How to Organize Your Tax Documents for Your Accountant
Last Updated on March 8, 2023 by Carolyn
Though this post is directed at US taxpayers, It still should be useful to non-US taxpayers but keep in mind that form references such as 1099’s, Schedule C and US tax rules may not apply. This post may contain affiliate links. Full disclosure here. Investment advice published here is of a general nature only as disclosed here.
How to Organize Your Tax Documents
You have received all your tax slips (w-2’s, 1099’s, etc.), and you have records of your other income and expenses, but now what? How do you organize your tax documents so that your accountant can prepare your taxes with ease?
Hiring a Professional Accountant
This may be a bit biased considering I am a professional accountant but hiring a professional to prepare your income taxes can be a really smart idea.
Not only can it save you a lot of time preparing your taxes in lieu of doing it yourself in Turbo Tax or Tax Act ( many people tell me it takes them 8-10 hours to prepare their own returns) but it can actually save you money and give you peace of mind that you haven’t missed something.
It’s a tax professional’s job to know what deductions you are eligible for and to provide tax planning advice to maximize deductions and minimize income tax liability.
A good accountant will get to know you, your family, and your business so they can spot potential deductions whether it be that your eldest has started university and might have tuition credits or perhaps you have undertaken home renovations and can take advantage of some energy credits. Expect to answer some questions and be perturbed if you’re not asked any!
How to Organize Your Tax Documents for Your Accountant?
First of all, be aware that just because you’ve hired an accountant to prepare your taxes doesn’t absolve you of any tax preparation work.
Gone are the days of plunking a shoebox full of receipts on your accountant’s desk and saying “call me if you have any questions”. Do this and you will most surely be shown to the door. Continue reading to find out how to organize your tax documents for your accountant.
Most accountants don’t want to see any receipts at all. What they do want to see is a summary of income by type as well as a summary of deductions by type, followed by another page with a detailed list of those same income and deduction items, whose totals ties into the figures listed on the summary.
I recommend listing out all income reported on forms in this order: W2s, 1099-int, 1099-div, 1099-r, SSA-1099, 1099-B, 1099-G and K-1s. Use 2 columns, one for taxable income, and one for federal tax withheld ( if you have state tax withheld add a 3rd column).
If you have rental income or self-employed income list the income and expenses on a separate page and then just list the property address or business name on your summary and cross-reference to the detailed schedule.
Rental Income and Expenses
You need to separately list income and expenses for each rental property you own.
Income will include all rent received including last month’s rent deposits but not damage and pet deposits.
Expenses that you might have include:
- Mileage related to the rental property
- Property taxes
- Mortgage interest
- Management fees
- Repairs and maintenance
- Other expenses such as HOA fees, gifts, travel related to the property, and professional fees.
If you made improvements to any of your rental properties be sure to list the date, cost, and description of the improvement.
If you bought or sold a rental property during the year include a copy of the purchase/sale agreement.
Be sure to include copies of all the forms listed, your accountant is required to examine and keep copies of the slips.
In most cases, if you receive a 1099-NEC you’ll need to report that income as self-employed income. Also included in self-employed income is any money you’ve earned through any sole-proprietorship business ( this would include side gigs, online sales, consulting, etc).
From self-employed income, you can deduct all reasonable expenses incurred to earn that income. See “What Expenses Can I Deduct” for more details on self-employed deductions.
List these expenses out by category such as labor, advertising, supplies, etc. As mentioned in the article linked above refer to IRS Schedule C ( or F if you’re a farmer) for categories to use.
If you’ve purchased or sold equipment during the year list the date, cost and a description of each piece of equipment bought or sold.
If you used your vehicle for your business don’t forget to include the following information:
- Make model and Year of vehicle.
- Total miles put on the vehicle in the year
- Business miles driven
- personal miles driven
If this is your first year claiming the business use of vehicle expense or if you claimed actual expenses in prior years also include your vehicle’s operating expenses for the year:
- Repairs and maintenance
- Interest if financed
- And if this is the first year claiming the vehicle, list its cost.
Another deduction you may be able to take is the home office deduction. You can read about that on the irs website here.
You’ll summarize your deductions just like you did your income.
Items to include are:
- Student loan interest paid
- IRA contributions (list Roth, SEP and traditional contributions separately)
- Health insurance premiums paid (if you’re self-employed)
- HSA contributions
- If you itemize deductions you’ll want to list out the following, first make a summary and as you did with the income items, list the details separately.
- Medical expenses (include out-of-pocket expenses only)
- Taxes ( property taxes, state income taxes or sales tax, personal property taxes)
- Mortgage interest and points paid on your principal residence.
- Charitable contributions ( list separately cash and in-kind contributions)
- Other deductions ( such as gambling costs, tax preparation fees, and other miscellaneous deductions)
You don’t need to include deduction receipts but it’s a good idea to include forms 1098-int with your figures as often the interest deduction is limited.
If you have expenditures that are eligible for credit list them next. These might include (but are not limited to) childcare expenses, education expenses, and energy credits.
For these items, it’s a good idea to include copies of receipts as they are various dates and figures required to calculate the credits.
And lastly don’t forget to list Federal and State estimated payments you’ve made during the year. You should list the date and amount of each payment.
What Format Should This Summary Be In?
A spreadsheet is optimal as it makes it easier for me to make calculations as required if sent to me in an editable spreadsheet file format. A handwritten summary or list in an email is better than no summary at all.
Why Summarize All of this Information?
In this electronic age, many clients submit their tax information to their accountants electronically, sending scanned copies of their information. I often get multiple-page scans without summaries and not even a notation of how many pages I was supposed to receive.
