Tax Preparation Checklist

It’s that time of year again: Spring is approaching — and so is April 15. It’s tax time, and if you haven’t got your information together, now is a good time to start collecting the documentation you need to complete and file your tax return. Even if you use a professional tax preparation service or an accountant, you are still responsible for getting everything together and taking it in. For the simplest tax returns, your  checklist is fairly short: All you need are your Social Security Number, and the Social Security Numbers of your spouse and/or children and other dependents. You will need your address, and any W-2 forms. If you have a child care provider, you should get the name, address and tax identification number so that you can deduct a portion of those expenses.The only other things you might need are your charitable donations and the mortgage interest and property taxes you have paid if you itemize your deductions. Receive your refund faster by providing your bank account number and the routing number for your bank for direct deposit purposes.

But what happens when you have a more complicated tax return? With investment gains and losses, interest income, self employment income and taxes and education expenses, the forms and schedules start to add up. Here is a checklist that should help you get what you need for a more complex tax return. Your accountant (especially if it’s you) will thank you.

Self employment taxes

If you are self-employed, you know that there are any number of extra items to worry about. One of the important things you will need, especially if you bring your taxes to an accountant for professional tax preparation, is a profit and loss statement. Prepare this ahead of time, with your income listed, as well as your expenses. Understand that foreign income should be broken out and listed separately, as well as foreign income tax paid. Categorize your expenses so that they are easy to identify. Expenses include 50% of meals and entertainment for business purposes, mileage, supplies, trade subscriptions, cell phone use, Internet use and other items that are used strictly for business. Personal finance or business finance software can help you keep track of business expenses to make this process easier. If you offer insurance and retirement plans, these expenses can also be deducted.

You will need any 1099s that have been sent to you, recording work you have done for others. For those with S-corps and LLCs, check the 1099s that have been sent to you. You want your business tax ID on the form. If your personal Social Security Number is on the 1099 instead, you will have to fill out Schedule C for that income. If you pay for health insurance, make sure you have your total premiums paid over the year. You can also hire your children under the age of 18 to work for you, receiving a deduction. For most LLCs and for sole proprietorship, no FICA is required. Depreciation deductions and new equipment deductions are also available. Balance sheets and payroll information is also required in some cases; make sure you keep good records. If you pay estimated taxes quarterly, make sure you have what you have already paid for the year.

Interest income and capital gains

If you have investments, you will need to report your earnings. Even interest earned on a savings account needs to be reported as income. Capital gains (and losses) need to be reported. Make sure you understand the rules for government municipal bonds. You may not have to pay taxes on interest earned, but you may be subject to capital gains tax. Retirement accounts are tax-deferred, and the earnings on these investments work differently. Also, be aware of what taking different distributions, qualified or unqualified, might do to your taxes. Don’t forget about 529 plans, Coverdells and health savings accounts. All of these have certain tax benefits and information on these accounts should be part of your tax preparation.

Other items you may need

In addition to the tax-related documentation above, you might fall into one or more of the following categories. Here are some of the other items to remember when it comes to preparing your taxes:

• Jury duty pay.
• Alimony.
• Unemployment benefits.
• Prizes and/or gambling winnings.
• State and local taxes paid during the year.
• Student loan interest.
• Qualified education expenses (also: Lifetime Learning or Hope credit information).
• Moving expenses.
• Work-related expenses you were not reimbursed for.
• Losses due to theft.
• Casualty losses.
• Medical expenses.
• Gains from real estate sale (consider a 1031 exchange).

Keep it organized

Keep what you need in mind throughout the year. I have a file folder set aside for documents I need for my taxes. I also keep track of my income, deductible expenses and charitable contributions in personal finance software so that it is easier to retrieve at the end of the year. If you have a complex tax return, with a number of forms and schedules, you might consider having it professionally prepared. Finally, if you have questions about what you need, it is possible to find most answers on the IRS Web site or by talking to a knowledgeable tax professional.