See these step-by-step instructions for putting together all of the 2020 tax documents Carrie needs to file your tax return!
Building A Better Tax File
We’ve discovered that when it takes us a long time to prepare a tax return, it’s usually due to one of two things: either we’re missing some information and have to track it down; OR we have far too much information and have to sort through it. Either way, the solution is the same: a complete and organized tax file. If you want to get your tax returns done and filed quickly and efficiently, the best thing you can do to help us is to bring us a tax file that has everything we need, and nothing (or little) that we don’t.
Start with Carrie’s General Tax Checklist for 2021
The first thing we need is last year’s tax returns. If Carrie prepared your returns last year, then you can skip this one. If she didn’t, then that’s the first thing to put into your file – your 2018 tax returns, federal and state.
Next, your driver’s license and your spouse’s driver’s license. This is a relatively new requirement, but we do need to have them on file. If you brought them last year, and nothing has changed, just let us know. Otherwise, take a photo or scan your license, and add it to your file.
Next, we need your full name, social security number, and date of birth. We need them for your spouse, if you have one, and for each of your children. Again, if Carrie prepared your taxes last year, you can skip this, unless you’ve added to your family since last tax season. If you have, add your new spouse’s or kid’s information to your file.
If you have children that you claim as dependents, we need to see something that proves that they lived with you. School records, health insurance forms, medical records – an official document that has the child’s name and your same address on it.
INCOME
We need information about your income. Put in all W-2s for you and your spouse; any 1099s for interest or dividends or tax refunds or miscellaneous income. Often, W-2s, and sometimes 1099s, come printed multiple times. Sometimes, there are multiple copies on a single sheet of paper. But we only need one copy of each item. So, if you get 5 copies of your W-2, just put one into your file for us, and keep the rest for your own records.
>>>IMPORTANT INFORMATION NEEDED FOR 2020 TAX RETURNS<<<<
(This is not on our 2020 checklist, so add it anywhere you like)
We need to report how much each taxpayer and spouse received as Economic Impact Payments (EIP) (also called “stimulus” payments), both the first round of payments in Spring 2020 and the second in late December 2020 or early January 2021. The payments are non-taxable, but they need to be reported because anyone who qualified for EIP but didn’t receive it will receive the amount missed as a credit on their 2020 tax returns. In order to catch all of the missed payments, we have to report the amount received from both rounds of stimulus for every tax return.
If you took money from a Health Savings Account (HSA), you should receive a
1099-SA. Include that form in your file, along with a statement that the entire amount paid for medical expenses (if that is the case).
If you’re a partner or shareholder in a business, or the beneficiary of an estate or a trust, you’ll receive a K-1. We’ll need a single copy of the K-1, with all pages included. You won’t receive the K-1 until the taxes for the business or trust are prepared, but don’t wait. Go ahead and bring your other documents to us, so we can get started. We can add the K-1 information when it arrives.
Next is “other income.” If you received alimony, or won money gambling, or had income from a hobby, let us know. You might receive a 1099 for other income, and you might not. If you got one, put one copy in your tax file. If you don’t have a 1099, just give us the amount of income, the date you received it, and a description.
DEDUCTIONS
Many of us who have been itemizing deductions may want to take the standard deduction this year, as it has gone up to $12200, or $24400 for MFJ. But we won’t really know which is best, until we do the math. Additionally, some of the deductions you won’t itemize on your federal return, you will want to itemize on your state return. So, in most cases, we do want to see the documents you have for deductions.
Start with the deductions you can take whether you itemize or not (aka “above the line” deductions).
If you are a teacher in a K-12 school, you can claim educator expenses. This is a deduction of up to $250 you spent for classroom supplies, books, computer equipment, and/or professional development. You can only claim expenses for which you have not been reimbursed. All we need is the amount spent. You should keep your receipts, just in case.
If you paid alimony to a former spouse, let us know how much you paid. If you made contributions to an IRA (or IRAs), we need to know the amount contributed and the type of IRA. If you’re filing jointly, make sure we know which contributions went to which account, for whom.
If you paid interest on a student loan, and/or tuition or other college expenses, you should receive a 1098 form(s). We need one copy of each 1098. If you didn’t get a 1098, or the 1098 doesn’t cover all the expenses you paid, we need the amount spent and a brief description.
