Start Organizing Your Deductions
While you’re waiting on your official tax forms from your various sources of income, you should start thinking about what deductions you’ll have on your 2019 return. Will you be claiming the standard deduction or itemizing? Do you qualify to deduct medical expenses? Do you have a business with qualifying expenses?
If you’re planning to take the standard deduction, you don’t need much in way of documentation. However, if you had high deductions this year and want to itemize, you’ll need to start getting all of that information together. This could include:
Expenses associated with rental properties, such as maintenance costs, advertising, property management, etc. You’ll need to have proof of these expenses, including receipts and bank statements.
For self-employed individuals, you’ll need proof of any expenses you’re hoping to deduct for your business. This can include anything from a new computer to subcontractor costs and website expenses. Again, have proof of these expenses.
To deduct any contributions you made towards your retirement accounts, you’ll need copies of the statements for the accounts to which you made a contribution.
If you gave to charity in any way this year, you can deduct the cost of that donation. Not only would this include any cash contributions, but also the value of items donated to a charity. Look for any receipts from the charity in question as you organize the documents. These are the best way to support your deductions for charitable contributions.
Miles driven can also be deducted, whether they were driven for charity or business purposes. However, you must have a detailed record of the dates, miles driven, and the purpose of each trip you made.
There are other deductions that you may be able to claim as well. If you’re not sure what deductions you qualify for, schedule a meeting with one of our tax experts, and we’ll help you to determine what deductions you can take as well as what supporting documents you will need.
Know What Forms You’re Waiting For
If you’re a wage- or salary-earning employee, you know that you need to wait on an income tax form from your employer. If you’re a freelancer, you know you need to wait for forms from each of your clients. But what other tax forms are you waiting on? How do you know if you’re still missing any? Obviously, the best way to ensure you get all of your tax forms is to know exactly what you should be receiving. Here’s a quick look at some of the most common types of income tax forms that people receive for individual tax returns:
- W-2 – For employees earning a wage or salary
- 1099-Misc – For freelance workers (one from each client)
- 1099-Div – For income from dividends
- 1099-G – For those receiving unemployment benefits
- 1099-R – For income from annuity, pension, or IRA
While you’re still waiting for your tax forms to come in the mail, make a list of all your sources of income; do a little research to find out which forms you should be receiving for each income source, or send the list of income sources to your CPA and ask them what forms you should be expecting. Once you know everything that you’re waiting on, you’ll know the moment you have all the necessary documents to file your taxes.
Make Your Files Digital
As you may have noticed, we haven’t yet mentioned how to organize all these documents for your tax return. While you could simply place all of these documents into a “2019 Taxes” folder, we strongly recommend that you digitize your documents as well. This can be done with a scanner or even just with the camera on your smartphone. Before you file any receipts or forms away, snap a picture and save it to an online folder with all of your tax documents. This protects your paperwork from accidental loss as well as disasters like fires or flooding.
At The Accounting Guys, we offer a secure client portal for uploading all of your tax documents, so you don’t have to worry about having your information stolen by hackers. Our portal encrypts, protects, and share your information with your accountant instantly so that we can start preparing your tax return as soon as possible.
Use Subfolders
Whether you’re organizing digitally or physically, there’s a better way to organize that paperwork than to throw it all into a single folder. Use subfolders to break your documentation down into more manageable parts—that way, you’re not digging through income tax forms while trying to find your spreadsheet of miles driven for work. The exact folders you’ll need will depend on your tax situation, but here are some suggestions:
- Income Tax Forms
- Business Deductions
- Charitable Contributions
- Medical Expenses
- Rental Properties
For your various expense folders, you may want to consider making up a spreadsheet that shows the total expenses in that category, then file all supporting documents (receipts, bank statements, etc.) behind the spreadsheet. When it’s time to file, you already have the total amount of your donations, making filing that much quicker and easier.
Whether you’re filing your own taxes or working with a tax preparer in Provo, organizing all of your tax documents upfront allows you to get your taxes filed sooner and makes it less likely that there will be preventable errors on your return. If you have any questions about your tax documents or filing your return, contact The Account Guys today.