Checklist for Tax Preparation
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When you are getting ready to prepare and file your return, its a good idea to get organized. Otherwise you will be making frequent trips to your tax preparer. Even if you are doing the taxes yourself using online tax software, it helps a great deal to do your homework.
Here’s a checklist to help in tax preparation. Pick those categories that apply to you and get the information available organized to save time when preparing your income tax return. Print a report of your financial transactions for the tax year if you maintain your data in a personal finance software program. TIP: If you don’t have a personal finance software, you can use a free online finance manager like Mint.com. This will help as you gather all the information needed.
Your Personal Information
- Your personal information like social security numbers - yours, your spouse’s and dependents.
- Copy of the IRS notice announcing the amount of your advance child tax credit payment and amount you received.
- Child care costs with checks, invoices, provider name and provider’s tax ID and SSN
- Education Costs: tuition receipts for post high school education, Form 1098-T.
- Any adoption costs including legal fees, transportation and any other costs. Also SSN or ID number of adopted child/children.
Your Income Tax Information
Income from jobs :Forms W-2 for all employers for whom you and your spouse worked during the year . If you worked in multiple states, you might get additional W2 copies containing the state tax witheld.
- Investment income : Form 1099-INT, Form 1099-DIV, Form 1099-B, confirmation slips or brokers’ statements for all stocks, etc., that you sold in the tax year, Schedule(s) K-1 (Form 1065), Schedule(s) K-1 (Form 1120S), income from foreign investments, Income from stock option exercises and sales with Form 1099-B for proceeds from stock sales
- Local and state tax refunds, Form 1099-G.
- Statements for alimony received.
- Business or Farming Income : Books/accounting records for your business, or Invoices, Bank statements, Cancelled checks for expenses, Payroll records along with Invoices for purchases of machinery, equipment, furniture, Logs or records listing vehicle mileage and Inventory records if any.
- For home business : Square footage of home office area and home, rent paid if rented, Form 1098 for Mortgage interest, property tax payments, Home owners insurance payments, invoices for repairs and maintenance on house.
- Form 1099-R for payments from IRAs or retirement plans, Deposit receipts and contribution records to IRAs, the most-recently filed Form 8606.
- Rental property income : Form 1099-MISC or other records for rental income, Form 1098, Property tax payments, prior years record of suspended rental losses, any other expenses.
- Form 1099-G or unemployment check stubs and deposit records
- Form SSA-1099
- Income from sales of property. Bill of sale, escrow statement, closing statement or other records. Invoices receipts etc to show cost of the sold property. Invoices etc for improvements made to the property
- Miscellaneous incomes like jury duty pay records, Form(s) W-2G, receipts for all gambling purchases, Form 1099-MISC, Form 1099-MSA, Scholarship records, director’s fees receipts for money received for serving on a corporate board of directors.
Your Itemized Tax Deductions
- Form 1098, or your mortgage statement.
- Form 1098 if you purchased a home in previous tax year, and prior tax return if you refinanced in prior year and are deducting points on that loan over its life,
- Investment interest expense: Brokers’ statements showing any margin interest paid and loan statements for loans taken out to purchase investments
- Losses due to theft etc. with description of property and insurance reports showing reimbursement or any cancelled checks showing value of property.
- Charitable donations: bills receipts or cancelled checks for cash donations, mileage records for charitable purposes, receipts from charitable agency with estimated value in the case of property donations, prior years’ tax returns for any unused charitable contributions.
- All work related expenses : Reimbursement check stubs or reports from employer, union dues, receipts bills or invoices for supplies, gifts to clients, any uniforms or special clothing, seminars attended, professional publications and books. Travel information including invoices receipts etc for transportation, lodging, restaurants, parking etc. Any job search expenses and job related educational expenses.
- Misc. deductions like Tax preparation fees, cost of income tax return preparation software and books, Safe deposit box rental fees from bank. IRA custodial fees, investment advice costs.
- Last year’s state income tax return, Forms W-2 and any cancelled checks for state estimates you’ve paid.
- Medical and dental expenses including Form SSA-1099, year-end pay stub for premiums paid through your after tax wages Mileage records for trips to the doctor, clinics, etc.
- Real estate tax collector bills or cancelled checks and Form 1098 or closing statement if you bought, sold, or refinanced property in the tax year.
- Any tax bills or cancelled checks for personal property tax like automobiles etc.
- Employee SSN and wages paid during tax year to any household employees.
- Records showing any estimated tax payments or overpayments for prior years.
- If you want your refund to be deposited into your bank account you need the Routing number and Bank account number.
- Any foreign bank account information with name, location account number and account value.
TIP: If you use an online tax preparation software like Turbo Tax’s Deduction finder can find most of the deductions you are eligible for.
Your Adjustments
- Invoices etc. for moving expenses if any. Also include paycheck stub for any moving expense reimbursed.
- Insurance premium bills, or cancelled checks for self-employed health insurance.
- Year-end account summary, or cancelled checks for, SEP, SIMPLE, Keogh and Other Self-employed Pension Plans
- Cancelled checks for alimony paid.
