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Get your (f)act(s) together


It's nearly impossible to remember every question to ask and every document to gather. These checklists can help.


Tax Time

Get your (f)act(s) together

Jump to:
Choose article section...Things your accountant absolutely must know

It's nearly impossible to remember every question to ask and every document to gather. These checklists can help.

By Dennis Murray
Senior Editor

"My taxes? I give everything to my accountant and let him worry about them." You've undoubtedly heard statements like that. Maybe you've said as much yourself. But whether you do your own taxes or pay someone to do them for you, it's never a good idea to let your records go unsorted. Likewise, don't assume that when it's time to prepare your return, you'll remember everything you need or that your accountant will remind you about anything you forget.

Organizing your records and preparing your questions well ahead of time can pay off in several ways: You won't have to scramble for missing papers at the last minute, your return will be less likely to contain mistakes, and you'll have the ammunition to fend off any challenge from the Internal Revenue Service.

Getting your act together tax-wise also reduces stress and benefits your wallet. "Someone who's organized will likely get a more accurate return at a lower fee than someone who's disorganized," says James A. Kimble, an accountant and practice management consultant with Gilmore, Jasion & Mahler of Toledo. "When I discuss this with our physician clients, I use the analogy of a patient who comes to the office without all of his medical data and dribbles it back with e-mails, faxes, and phone calls. It's hard to give that sort of patient the best care."

The IRS doesn't dictate how you must organize your records—it requires only that you be able to produce them upon request. Therefore, if you haven't already done so, create files for bills, receipts, invoices, canceled checks, brokerage statements—everything you might need to prepare your tax return and might help you or your accountant substantiate a deduction. A peek at last year's return will help jog your memory, as will the detailed list of documents below.

"For about 35 percent of the returns we handle, we wind up waiting for some piece of information," says accountant Bert Tobia, of Tobia and Hillyer in Fairfield, NJ. "Usually it's related to the basis price of an investment that has been sold. The person doesn't know what he paid for it and has to find out for us."

To prevent delays in completing your own return, keep a log of any potentially deductible expenses as they come along, such as for car mileage or the times you use your home computer for business. If you have a software program such as Intuit's Quicken or Microsoft's Money, you can track many deductible expenses electronically and provide your accountant with printouts. "In our experience, clients who use these programs make fewer errors and have more accurate data," says Jim Kimble. "They're also much less likely to have problems with the IRS."

Things your accountant absolutely must know

In addition to major life changes—marriage, divorce, a birth—you'll need to touch base with your tax preparer on other important developments. Review the following questions, several of which a busy accountant may fail to ask. Each Yes answer might prompt a discussion that could bring savings.

Your dependents

• Did you adopt any children or begin adoption proceedings?

• Did you pay someone to care for your child while you worked or looked for work?

• Did you pay a nanny or other domestic worker more than $1,200?

• If you have a child younger than 14, did he or she have investment income of more than $700 but less than $7,000?

• Did any of your kids earn income of more than $4,400?

Education expenses

• Did you or your spouse pay interest on a student loan?

• Did you or any of your dependents have higher-education expenses? If so, where did the money used to pay for them come from?

• Did anyone withdraw money from an education IRA?

Purchases, sales, and debt

• Did you start a business or acquire an interest in a partnership or S corporation?

• Did you sell a business, rental property, farm, or any interest in a partnership or S corporation?

• Did you have any debts canceled, forgiven, or refinanced?

• Did any balances owed to you become uncollectible?

• To buy your principal residence, did you withdraw any money from an IRA or Roth IRA?

• Did you pay points on a refinanced mortgage?

• Did you pay mortgage interest?

• Did you take out a home equity loan?

• Did you sell stock or mutual fund shares, or cash in any taxable bonds?

• Did you receive stock options from your employer, exercise any stock options,

or dispose of any stock acquired under a qualified employee stock purchase plan?

• Did you have any securities that became worthless?

Sale of your home

• Did you and your spouse occupy the home as your principal residence for at least two of the past five years?

• Whose name was the house in when it was sold?

• Did you ever rent out this property or use any portion of it for business?

• If you had more than $500,000 of profit on the sale ($250,000 if you're single), do you have receipts showing the cost of any improvements you made to the home and property?

