Year-end is a great time to think about organizing your documents and getting your records ready for the upcoming tax season. There are some items that you will need to keep and record throughout the year to supplement the records you will receive after year-end. Keeping all your tax documents together and organized can save you time and money when you file your return.
Make sure you have the documentation for everyone that you will be reporting on your return, including legal names and identity numbers. If you have a new child or other dependent, request a social security number sooner rather than later. If you typically itemize deductions, keep any donation receipts or a copy of the canceled check to substantiate charitable contributions. (See our recent blog article on new substantiation requirements for charitable donations.)
If you own your own business, it’s important to keep all business receipts as well as a mileage log so that you don’t miss out on any potential deductions. You should have supporting documentation for each item of income and each deduction shown on your tax return. Even if you are expecting to take the increased standard deduction for 2018, you may still be able to itemize deductions on your New York State return. Therefore, you should still maintain documentation for any itemized deductions you might take.
Knowing what forms to expect in the coming year will help you determine if you are missing anything when you are ready to file your return. Make a list of the forms that you received in the prior year and update that list for any changes that occurred during the year. For example, if you start a new job, open a new bank account, purchase or sell new investments, receive taxable distributions from an estate or trust, or open and fund a new health savings account, you can expect to receive documents that you may not have received in the prior year. These records are an important part of your tax return, so follow up with those responsible for providing the forms if you do not receive them.
When you start to receive your tax documents after year-end, put them together with the other documents that you have maintained throughout the year. It may be helpful to keep these documents in a single folder with income items on one side and expense or deduction items on the other side. Our firm provides tax organizers to our clients, which can also be helpful in organizing your documents.
Whether you prepare your own taxes or work with a tax professional, having your documentation complete and organized will help set the stage for a smooth tax preparation process.
By Samantha Jordan, CPA