One of the most confusing parts of getting ready for tax time is knowing what documents you need to prepare your taxes.  Basically the documents break down into three categories.  Income statements, deductions and receipts.

The Challenge of Receipts

Receipts are the most challenging documents to store and organize. This is especially true if you are a small business owner. Receipts are your main protection if the IRS decides to audit and details are critical.  It’s imperative to keep all receipts pertaining to business and a very good idea to get into the habit of making notes on entertainment and dining expense receipts.

Simple Receipt Storage Solutions

I personally love a simple accordion file folder with 13 or more slots for filing my receipts. It’s important to make sure your file folder has enough slots to accommodate all the tax categories you need. At the end of the year I make sure all the receipts within a given category are organized by date, then I hand the entire folder over to my accountant. I actually have two of these that I rotate yearly, so I always have one working receipt folder available. I keep a designated area in my wallet for my business receipts and simply file the receipts in my file folder when the area in my wallet is full.

Consider Scanning for Added Protection

Scanning your receipts can help solve two problems. First, if IRS comes knocking, they won’t care that your receipts from four years ago have faded; so scanning receipts is a great way to give you that added layer of protection.  Secondly, if you set up a system to scan as you go using your phone, then you won’t have to wonder where all your receipts are stored and you won’t have to deal with that shoebox full of papers come tax time.  There are many smartphone apps dedicated to receipt scanning that are easy to use and can save you hours of searching, sorting and organizing papers during tax time.

List of Needed Tax Documents

Income Statements:

• W-2 – wages and salary
• W-2G – gambling winnings
• Form 1099-R – retirement income
• Form 1099-INT – interest
• Form 1099-DIV – dividends
• Form 1099-MISC – miscellaneous income, including self-employment
• Form 1099-G – government payments
• Form 1099-SA – MSA or HSA distributions
• Form 1099-B – broker or barter exchanges
• Form SSA-1099 – Social Security benefits
• Form RRB-1099 – railroad retirement
• Schedule K-1 – partnership income or loss
• Other sources of income, such as jury duty pay, gambling winnings and cancellation of debt
• Cryptocurrency transactions
• Alimony payments

Self-Employment and Business Records:

• Form 1099-NEC
• Form 1099-K
• All records of business income and expenses
• Mileage
• Business assets to be depreciated
• Home office expenses

Deductions:

• Form 1098 – mortgage interest
• Form 1098-E – student loan interest
• Form 1098-T – tuition
• Out of pocket medical expenses

Receipts & Records:

• Unreimbursed mileage related to work or volunteering
• Charitable donations
• Contributions to retirement plans
• Healthcare expenses
• Self-employment income and expenses, including any:
  • Home-office expenses
  • Health-insurance premiums paid
  • Transportation costs
  • Advertising fees
• Rental property
• Moving expenses, if you moved for a new job
• Expenses for energy-efficient home improvements
• Tuition or fees paid for education for you, spouse, or dependents
• Retirement account rollovers
• Child care and dependent care expenses, including the employer identification number (EIN) or SSN of the care provider

Additional Documents:

• Your Social Security number (SSN) or taxpayer identification number (ITIN) and SSNs or ITINs for spouse and dependents (if any)
• Your birth date and birth date for spouse and dependents (if any)
• A copy of last year’s return

By Darla Pompilio

Your Tasks Our Time, LLC

Documents List Source: IRS.gov, H&R Block & Forbes

The post The Challenge of Tax Receipts appeared first on Your Tasks Our Time.

Most people don’t have time to maintain meticulous records so one of the easiest ways to keep track of tax documents is to select a place to put all tax related papers throughout the year.  You can use a file, a box, or a bin as long as it’s big enough to easily hold all of your receipts and documents without fighting to squeeze the papers into the container.  If you have to fight to store your paperwork, the system will fail and you will be back to square one.

If you want to make tax time even easier you can set up a simple tax filing system using a file folder with multiple dividers.  Label the dividers into individual categories such as postage, supplies, and donations. Then file your receipts and documents into the appropriate categories.

Many people are so overwhelmed by paper that they simply ignore it and hope it will disappear.  Unfortunately, it only accumulates until it feels completely out of control but that doesn’t have to be the case.  It’s better to take control of paper before it takes control of you.  A good way to do this is to Decide to Decide.  Take a good hard look at the paper coming into your home by sorting it into categories.  Some of the most common categories are bills to pay, papers to file, items to read, and action items.  Most pieces of mail will fit into these 4 broad categories so keep it as simple as possible.  Next, you will need to determine where you will sort and store your mail each day.  This should be a location near the door where the mail comes into the home and I suggest using a separate sorting container for each category of mail.  Now that you have a system, you can decide what categories you need, decide where you will sort and store your mail each day, and finally, decide to use your system consistently.

If you are ready to tame your paper storm, please give us a call or email to schedule your appointment today.

Darla Pompilio

Your Tasks Our Time, LLC

The post Tax Time Clutter appeared first on Your Tasks Our Time.