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Tips for Tax Prep
March 2019
By Nancy Burger
It's that time of year again…
Tax season can be daunting, especially if you're faced with sifting through shoe boxes full of crumpled receipts to get your tax ducks in a row.
Some people choose to do their own taxes, but if that's a tall order or your financial situation is complex, you might want to consider hiring a tax preparer. If you do, be sure your candidate has a Preparer Tax Identification Number (PTIN) showing that he or she is authorized to prepare federal income tax returns. Fees will vary depending on the complexity of your return, so make sure you ask for a range upfront, and avoid anyone who will take a percentage of your refund. (See links below for IRS tips on choosing a preparer and for a directory of tax preparers).
Here are a few simple tips to help you in your tax prep process:
Get organized: If you didn't do so this year, start preparing for next year by setting up a file folder for all tax-related information, statements and receipts. (Note: To figure out what receipts you'll need, you must first determine whether it's worth it to itemize deductions by comparing your itemized total to the standard deduction amount.)
It's much easier to prepare for tax season when you put everything in one place throughout the year. Even if that means dropping everything in a labeled grocery bag, at least you know where to look when tax season rolls around.
Here's a partial list of the types of forms you could have received:
Categorize forms and statements into "money in" and "money out": Separate papers into "income" and "payment" categories (sticky notes work great for this). Income would include such items as W-2's and 1099's - anything that shows money you have received (including refunds from the prior tax year). The "payment" category includes any and all expenses, charitable contributions or anything representing funds outflow.
Once you've separated into these general categories, you can get more specific and group receipts and statements into sub-categories, such as interest income, wage income on the "inflow" side, charitable contributions, office expenses and medical bills on the "outflow" side.
Use last year's return as a guide: Reviewing your prior year tax return can help remind you of items you might need to include.
Review your checkbook: Go through your transaction register (or your online banking statement) to make sure you don't miss any expenses, donations, etc. that you might have written a check for.
Don't forget online purchases: Don't overlook Amazon or other purchases you've made throughout the year that might be deductible.
If you work at home: If you have a home office, a portion of your home expenses could be deductible, so be sure to tally up rent/mortgage expense, utilities, etc. and then determine the percentage you can claim (consult a tax professional if you're unsure).
Whether you file your own taxes or use a professional tax preparer, the better organized you are the smoother the process will be.
Tax season can be daunting, especially if you're faced with sifting through shoe boxes full of crumpled receipts to get your tax ducks in a row.
Some people choose to do their own taxes, but if that's a tall order or your financial situation is complex, you might want to consider hiring a tax preparer. If you do, be sure your candidate has a Preparer Tax Identification Number (PTIN) showing that he or she is authorized to prepare federal income tax returns. Fees will vary depending on the complexity of your return, so make sure you ask for a range upfront, and avoid anyone who will take a percentage of your refund. (See links below for IRS tips on choosing a preparer and for a directory of tax preparers).
Here are a few simple tips to help you in your tax prep process:
Get organized: If you didn't do so this year, start preparing for next year by setting up a file folder for all tax-related information, statements and receipts. (Note: To figure out what receipts you'll need, you must first determine whether it's worth it to itemize deductions by comparing your itemized total to the standard deduction amount.)
It's much easier to prepare for tax season when you put everything in one place throughout the year. Even if that means dropping everything in a labeled grocery bag, at least you know where to look when tax season rolls around.
Here's a partial list of the types of forms you could have received:
- Form W-2: if you have a job
- Form SSA-1099: if you received Social Security benefits
- Various 1099s: to report income, dividends, interest and gains and losses on investments
- Form 1095-A: to report information from the government Marketplace from which you purchased health coverage
- Various 1098s: reporting mortgage interest (1098), student loan interest (1098-E) and tuition payments (1098-T)
- Form W-2Gs: for certain gambling winnings
- Schedule K-1s: from entities in which you have an ownership interest, such as S corporations, partnerships, limited liability companies, trusts or estates.
Categorize forms and statements into "money in" and "money out": Separate papers into "income" and "payment" categories (sticky notes work great for this). Income would include such items as W-2's and 1099's - anything that shows money you have received (including refunds from the prior tax year). The "payment" category includes any and all expenses, charitable contributions or anything representing funds outflow.
Once you've separated into these general categories, you can get more specific and group receipts and statements into sub-categories, such as interest income, wage income on the "inflow" side, charitable contributions, office expenses and medical bills on the "outflow" side.
Use last year's return as a guide: Reviewing your prior year tax return can help remind you of items you might need to include.
Review your checkbook: Go through your transaction register (or your online banking statement) to make sure you don't miss any expenses, donations, etc. that you might have written a check for.
Don't forget online purchases: Don't overlook Amazon or other purchases you've made throughout the year that might be deductible.
If you work at home: If you have a home office, a portion of your home expenses could be deductible, so be sure to tally up rent/mortgage expense, utilities, etc. and then determine the percentage you can claim (consult a tax professional if you're unsure).
Whether you file your own taxes or use a professional tax preparer, the better organized you are the smoother the process will be.
Co-founder Nancy Burger started her finance career on Wall Street in the 1980’s and now works as a freelance analyst and writer for a money management firm. She has contributed to articles that have appeared in Forbes.com, Nasdaq.com, TheStreet.com and CNBC.com.
