paperwork organized for taxes

How to Get Your Paperwork Organized for Tax Preparation

It’s a new year, and time to get your paperwork organized for tax preparation. If you haven’t been doing this throughout the year, it can be quite a project. While you may end up with mountains of paper to sort through, follow these tips. They will help you to organize your thoughts and make the task less daunting.

Let’s Get Started!

Before we begin putting things together, make sure you have information on any estimated tax payments you made during the year. Be certain to note the date you made the estimated payment, who you made it to and the amount of the payment.

Break the Task in Half

You can consider what you need in two parts — Income and Expenses. Organizing into these two categories will help your accountant prepare your return more efficiently.

Income Documentation

If you work for a company as an employee, you will receive a W-2 from your employer. They must be issued by the last day of January, so you should expect it within that time frame.

You can receive a 1099 form for a variety of reasons. If you work for a business as a contractor, and you are not an employee, you will receive a 1099 instead of a W-2. Companies are required to issue a 1099 if you perform services and are paid more than $600 during a calendar year.  You might receive 1099s if you earned interest or dividends during the year. You will also receive one if you received a tax refund in the previous year.

The form K-1 is also issued in a few different scenarios. If you are involved in a partnership, your share of the income will be reported on a K-1 that is mailed to you. If you are the beneficiary of a trust or estate, you will be sent a K-1 form for that income. S-Corporations also issue K-1s to each shareholder at the end of the year.

Remember to include all income, including farm income, rental income, and alimony payments.

Itemized Expense Deductions

A few things have changed with the tax code when it comes to deductions. Here are the areas impacted:

  • Mortgage interest is only deductible for the portion of your mortgage that is $750,000 or less. In 2017, it was $1,000,000 or less. Taxes deemed to be SALT (State and local taxes) cannot be more than $10,000. This includes income tax, sales tax, real estate tax, and personal property tax.
  • Medical Expenses are only deductible if they exceed 7.5% of your adjusted gross income.
  • Things you can no longer deduct:  moving expenses, tax preparation fees, employee expenses that your employer has not reimbursed you for, theft and personal casualty losses, and “miscellaneous” deductions.
  • 1098s would be sent to you if you paid tuition, interest on student loans, or mortgage interest. Keep them together and give them to your accountant. Other itemized deductions can be submitted in receipt form, except for medical expenses. Summarize them and present the summary to your tax preparer to see if the amount will qualify.

When in Doubt, Don’t Throw it Out!

It’s always best to err on the side of caution when it comes to throwing papers away unless you verify that they are stored digitally. When we work with clients, we give them a list of everything they need. That way, staying organized makes it much easier on everyone.

Get Started Now

It is never too early to begin tax preparation. If you need help to organize your paperwork and file your tax returns, let the staff at JStevens Accounting simplify your life. Call us today, and let’s knock this out early!