Truthfully, you should have been preparing since January when your 1099s and W-2s began to trickle in. But all is not lost. You still have time to separate your records into income and expense categories. You may consider asking your CPA’s office if they have a tax organizer or questionnaire you could complete before your meeting. By design, these organizers are built to remind you of events and transactions that you may have forgotten about.
Items you should bring to your accountant’s attention include any foreign financial dealings. You may remember a few weeks ago, I highlighted the foreign tax credit. Your accountant needs to be aware of any special reporting requirements you may have.
To help your accountant, organize your paperwork by separating your income statements from the rest of your paperwork. This includes your employment W-2s, 1099s from banks, investment accounts and your prior year’s state refund; and K-1s from partnerships. It is extremely important to include the instructions for the K-1s. Keep in mind K-1s often arrive much later than your other income statements. In order for you to receive a K-1, the partnership must first file their tax return. It is very likely you may receive a K-1 after April 15th. Make a list of the K-1s you expect to receive. If you do not receive it by the time you are ready to file, you can file for an extension or complete your return without the K-1 and amend it later when you receive the statement. Your CPA should recommend the best course of action for your situation.
You should also pay close attention to transactions during the year that may require special treatment from your tax preparer. These include the sale of stocks or other property, gifted or inherited property, sale of a home, the refinance of your home mortgage, purchase of a home, a change in your filing status, the addition or loss of a dependent and any depreciation deductions you may be entitled to. If you are following a tax organizer provided by your CPA, it should walk you through documenting these records. If you do not have an organizer available to you, you can compare your collected documents to your prior year’s tax return.
Using organization and thoroughness in your tax records will enable you to be on the right track with your taxes. Do not miss any of the deductions you are entitled to take because your records are not organized. Because of the complexity involved in computing a tax return, attention to detail on your part can only enhance the value of your accounting professional’s advice. Tax minimization is a benefit of well-organized personal cash management.