- Cancelled checks for classroom supplies etc if you’re an educator.
- End of year account summary or bank statements for IRA contributions
- Form 1098-E showing interest paid, or Loan statements for Student Loans.
- Account statements for medical savings account contributions.
TIP: You can estimate your taxes before you go through the details of preparing your tax return by using a tax refund preview tool like this Online Tax Refund Calculator.
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All About Tax Planning
Tax planning is essentially tracking your income tax deductible items as they come up, and keeping records organized and handy in case they are needed. The most important tool for tax planning is a small filing cabinet. You can use this filing cabinet to file your tax planning documents and receipts, as well as keep track of previous tax returns filed and other important documents such as birth certificates and social security cards. The file cabinet you get to use for your tax planning should be fire proof and have a lock. That way your tax planning documents are safe in almost any disaster, and other people cannot easily gain access to your tax planning and other important documents.
Part of tax planning is making sure that you are aware of what expenses are tax deductible. You cannot engage in tax planning and track tax deductible expenses if you don’t know what you should be tracking! The Internal Revenue Service offers many publications on this subject. However, if you have any questions about income tax deductible items you should contact a qualified, certified, and licensed tax professional.
Once you know what tax deductible expenses you will need to track for the coming tax year, you need to set up tax planning record keeping system. This can be a simple receipt book, expanding file, index cards, envelopes, or any other method that makes sense to you. Keep in mind, however, as you engage in tax planning, that your tax planning record keeping system should not only make sense to you, but also make sense to your income tax preparer and the Internal Revenue Service if necessary.
At the end of each month, you can add up the totals for the different types of income tax deductible expenses you recorded in your tax planning records for that month. This way, all you have to do to discover your tax deductible amount is add up the totals for each month. The other records you collect and track through your tax planning are simply for proof that you can claim these income tax deductions, and are not really needed for preparing your income tax return if you have all of your totals in order.
On the surface, income tax planning may seem complicated and difficult. But with proper organization, tax planning is really quite easy. Not only that, but when you engage in income tax planning, you better your chances for that larger income tax refund that you need and deserve. If you have any questions about tax planning, you should contact a tax planning professional tax accountant today!
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Retirement Tax Planning Tips
Many people do not think ahead about reducing taxes during their retirement years. But actually there are many ways to reduce the amount of taxes that you pay during your retirement years. Some of these include.
Maximizing the nontaxable amount of your retirement plan benefits by taking a lump sum distribution limited to your previous contributions. Planning the order and timing of (a) retirement plan rollovers and (b) IRA distributions to maximize the nontaxable amount.
Eliminating withholding tax on retirement plan distributions by making a trustee to trustee rollover to your IRA. Electing to defer tax on the distribution to you of your employer’s stocks and bonds. Carefully considering whether and when you should convert your regular IRA to a Roth IRA.
Planning the order and timing of (a) retirement plan rollovers and (b) Roth IRA conversions to maximize the nontaxable amount. Reversing your previous conversion of an IRA to a Roth IRA because of change circumstances. Obtaining temporary use of retirement or IRA funds without paying tax or interest on the funds.
Deferring or accelerate income or deductions between tax years to minimize tax on social security benefits. Choosing distribution alternatives that delay taxation of required minimum distributions from retirement plans and IRAs.
Taking a partial lump sum distribution from a personally purchased annuity or a funded nonqualified plan after the annuity has started, rather than before. Carefully consider whether your rollover of retirement plan funds to an IRA should include your previous contributions to the plan. Carefully considering whether to roll over your employer’s stocks and bonds to an IRA.
Electing the most favorable method for computing the tax on a lump sum distribution from your retirement plan, if you were born before January 1, 1936. Deferring income (or accelerate deductions) between tax years to qualify for a Roth IRA conversion.
Choosing the distribution methods and distribution periods for your retirement, IRA, an annuity benefits that maximize the deferral of your taxes. Taking the first required minimum distribution from your retirement plan or IRA in the tax year generating the lowest tax. Structuring distributions from your retirement plans or IRAs to avoid the penalty tax on premature distributions.
Electing the most favorable method for computing the tax on lump sum payments of prior year social security benefits. Determining the percentage of disability insurance premiums you paid a to maximize the nontaxable portion of your disability benefits. Qualifying for nontaxable VA disability benefits to replace taxable U.S. Military retired pay. Preserving your surviving spouses right to elect to own your IRA or Roth IRA.
Preserving the right of your beneficiaries to choose between alternative methods of distribution of your retirement and IRA benefits. Establishing separate IRA accounts for your beneficiaries to maximize their tax deferrals. Designating a trust as the beneficiary of your retirement or IRA benefits to provide better control of funds.
Devising an estate plan that reduces or eliminates federal estate taxes on your retirement or IRA benefits. Making a charitable beneficiary designation that will eliminate taxes on retirement or IRA benefits. Using multiple trusts as IRA beneficiaries to maximize tax deferral.
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