How do I know it’s complete? What if one of the pages you meant to scan stuck to another one and didn’t get scanned?
This is where the tax summary comes into play. A missing document can be identified at a glance.
You can save this summary as a starting point for the next year, just delete the figures and put the new year’s information in. This process will draw your attention to missing information.
eg. If you had a 1099-int form from Fidelity shouldn’t you have one this year? Sometimes the case might be that you closed the account, but oftentimes you’ll find you are missing a slip!
When Should You Send This Information to Your Accountant?
A lot of tax filers are anxious to send their information to their accountant as early as possible but sending it in too early can be problematic.
First of all the deadline for most companies to mail their forms 1099 is January 31st. Add a few days to that and you’re into the first week of February. Investment firms have until February 15th to issue their consolidated 1099’s and if they file an extension, they have until March 15th!
Also these days it seems that if you receive a 1099-div from an investment brokerage, it often gets corrected towards the end of February. I can’t tell you how many tax returns I’ve filed only to get a call the next day from my client saying they’ve received a corrected 1099. Their return then needs to be amended which costs them an additional fee.
Your best bet is to contact your accountant and ask them when they’d like your information. I usually tell my clients if they have all the information submit it to me. That way we can get the return prepared and then perhaps wait until mid to the end of February to actually submit it.
What if I’m Waiting on a K-1?
If you own an interest in a partnership or S-corporation you will have to wait until you receive your K-1 to file your own income taxes. And since the partnership or corporation may file an extension, you have no choice but to also file an extension.
I recommend contacting the managing partner or their accountant to get an estimate of the K-1 figures so that you have some figures to include in your extension calculation.
Submit all of your information to your accountant and let them know that you’re missing a K-1 and give them the estimated figures.
How Should I Send This Information to My Accountant?
Now that you’re ready to submit the information to your accountant, what’s the best way to get it to him/her?
This is the electronic age so most accountants will prefer you to send your information to them electronically. Most accountants have secure portals to which you can upload your documents.
Ask your accountant for their secure portal link and use their portal. And if you want to know how long it will take your accountant to prepare your return, now would be a good time to ask.
“”Do not email any personal documents with your social security number or other confidential information on them. Hackers are many and you do not want to become a victim!”.”
Once you’ve uploaded your documents to your accountant’s portal allow them some time to prepare the return. Most likely they have a queue and you are now in it.
If you forget something or receive additional information after your initial upload, upload it to the portal and perhaps let your accountant know by email that you uploaded an additional document.
Contacting Your Accountant
We are all anxious to know if we’re going to owe or end up with a refund, but calling or emailing your accountant to ask “How are my taxes coming along” or “Do you need anything else for my taxes “doesn’t help the process. It just clutters up your accountant’s email and message machine.
Think about it: If every client sends an email asking how their taxes are coming long, and your accountant has 200 clients, that’s 200 extra emails they need to address. These emails just slow the process down.
If you haven’t heard from your accountant and it’s after whatever time they said it would be for completing the return or a deadline is rapidly approaching, it’s Ok to contact them to ask for the status of your return.
If you call leave a message, don’t be that person who calls 3 times a day and doesn’t leave a message. Many accountants have set times for phone calls because it’s very disrupting to answer calls while working on returns.
Replying to Emails
If your accountant sends you a message or email with questions try to reply to all the questions in one email and use “reply” to respond. Replying to each of your accountant’s questions in a separate response makes it hard for your accountant to find all of your responses.
Using reply for the email will put the questions and answers in one email thread so that your accountant can see their questions and your responses at the same time.
Don’t Wait Until April
Remember: “An extension is an extension of time to file but not an extension of time to pay “
Your accountant can then calculate if and how much you need to pay with the extension.
If you wait until April to submit your information to your accountant expect that they will file an extension for you, and know that even then that you need to get the information to them as early as possible to calculate the extension properly.
If this is your first year with your accountant be sure to provide them with a complete copy of your prior year’s tax return as well as a list of all your dependents, yours, your spouses and your dependents’ dates of birth as well social security numbers and their relationship to you.
Don’t Be Afraid To Ask Questions
“ The only stupid questions are the ones not asked”
The tax laws are very complex and always changing. It’s difficult enough as a professional to keep up with all the changes; I have no idea how the layperson can be expected to keep up with them.
It also seems that everyone’s neighbors have tax advice to share. And often this information or advice is misconstrued. If you have a tax question, ask your accountant don’t heed the advice of neighbors no matter how well-intentioned they might be.
If you follow the advice in this post it should make it easier for your accountant (or even yourself if you prepare your own taxes) to file a complete and accurate return.
Do you want more tax tips? Read “Essential Small Business Tax Tips”.
Such a thorough post to say the least! Tax season is something I hate and dread so much this time of year. You’ve made it one step easier for me, though. Thanks for sharing!
Glad I could making organizing your taxes a little easier!
Thank you for the spreadsheet example. When would you say is the ideal time to submit the info to the accountant? We’ve traditionally made our appointment for mid-March since we had a few years when the investment company didn’t send the documents to us until early March.
I’d suggest getting everything else to your accountant in February and then they can have the return complete except for the investment documents. I know I’m not nearly as busy in February as I am in March. Mid-March is my deadline for getting a return completed by April 15th.
Such a comprehensive list and much appreciated as I am an accountant. You definitely should not wait until April to gather your documents. You won’t want to file an extension if you’re expecting a refund. And your tax preparer will appreciate you showing up with everything in hand.
Very true, April is NOT the time to start organizing tax documents. Many people don’t understand that an extension is only an extension of time to file not time to pay!
This is so useful! Thanks for the post!
I’m glad you like it, please share if you REALLY like it!