Filing a tax return can be one of the most complicated financial matters you must handle each year, especially if you’re self-employed or own a small business. Complex codes, room for interpretation, and different rules for various situations can involve filing your taxes.
Hiring an accountant to help you with these can save you a lot of stress. Here’s a list of the basic things you should provide your accountant. They may ask you for other specific documents that you need as well.
1. Identification Information
To prepare your taxes, an accountant needs specific identification details from you that can verify your identity. Your accountant will need your social security number and the social security number of your dependents. Every year the IRS sends back hundreds of returns because the names and social security numbers on the form don’t match.
You may also want to bring a second form of identification, like a driver’s license, military ID, or any state-issued picture ID card.
2. Your Most Recent Tax Return
While you may not qualify for the same deductions or write-offs as last year, providing your accountant with the previous year’s return can help them easily access information and calculate certain deductions without repeatedly calling you. Suppose you’re meeting with a new accountant; in that case, this could also be an excellent opportunity to discuss any discrepancies between previous returns and your best approach.
3. Wage And Statements From Employers
Employers will give employees a Form W-2 wage and statement. If employees have not received this document from their employers by January 31, they should check in to ensure nothing has been mixed up.
Independent contractors and freelancers should receive a Form 1099-MISC from all the clients they worked for throughout the year.
4. Additional Income Statements
Did you obtain other sources of income during the year? Maybe you accrued interest and dividend income from investments, unemployment, or social security income. If applicable, you should receive statements for each of these sources of income that you will need to take into your accountant too.
5. Documentation Of Real Estate Holdings
There are a lot of deductions you might be eligible for if you have real estate holdings. Bring any documents that pertain to a recent home purchase, proof of paid mortgage or home equity loan interest, or proof of paid real estate and personal property taxes paid.
6. Proof Of Expenses
To get your deductions and credits, you must hand over documentation proving your expenses for the year you’re filing taxes. Bring receipts, invoices, medical bills, charitable contributions, IRA contributions, job-hunting expenses, mileage logs, educational expenses, self-employment expenses, and more to your accountant. It’s better to have too much documentation to provide than too little.
5 Tax Deductions You Didn’t Know About
1. Sales Taxes
If you itemize your deductions, you can deduct sales or state income taxes from your federal one. The Tax Cuts and Jobs Act limited the deduction you can take to a combined total of $10,000 for state, local, and sales tax paid ($5,000 if married and filing separately). The IRS has a sales deduction calculator you can use to find out what your deduction would be.
2. Health Insurance Premiums
Medical expenses can be very costly, but in some cases, the IRS is sympathetic to the cost of insurance premiums. In the 2023 tax year, the IRS allows you to deduct total qualified unreimbursed medical care expenses that exceed 7.5% of your adjusted gross income. This applies if the taxpayer uses IRS Schedule A to itemize deductions.
Self-employed people responsible for their health insurance coverage might be able to deduct 100 percent of their premium cost. This deduction is an adjustment to income, not an itemized deduction.
3. Teacher’s Tax Savings
Teachers often have out-of-pocket expenses associated with things they buy for their classrooms. The IRS allows K-12 teachers to deduct up to $250 for unreimbursed expenses for materials. This gets deducted from their income taxes by itemizing the deduction.
4. Educational Expenses for Any Age
College students are not the only people who can deduct education expenses from their taxes. Graduates pursuing continuing education are covered too.
Students of any age can benefit from the Lifetime Learning credit; 20 percent of the first $10,000, up to $2000, is spent on higher education. This credit is not available at higher income levels but does not have an age cap.
5. Self-Employed Social Security
The hard part about being self-employed is that you have to pay 15.3 percent of your income for social security and medicare taxes, a portion usually paid by both employee and employer. However, there is a bit of a break for the self-employed. You can deduct the 7.65 percent employer portion from your income taxes. Visit this site and know more about Vancouver corporate tax accountant.
What Do Tax Accountants Do?
These accountants have two primary roles – preparing returns and planning. Whether an accountant is self-employed or working for an accounting firm, they specialize in assisting clients with tax return preparations. They meet with clients to gather needed documentation like paystubs, proof of investments, and other financial documents. An accountant must be familiar with the tax laws to file these returns. They determine how much tax is owed by looking at a client’s tax deductions and credits.
Accountants who do tax planning often work with larger companies that work internationally. Tax planners aim to develop a strategy for corporations to avoid tax ramifications and minimize income tax. These companies hire internal and external accountants to develop long-term plans to save them money over time.
It pays to be prepared, even when you’re having someone else prepare your taxes for you. Make sure you provide your accountant with all of the necessary information. Be proactive about gathering your finances into one place so that you won’t need to worry before the filing deadline. If you provide your accountant with everything they need, you should have a hassle-free tax season ahead of you.