the 1099-B does not include your original purchase price, do your best to find it because your accountant will need it.
  • W2-G: You will receive one of these if you won more than $500 gambling.

You are also required to provide proof of any self-employment income, even if you did not make a profit (your tax preparer will discuss deductible expenses with you). Be honest and include income from activities like hobbies since it is less costly to deal with the taxes now than to face an audit later.

Proof of Expenses

You don’t have to be in business to have deductible expenses. There are more than 10 common expenses that can be used to reduce your tax bill. In order to save your accountant time and you money, it’s always best to total your expenses for each category yourself rather than handing your accountant a stack of receipts.

  • Self-employment or home office expenses: Tally your business mileage and gas/toll/repair expenses separately and let your accountant determine which is to your advantage to use. If you have a home office for use with your job, total all your expenses, including utility bills, as your accountant will be able to take a percentage of them as a business expense.
  • Education expenses: Include both required education expenses for your job, such as continuing professional education and training, and college tuition bills for yourself, your spouse, or dependent children. You should receive a 1099-T from any college or university to which you paid tuition.
  • Medical expenses: This total should include all of your out-of-pocket expenses for deductibles, co-pays, medications, and insurance premiums that you paid. You will only be able to deduct these expenses if they exceed 10% of your adjusted gross income.
  • Charitable contributions: Tally all receipts for monetary donations. Donations of goods such as clothing and furniture should include a description of the items along with their fair market value. Organizations like the Salvation Army and Goodwill provide value guides that the IRS accepts.
  • Mortgage interest: If you own a home that has a mortgage, your lender is required to send you a mortgage interest statement that will include the total amount of interest you paid for the year.
  • IRA contributions: Unlike 401(k) contributions, which are made with pre-tax dollars through your employer, IRA contributions are made with after-tax dollars, which means they can be deducted from your income on your tax return.
  • Energy-efficient home improvements: Some, but not all, improvements to your home that improve its energy efficiency may be tax deductible.
  • State, local and sales taxes: Most taxes that you paid during the year are deductible from your income. These include state and local income taxes, property and school taxes, as well as sales tax that you paid on big-ticket items like appliances and cars.
  • Union dues:– If you are a union member, your dues are deductible.
  • Unreimbursed employee expenses: These includes things like required work uniforms that you pay for as well as tools that you need to perform your job. You can’t deduct clothing that can be worn outside of work.
  • Losses to casualty or theft: These include things like stolen property that was not covered by insurance or injuries or damages that were not covered by insurance.
  • Gambling losses: Losses are only deductible against winnings.
  • Tax preparation fees: The amount you paid to have last year’s taxes completed is deductible on this year’s tax return.

Payment

The best way to avoid unnecessary interest and penalties on any taxes you owe is to pay them on or before April 15. The easiest way to make certain you don’t forget is to be prepared to make the payment with your return.

Some professional tax preparation software allows accountants to enter your debit/credit card or checking account information into the return so that when it is e-filed, payment will be remitted to the IRS. In the event your accountant’s software does not have this feature, bring a check and put it in the payment envelope when you pick up your tax return.

Questions

Tax professionals are not only knowledgeable about how to prepare your taxes, they are experts about all sorts of tax issues. A good use of your time and your dime (what you pay your accountant) is to ask questions.

The best time to ask questions is when you return to pick up your completed tax return, because your accountant will be more familiar with your tax situation by then. It’s a good idea to write down your questions and concerns before you pick up your completed return so you’ll have them ready. Some important questions to consider asking are:

  • Should I make any changes to the amount my employer withholds?
  • Are there any tax law changes that are expected in the coming year that will negatively affect my return next year?
  • What can I do to lower my tax bill next year?
  • Ask about the deductibility of any home improvements you plan to make.
  • Ask if you should make an appointment for a midyear or year-end review to prepare for next year.

At the end of the tax preparation process, you should be comfortable knowing that you have done all you can to lower your tax bill this year and have the information you need to potentially save on next year’s bill as well.