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Tips to Organize Your Tax Records - Creating order out of chaos

11/9/2020

1 Comment

 
As important tax records start filling mailboxes, how can you make sure your tax preparation goes smoothly and efficiently this year? Here are some tips.

Keep it all in one place. It seems obvious, but how often have you found yourself going through piles of paper looking for that elusive 1099 tax form or charitable deduction receipt? If you only do one thing, this is it.

Time to sort. Now that everything is all together, best practice is to sort your information into the same buckets used in your tax return. At a minimum, sort the information into the basic categories below. If you have a lot of one category, sort that stack into the following sub-categories.

A. Income
  • Wages (W-2s)
  • Alimony
  • Business income (1099's, K-1s)
  • Interest income (1000-INT)
  • Dividends (1099-DIV)
  • Winnings (W-2G, 1099-G)
  • Social Security
  • Investments (1099-B)
  • Other Income Items

B. Income Adjustments

  • Student loan interest
  • Tuition & fees deductions
  • Alimony paid
  • Educator expenses
  • Other education expenses
  • IRA contributions
  • HSA/MSA contributions

C. Itemized Deductions

  • Taxes paid
  • Charitable contributions
  • Interest expense (mortgages)
  • Medical/Dental expenses
  • Investor/Other expenses
  • Casualty/Theft losses

D. Credit Information

  • Child & dependent care expenses
  • Other credit-related expenses
  • Adoption expenses
  • Education expenses

E. Business/Rental

  • Sort income and expenses for each business activity or hobby activity or rental unit
Note: Remember this list is not all-inclusive, it is here to help you sort your information into a usable form to make tax filing easier.

Not sure bucket. There may be things you receive that you are not certain about needing for tax filing purposes. These items should be gathered in one place for review.

Sum it up.
 Once the information has been categorized, create a summary of the information. This summary can be a printed copy of an organizer or it could be a simple recap you create.

Is something missing?
 Pull out last year’s tax return and create a list of things you needed last year. Use this as a checklist against this year’s information. While this process will not identify new items, it will help identify missing items that qualified in prior years.

Finalize required documentation.
 Certain deductions require substantiation and/or logs to qualify your expense. Common areas that require this are: business mileage, charitable mileage, medical mileage, moving mileage, non-cash charitable contributions, and certain business expenses. These logs should be maintained throughout the year, but now is a good time to make sure they are complete and ready to go for tax filing.

It is very easy to overlook something given the lengthy list of taxable income items, deductions and credits. By following these tips you can greatly reduce that risk.

​"Tax Tips" are published to provide current tax information, tax-cutting suggestions, and tax reminders. If you would like more information on anything in "Tax Tips," or if you'd like to be on our mailing list to receive other tax information from time to time, please contact our office.
 
The tax information contained in this site is of a general nature and should not be acted upon in your specific situation without further details and/or professional assistance.
 
We are trusted CPA advisors servicing Burr Ridge, Hinsdale, Willowbrook, Darien, Naperville, and all Chicagoland area. 

Do you need assistance with your business and/or personal tax returns? Would you like to have a trusted source for your accounting, allowing you additional time to focus on increasing your business? Do you use QuickBooks, or plan to in the future, for your accounting? We include these in all our service packages, customized to fit your personal or business needs.   
 
We are currently accepting new clients. Your initial consultation is free, so you have nothing to lose and everything to gain. Our experienced staff is available to help you streamline your accounting, giving you more free time for yourself. Set up an appointment today by calling (630) 320-3720 or email us at [email protected]. 
 
For more free resources, such as Tax Rates, Tax Organizers, and Record Retention Schedules, access our website www.monarchaccountinggroup.com.

Monarch Accounting Group, Inc
145 Tower Drive, Suite 4
Burr Ridge, IL 60527
Phone (630) 320-3720
1 Comment
Tez link
7/27/2021 05:16:21 pm

I appreciate what you said about creating a summary of your information so it is easier to find. I need to get a tax agent to help out with my own books before April. I still have no idea how to do deductions and need help.

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145 Tower Drive, Suite 10
Burr Ridge, IL 60527-7836
Email: [email protected]


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  • Home
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