If you pay for health insurance premiums with after-tax dollars (meaning, your insurance cost isn’t taken out of your paychecks before your income is taxed), we need to know the total amount you paid during the year.
Let us know if you think you qualify for any other, less common, deductions.
Now we’ll move on to deductions that are taken on Schedule A.
First up is property tax. If you pay your property taxes in escrow through your mortgage, the amount you paid for property taxes should be shown on the 1098 from your mortgage company. If you pay them independently, then we need to know the total amount paid for the year (for each property).
Auto registrations are partially deductible, and we must calculate the amount you can deduct. So, for each vehicle you registered during the tax year, we need the year, make and model of the vehicle, and the amount you spent to register it. You can make a copy of the registration form, or you can just give us the information.
If you paid mortgage interest, we need the 1098 from your mortgage company. As stated above, this may also include your property tax.
Medical expenses must be more than 7.5% of your Adjusted Gross Income in order to be deductible. But those expenses include more than just doctor and dentist bills. They include the costs of prescription medicines, hospital stays, lab tests, long-term care or nursing home, insurance premiums, eye exams and glasses, hearing aids, and even medical transportation. What we need is the total spent for insurance premiums, the total spent for LTC insurance premiums, the number of miles driven for medical reasons, and the total amount spent on all the rest.
For charitable contributions of cash, you can give us the name of the organization and the amount, OR you can include a copy of the receipt for each donation. Please don’t include multiple receipts for the same donation – that gets confusing!
For donations of goods, we need information from the receipt (organization, date, description of goods). We also need an estimate of the value of the donation, AND an estimate of the original cost of the donated goods. So, you can note that on the receipt, and include each receipt in your file, OR you can just make a list of donations with all that information on it. Remember, you need to keep the receipts for all your donations. If you give them to us as part of your file, we’ll give them back when your taxes are done. If you don’t give them to us, just keep them in your files. If you were ever to get audited, you’d need to have them.
Please note that the following were deductible in the past but are no longer deductible under the new Tax Cuts and Jobs Act: Unreimbursed expenses from a W-2 job; tax preparation expenses; casualty losses.
CREDITS
If you pay for dependent care, your caregiver might provide a receipt with the total amount you paid them for the year, along with the name and address of the provider, and their EIN. If you have that, just put it in your file. If they don’t provide it, then just give us that information. If you have multiple kids using the same provider, please allocate the amount spent to each child.
School fees include registration costs, textbooks and activity costs – as long as they are paid directly to the school. We need the amount attributed to each dependent child.
You may qualify for an energy credit if you installed insulation, storm doors or windows, solar panels, a geothermal system, or other energy-saving items to your home. You may also qualify if you purchased an electric vehicle. We need the details of the expense: what you added, when, and how much it cost.
Let us know if you think you qualify for any other, less common, credits.
MISCELLANEOUS
We no longer need proof of health insurance, but if you received a premium tax credit, we’ll need the 1095-A from the health insurance marketplace.
If you made quarterly estimated payments, or any estimated payments, we need to know. Please give us the date and amount of each payment you made, for federal and state taxes. If you don’t know what these payments are, don’t worry. You probably aren’t someone who makes them.
If you’d like to have your tax refunds deposited directly into your bank account, please provide the routing number, account number, and type of account (checking or savings). Or, you can include a voided check and we can take the information from that. We can also, upon request, set up automatic payment of any balance due with that same information.
We do need to know about any activity with virtual currency. If you bought, sold, exchanged, received or otherwise interacted with BitCoin or any virtual currency, we have to tell the IRS. It’s just a box to be checked, so all we need from you is a yes or no answer.
Lastly, please provide any other information that might be relevant.
Did you buy or sell a house, change jobs, inherit something, adopt a
child, separate from your spouse, move to a different state (or country), start
or close a business, or do anything else that might possibly affect your taxes,
but wasn’t covered in the documentation you have in your file so far? If so, please provide documentation about it. If you don’t know what to provide, give us a call, and we’ll give you some guidance.
We’d love to increase the number of complete, clear files we
receive, which would decrease the turnaround time for your tax returns. Thanks for helping us work more efficiently!