Tax documents have started to arrive and it’s time for us to organize these pieces of paper or digital information. Even though the filing deadline is still a little ways off, and even though taxes are scary, it’s better to start to get organized now.  What do you need to bring to your tax preparer to be ready to file?  There are specific documents that are required and how you organize these can impress your accountant or bookkeeper and save you money in fees.

 

Gather your documents

As paper statements arrive in the mail, be sure to place these in a Taxes 2021 folder. Organize this information in paper or digital folders as you collect the documents according to Income and Deductions.

Income

Income documents confirm the money you received during the previous year. These include:

• W-2 forms (Statement from your employer that includes how much you were paid, deductions for medical and social security.)
• 1099 forms (Form 1099-Misc for contract work, Form1099-INT for interest, Form 1099-DIV for dividends and Form 1099-B for broker-handled transactions.)
• Next year income from Venmo and Square will be included.

Deductions

Documents that help reduce your taxes are known as deductions. You will need to gather the information for this documentation, which may take time. Break this into chunks to make it easier to gather this information.

• Property taxes paid by you or your escrow account
• Mortgage interest on Form 1098
• Charitable donations with receipts from those entities
• Retirement account contributions up to a set limit. Look for these forms with your January statement
• Educational expenses which are on a form 1098-T
• Medical bills if they total more than 7.5% of adjusted gross income for most taxpayers
• State and local taxes and sales tax which the IRS provides tables with average amounts you can claim.

Credits are similar to deductions.  Currently the primary credit is the Child Tax Credit for each child in your family

Keep a record of the estimated taxes paid for this year. Those are quarterly payments made to adjust for additional income throughout the year. As you pay these electronically or by check, record that date and amount paid.

 

Shortcuts for tax preparation

There are shortcuts to gather this information.

• You can also gather this information online in your investment, mortgage, and online appraisal district accounts.
• Use one check book register each year and record the information as you write the check. Highlight in your favorite color to be sure you see these.
• Keep all tax papers all year long in a folder marked Taxes 20XX in your command center in the office or kitchen.
• Scan receipts to a digital folder all year long. Keep this folder on your computer.
• Take a picture with your smart phone and create a photo album of Tax Receipts 20XX
• Set appointments with yourself the last weekend of January, February and March to set aside time for tax preparation.
• Ask your doctors and pharmacy for payment records for the entire year.
• Partner with another family member as you organize your documentation. Your college and adult kids will need this preparation for their own taxes.
• Use a tax preparation check list.

Now that you have all the data you need, use file folders for each segment of information.

• Your information, including name, address and social security numbers
• Income
• Deductions
• Credits
• Estimated taxes

 

You are ready to go to your accountant or tax preparer with everything you need and you are guaranteed to impress!