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Tax Prep Checklist: What You Need to Know

If you’re part of the roughly 60% of Americans who pay someone else to prepare their tax return, then there’s a good chance that you’ve had to make more than one visit to the preparer’s office because you forgot something. A financial advisor can also help you optimize your tax strategy to reach investing and retirement goals. Since preparing taxes happens only once a year, we’ve put together a checklist with five items to help you gather all the documents you need beforehand.

Five Things Your Accountant Needs to Prepare Taxes

Depending on your filing status, your accountant will need different types of information to prepare your tax return. In addition, if you are self-employed or a full-time college student, this will also determine the types of forms that you will need to use. Here’s a breakdown of five types of documents you’ll need when filing your taxes:

Identification Documents

Even if you’ll be returning to the same tax preparer you’ve used for years, it’s always wise to bring along some identification. This is especially important when you plan on requesting a refund anticipation loan (rapid refund), since preparers are required to keep a copy of your current ID on file.

It’s always a good idea to bring Social Security cards for yourself, your spouse and any dependents rather than trying to recite them from memory. A mistake of even a single digit will result in your return being rejected, and that can mean a delay in getting any refund you are entitled to.

In addition to Social Security cards, driver’s licenses or other federal IDs, those claiming a dependent might need to bring form 8332 (which shows that a custodial parent releases the right to claim a child to you).

Proof of Income

Tax Prep Checklist: What You Need to Know

Your income tax return must reflect all of your income – not just most of it or what you remember. This is important because any income that doesn’t make it onto your return can result in penalties and interest for under-reported and under-paid taxes.

For tax purposes, income is any money you receive from any source that is not a gift. This includes social security, retirement benefits, sale of real estate, investments (including dividends), bank interest, alimony, gambling and, of course, wages. Income from your job, or jobs, will be reflected on W-2s. All other sources of income, such as money earned as an independent contractor, will be reported on a 1099 of one form or another.

Some often overlooked sources of income that you will need to have documentation for are:

  • Foreign earned income
  • Rental income
  • Income from hobbies
  • Savings and investments of dividends
  • Unemployment
  • Trusts
  • Prizes
  • Debt that has been forgiven

Proof of Expenses

Many people don’t itemize their returns and therefore fail to bring proof of expenses with them to the tax preparer. This is a bad practice, as any deductible expenses that you have which are greater than the standard deduction will reduce the amount of taxes you owe or increase the size of your refund. For tax year 2021 (which you will file in early 2021), the standard deduction is $12,550 for individuals, $25,100 for married couples filing jointly and $18,800 for those filing as head of household. Tax-deductible expenses that can lower your tax burden include:

  • Self-employment expenses, such as mileage and equipment
  • Un-reimbursed employee business expenses, such as travel and client meals
  • Certain education expenses related to your job
  • Medical expenses (over 10% of your adjusted gross income)
  • Charitable contributions, including non-cash donations, such as clothes or food
  • Mortgage interest
  • IRA contributions
  • Union dues
  • The cost of last year’s tax preparation

Proof of Losses

Losses occur as a result of things like natural disasters, fire, theft and other unexpected catastrophes. Bring along proof of the event in the form of police or fire reports, insurance claims and other official documentation that spells out what occurred and when. If you’ve received partial payment in the form of insurance or federal or state disaster relief, bring that along as well.

Blank Checks

There are two reasons you should bring blank checks along to your tax preparation appointment: if you owe, it’s a good idea to write the check right there and mail your payment in when you leave the office, and if you’ll be receiving a refund and would like it directly deposited into your bank account, you have the information on hand.

Bottom Line

Tax Prep Checklist: What You Need to Know

It pays to be prepared, even when you’re having someone else prepare your taxes for you. Make sure you provide your accountant with all of the necessary information. Be proactive about gathering your finances into one place, so that you won’t need to worry before the filing deadline. If you provide your accountant with everything they need, you should have a hassle-free tax season ahead of you.

Tips for Filing Your Taxes

  • A financial advisor can help you during tax season. SmartAsset’s free tool matches you with up to three financial advisors in your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
  • If you don’t know whether you’re better off with the standard deduction versus itemized, you might want to read up on it and do some math. Educating yourself before the tax return deadline can help you save a significant amount of money.

Photo credit: ©iStock.com/Rawpixel LTD, ©iStock.com/bymuratdeniz, ©iStock.com/AndreyPopov

Frank Addessi Born and raised in the center of the known universe, Brooklyn NY, and currently hiding out in the bucolic hills of northeast Pennsylvania writing about personal finance. His expertise includes personal loans, credit cards and retirement. It's not easy living the American Dream but someone has to do it!
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