Ready to take the leap? Start with setting up a 2017 Taxes file. Yes, you read that right. Start on next year’s taxes now! (Of course, have a bin ready for your 2016 tax documents as they arrive. Put it right next to where you put arriving mail.)
While it’s tempting to stop there, I urge you to soldier on! Open the envelopes and check the basic information to be sure it’s correct (your name, address, social security number, etc.). Doing that now, and requesting a correction if necessary, saves you and your tax preparer time and aggravation as the tax filing deadline nears.
Do you want to jump in with both feet? Using last year’s return as a guide, confirm that you’ve received all of the documents you should - plus additional ones this year if you added investments and financial institutions. Go after any missing ones BEFORE you visit your tax preparer. While the normal deadline for mailing 1099s to taxpayers is January 31 (or February 15, depending on the specific form), they may continue to trickle in, especially corrected forms. K-1’s have a March 15 deadline but are notoriously late. If you file your taxes before all your information has arrived, you will have to file amended returns at additional expense. If you file for a six month extension, you still need basic information now in order to pay any taxes due.
Note that some tax forms may be obtainable only online (like the 1099-G reporting an overpayment from 2015 state income taxes if you itemized on your federal tax return: https://www8.tax.ny.gov/PIGI/pigiHome.
But back to your new “Taxes 2017” file. I find that the best way NOT to let things fall through the cracks and take advantage of every tax break, is to collect information as it happens. This means that as you incur an expense, make a donation, pay for a capital improvement on your house, and so on, you note it either in an electronic or manual system. The IRS agrees. This is what they call “contemporaneous documentation.” It’s their requirement for everything from recording medical and business miles, receiving confirmation of donations, and more.
Of course, your accountant is your source for all tax advice. As a financial organizer, I don’t prepare clients’ taxes. My role is to capture and organize clients’ information and paperwork year round, making the process pain free for both client and preparer. I know what to look for and can locate valuable missing documentation. As I like to say to accountants: My clients are the ones without shopping bags full of receipts! We have already processed the paperwork and information before walking through your door.
While the weeks leading up to April 18 are called “tax time,” for me and my clients, building a tax file is a year-round activity. So why not make this the year you spread out the work and avoid the stress of a sprint to the finish line?