• Did you prepay any property taxes that the buyer reimbursed at closing?

Other real estate

• Did you buy, exchange, or sell any real estate other than your principal residence?

• Did you own rental property?

• Did you use rental property as a vacation home for part of the year?

Itemized deductions

• Did you receive a refund of state taxes?

• Did you donate property with a fair market value of more than $5,000 to a charitable organization?

• Did you relocate because of your job?

• Did you incur any casualty or theft losses?

• Was your casualty loss within a federally declared disaster area?

• If you or your spouse is self-employed, did you pay for health insurance?

• Did you pay premiums for long-term-care insurance?

Miscellaneous deductions

• Did you or your spouse make gifts of more than $10,000 to anyone?

• Did you make gifts, of any amount, to a trust?

• Did you or your spouse incur expenses in the course of doing volunteer work, including using your car to travel to and from the charitable organization?

• Did you pay dues to a professional organization or pay to subscribe to a professional publication?

• Did you pay for tax or legal advice?

• Did you pay litigation costs or contingent fees in connection with a taxable award for damages?


• Did you or your spouse contribute to an IRA, Keogh, SEP, or SIMPLE plan?

• Did you retire or change jobs?

• Did you or your spouse receive severance or retirement compensation?

• Did either of you turn 70 1/2 and not receive a distribution from an IRA or other retirement account?

• Did you or your spouse receive Social Security benefits?

Adapted with permission from CCH ProSystem fx, Riverwoods, IL

Pull your records together in record time

If you relaxed on a deserted beach or did some skiing this winter, then good for you. Unfortunately, while you were out having fun, tax time was drawing nearer. So before you meet with your accountant or sit down to do your return yourself, you'll need to gather the appropriate paperwork. Although this list doesn't include everything you may require, it covers the most common documents.

Records needed
Wages and salaries
Form W-2, which should arrive by Jan. 31
Alimony received
Deposit slips and ex-spouse’s Social Security number, copy of divorce or separation decree or agreement
Social Security
Form SSA-1099
Form 1099-G
Account records, checkbook, copies of checks received, and receipts
Refund of state and local income taxes
Form 1099-G
Sale of stocks and bonds
Form 1099-B and broker-confirmation statements
Form 1099-INT, Form 1099-OID, or deposit slips of interest received on money you loaned to others
Form 1099-DIV or company statements of dividend payments, especially if stock dividends have been paid
IRA distributions
Form 1099-R
Real estate
Sale of personal residence
Purchase papers, closing papers, and records of any significant improvements you made
Sale of investment property
All of the above, plus records of depreciation
Adoption credit
Child’s name, birth date, and Social Security number or taxpayer ID number; papers showing the date the adoption became final
Alimony paid
Canceled checks, copy of divorce or separation decree and agreement, ex-spouse’s Social Security number
Child and dependent care expenses
Canceled checks; name, address, and Social Security number or taxpayer ID number of the child care provider
Education credits
Student’s name and Social Security number; canceled checks and statement of tuition and enrollment fees; for dependents, records for support contributions
Itemized deductions
Cash gifts to charity
Canceled checks; receipts from charity
Casualty and theft losses
Documentation of fair market value of the property before and after casualty, and any insurance recovery; for thefts, statements from witnesses, police records, and, if available, photos of the items and newspaper accounts of the crime
Unreimbursed medical and dental expenses
Canceled checks, copies of billing statements, receipts for prescriptions; log of related travel expenses and lodging costs
Mortgage interest
Bank statement showing interest paid, Form 1098
Miscellaneous deductions
Cell phones, computers
Receipts and logs showing percentage of business use
Job search expenses (for a new position in the same line of work; expenses for your first job aren’t deductible)
Receipts, log of travel expenses and lodging costs
Professional society dues
Canceled checks
Safe-deposit box rental fees or cost of a home safe (if used to store taxable investments)
Bank statements, or receipt for home safe
Tax preparation fees
Canceled checks
Travel to check on investment properties
Diary or similar record to list date, place, and business purpose of the trip; itemized bills and receipts

Source: J.K. Lasser's Your Income Tax 2001. Adapted by permission of John Wiley & Sons Inc.

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Dennis Murray. Get your (f)act(s) together. Medical Economics 2001;3:61.

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