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How to Get Ready for Tax Filing: Seven Steps of Preparation

Now that the holidays are over, another event that looms on the horizon may not be a cause for celebration: Filing your tax return. Nevertheless, you can relieve some of the stress by having your return professionally prepared. There still is a little “work” required on your part, but it should not take much time or effort. Here are seven steps to guide you along the way.

  1. Assemble tax documents. Undoubtedly, you have been inundated with tax forms for the 2015 tax year, including W-2s and 1099s. Employers are required to send W-2s to employees by February 1, 2016. Similarly, investors will receive 1099s with the details of their investment activities. Instead of just dumping these in a pile on your tax return preparer’s desk, review them first to ensure they are accurate. In particular, verify the cost basis used to determine the tax ramifications of securities transactions.
  2. Verify Social Security information. It is critical to provide correct Social Security numbers for all dependents, including any children who were born or adopted in 2015. You can claim an exemption of $4,000 that is available for each dependent, in addition to a $1,000 credit for qualified children; but exemptions for some high-income taxpayers are reduced under a reinstated tax rule. Also, retirees may owe tax on Social Security benefits.
  3. Organize financial statements. Having your bank and investment statements on hand will make it easier to trace the origin of funds; and the reasons for deposits or payments. For instance, it may be determined that a bank deposit constituted a tax-free gift rather than earned income. Similarly, brokerage statements might indicate a carryforward of a tax loss that can be used to offset capital gains realized in 2015.
  4. Organize business records. The same advice applies to self-employed individuals and business owners, who are often lax with their record keeping. Make sure that expenses can be substantiated through receipts and other documentation. Remember that the IRS pays close attention to travel and entertainment (T&E) expenses, including deductions for business use of vehicles, so proper record keeping for T&E is critical.
  5. Check IRA details. A taxpayer can contribute up to $5,500 to any combination of traditional and Roth IRAs ($6,500 if age 50 or older) for the 2015 tax year. Deductions for traditional IRAs are phased out for active participants in employer sponsored retirement plans (and spouses of active participants). Roth IRA contributions are nondeductible, but generally lead to future tax-free payouts. Note: The deadline for IRA contributions for 2015 is April 15, 2016.
  6. Audit-proof charity deductions. Under the current tax rules, cash and cash-equivalent gifts to charities must be supported by records, including written acknowledgements for donations of $250 or more. For a contribution of a lesser amount, the appropriate statement will suffice. Stricter substantiation requirements apply to gifts of appreciated property (e.g., an independent appraisal is required for gifts valued above $5,000).
  7. Schedule a meeting. The last item on the checklist is arranging an early meeting with your tax return preparer. This can head off potential problems and resolve any discrepancies. Then you can relax in the knowledge your return is in good hands.

Even if you are not preparing your own return, do not wait until the last minute to get started. The sooner you provide the necessary documents, the sooner you can receive any refund.

If you would like to have a conversation about filing your tax return or our tax savings ideas, please contact Jim Forbes at 888-201-4484 or jforbes@skodaminotti.com.


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