Preparing for Your Next Tax Meeting
Your WNDE tax professional should be one of your most trusted advisors. Our main goal is to prepare an accurate return while also helping you minimize your tax obligations through potential tax credits and deductions. To help us accomplish this goal, we encourage you to review your Tax Planning Guide and have all records and information ready for your next tax meeting and be prepared for an in-depth discussion about your specific situation.
Your WNDE tax professional will need the following five (5) categories of information to prepare your tax returns effectively.
- Identification and Basic Information: For any new clients, we will need identification for you, your spouse, and all dependents claimed, such as Social Security numbers and other basic information including your date of birth, address, your previous year’s tax return, and any information relating to a change in your tax status such as marriage/divorce, or change in dependents. Divorced spouses filing separately cannot claim the same child as a dependent, so make sure you are in sync, if this situation applies to you.
- Income Documents: Most taxable income will be summarized in standard IRS forms sent by payers – W-2 forms for traditional salaries, wages, bonuses, and tips; 1099 forms for self-employment, independent contracting, and most investment and interest income; and K-1 forms for pass through income relating to ownership in S-corporations, partnerships, LLC’s, and trusts/estates. Generally, each income source must supply you with a corresponding form. There are many variations of the 1099 form related to specific sources of income; check the IRS website if you are missing a form and are not sure what type of form you should receive. It is the taxpayer’s responsibility to report all income, including if you have not received a 1099. It is up to you to supply documents, such as bank statements, spreadsheets, or written summaries for any income not covered by these forms. These sources include rental income, alimony, and self-employment income below the $600 minimum that triggers a 1099-MISC. Starting this tax season, the self-employed may be able to deduct some 2018 pass-through income using the new Qualified Business Income deduction.
- Expense Documents & Receipts: Expenses for mortgage interest and student loan interest will be documented on forms 1098 and 1098-E. Many other potential deductions such as medical expenses, property taxes, and childcare/daycare costs require verification through receipts, cancelled checks, statements, or spreadsheets. Your tax preparer may be able to help you find extra deductions that make itemizing worthwhile, but he or she must know what types of expenses you have. Review your WNDE tax organizer and potential deductions in advance, so you can research the possibilities prior to your meeting. Do your homework to consider all possible deductions, then organize and bring any documentation you think may be relevant. Don’t forget to include documents relating to unusual or catastrophic claims such as theft and casualty losses and losses from natural disasters. Be sure you include any reimbursements toward your losses when tallying your loss or deduction.
- Records for Charitable Contributions: If you made donations to charity and itemize your deductions, you need specific records to claim any write-offs. For example, for contributions of $250 or more, you will need a written acknowledgment from the charity stating the amount of your gift and if you receive anything (other than perhaps a token item) in return for your donation. If you’re lacking an acknowledgment, contact the charity and ask for it. You need it in hand by the time you file your return. Find details about the type of records needed for charitable deductions in IRS Publication 1771.
- Health Insurance Information: If you receive health insurance from your employer, bring a copy of your Employee Offer of Coverage or 1095-C form. If you purchased health insurance through the Marketplace, you will need to bring the 1095-A form issued by the exchange. These forms contain the insurance premium and subsidy information for you and your family members. Your tax professional will use it to fill out other forms that may apply to your situation, such as the Premium Tax Credit form (Form 8962) and the Health Coverage Exemption form (Form 8965).
For Businesses Taxpayers, preparation of tax returns is typically more complex. As your business tax return reports information about the income and expenses of your business, you or your accounting team will need to complete all bookkeeping, accounting and financial statements for the previous year. You’ll need to generate the reports and organize the documents that your CPA will need. Your WNDE tax professional will need reports summarizing the income and expenses of your business, including any equipment purchased and tax payments made during the year. Your tax professional will also need to know about health insurance and other benefits you offer employees. Complete and accurate recordkeeping is very important. Your tax professional will need the following information:
- Financial Statements including Income Statement (Profit and Loss Statement) and Balance Sheet
- List assets and equipment purchased during the year
- List equipment or assets that were sold, scrapped or disposed of during the year
- List estimated tax payments paid to the Internal Revenue Service and state tax agencies during the year
- List shareholders or partners and how many shares or what percentage they own
- Detail compensation paid to each shareholder or partner
- Lists any capital contributions received from the shareholders or partners
- Detail all dividends or distributions paid to the shareholders or partners
- List all loans repaid, received from, or advanced to the shareholders or partners
Your tax meeting is also an opportunity to talk to your tax professional about your business and financial situation. We recommend making a list of questions and issues that you want to discuss. Having a list of questions keeps your tax meeting focused on the issues most important to you. This will help you manage your time during the meeting and ensure that the meeting is as productive as possible, based on your priorities. You may wish to send your questions to your WNDE professional in advance. Some areas of interest may include the following:
- How is Tax Reform impacting my tax obligations?
- Are there any additional deductions, tax credits or tax strategies that would benefit me?
- As my business grows (or declines) are there any actions I should take to reduce taxes next year?
- Should I acquire additional capital equipment?
- If so, what is the best way for me to pay for or finance the investment?
- Do I have any potential audit risks?
- How can I improve my accounting and financial records?
- What are my options for setting up a retirement plan for myself and my employees?
- What can I do to improve my financials in order to obtain better banking and financing options?
- What is my business worth? (Discuss succession planning / exit strategies)
- Can you help introduce me to other professional resources who may be able to help me and by business? (Banks, Lenders, Attorneys, Insurance & Benefits Providers, etc.)
Whether for an individual or business, gathering the right data and documents and making a list of questions helps your accountant quickly focus attention on your specific needs. This allows you to be more proactive in the process, makes the annual tax meeting more productive, can help reduce audit risk, and ensures that returns are complete, accurate and take advantage of all appropriate credits and deductions.
If you have questions, or to schedule your tax planning meeting, please contact your WNDE tax professional.