Organizing Your Tax Documents

Creating Order Out of Chaos

As important tax records start filling mailboxes, how can you make sure your tax preparation goes smoothly and efficiently this year? Here are some tips.

1. Keep it all in one place. It seems obvious, but how often have you found yourself going through piles of paper looking for that elusive 1099 or 1095 form, business expenses, stock sales report, or charitable deduction receipt? If you only do one thing, this is it!

2. Time to sort. Now that everything is all together, best practice is to sort your information into the same categories used in your tax return as shown below:

• Income: wages (W-2s), alimony, interest income (1099-INT), dividend income (1099-DIV), business income (1099-MISC, K-1s), winnings (W-2G/1099G), Social Security, investments (1099-B), IRA/pension distributions (1099-R)
• Income Adjustments: student loan interest, tuition & fees deductions, alimony paid, educator expenses, moving expenses, IRA contributions, HSA/MSA contributions
• Itemized Deductions: taxes paid, medical/dental expenses, charitable contributions, interest expense (1098), investor/other expenses, gambling losses, casualty/theft losses, unreimbursed employee expenses
• Credit Information: child & dependent care expense, adoption expenses, education expenses, other credit-related expense

*For education credits, it is wise to acquire a transcript from the college that will detail all of the expenses paid, which is likely more than is on your 1098-T.

• Business/Rental: income, expenses, bookkeeping information, etc. 

*Real Estate Agents: Call our office for a special organizer for your income and expenses! 

3. "Not sure" pile. There may be things you receive that you are not certain about needing for tax filing purposes. These items should be gathered in one place and brought in with all of your tax information.

4. Sum it up. Once the information has been categorized, create a summary of the information. This summary can be a printed copy of an organizer or it could be a simple recap you create. This summary could also keep your fee down as we won't have to organize and summarize each category for your return. 

5. Is something missing? Pull out last year’s tax return or the organizer we mailed to you and create a list of things you needed last year. Use this as a checklist against this year’s information. While this process will not identify new items, it will help identify missing items that qualified in prior years.

6. Finalize required documentation. Certain deductions require substantiation and/or logs to qualify your expense. Common areas that require this are business mileage, charitable mileage, medical mileage, moving mileage, non-cash charitable contributions, meals and entertainment, and certain business expenses. These logs should be maintained throughout the year, but now is a good time to make sure the logs are complete and ready to go for tax filing.

It is very easy to overlook something given the lengthy list of taxable income items, deductions and credits. By following these tips you can greatly reduce that risk.

Need help organizing your information or want one of our special organizers, call (610) 863-8347 for your free consultation and/or organizer!