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Basic Records for Your Tax Accountant to Prepare Your Return

Published on: October 11, 2011 | 501 Comments

accoutning firmsPart I – Assembling Records Related to Income

Payroll – Provide your W-2. Do you realize that employers make mistakes? It is not easy to save all of your pay stubs; however it can be to your advantage to reconcile your W-2 with paychecks stubs and make sure there are no mistakes on the W-2. Therefore, it is recommended to save all paycheck stubs and at the end of the year summarize them and compare it to your W-2 records.

What if you have more than one employer? Make sure you have W-2 from all employers you worked for in the prior tax year.

Independent contractor – Make sure to keep all 1099’s – You should receive 1099 from every hirer who paid you as individual independent contractor (not incorporated) more than$ 600.

Capital gains- Your broker’s statements usually show the stated year activity, which is the tax year. If stocks that were sold were purchased in prior years, the accountant will need the stock basis. You may to go through old records to find transaction documents. It is recommended that you will prepare spreadsheet with the cost and date of purchase for every stock that were sold in the tax year.

Interest income – Collect all 1099-INT for interest income. If you forgot any form, the IRS will know and will send a demand letter with interest and penalties for the underreported amount.

Dividend income – Make sure you provide all 1099-Div for dividend. Make sure the dividend income is reported correctly, common mistake is to ignore the qualified dividend and not to include it in the tax return. The IRS will find out and will send a demand letter.

Other source of income

Distributions from qualified retirement plan.
Unemployment compensation.
Social security benefits.

Any income not reported in 1099 but was deposited into your bank account.

Any foreign source of income, capital gain, interest payment, rent received – all have to be included in the tax return.

Part II – Assembling Records on Expenses

Itemized deduction:

Medical records – Expenses greater than 7.5% of Adjusted Gross Income are an itemize deduction. You collect all out of pocket medical and dental expenses you paid for yourself, your spouse or any dependent you claim on your return.

Taxes you paid – Do not forget that you have a choice between sales tax deduction and state tax deduction, whichever is the higher. If you made a big personal purchase: Luxury car, boat, airplane expensive collectible, jewelries and so forth … your sales tax may be higher than your state tax. Recommendation: keep receipt for all big purchases with high amount of sales tax. Make a spread sheet of all of these purchases.

Real estate tax and other taxes

Mortgage interest – 1098 from all bank you took mortgage to purchase your home. If you have home equity loan do not forget that as well.

Gift to Charities- cash or value of goods.

If you donate goods, make a list of all donated item and get appraisal for the value of each item over $500.00. Keep the receipt from the charity organization attached to the listed of the donated item. Make sure it has the exact date of donation in the receipts

Keep receipts for all cash donation make sure they date show on the receipt is the day of donation.

Miscellanies job related expenses. – expenses you made and were not reimbursed by your employer : paying for food and meals during business meeting, attending networking expenses for your employer or any promotional expenses you made for your employer, buying equipment or supply for your employer, using your car for business mileage ,traveling expense and so forth.

Other things to keep in mind: (1) Installation in your house of energy efficient equipment. (2) Buying energy efficient vehicle. (3) Moving Expenses. (4) First time home buyer credit ( if you bought the home before April 30, 2010 or entered into a written binding agreement before May 1, 2010 to purchase the home before July 1, 2010. And actually bought the home before October 1, 2010.

This was written for promotional purpose and is not intended to be thorough or precise. You must consult your personal tax account.