It’s that time of the year again when we need to start filing our taxes. Instead of procrastinating or stressing about the hassle of tax time, here are some tips to keep things as easy and painless as possible this year. They are designed to help you stay on top of your game during tax time and to ensure that you don’t overpay your taxes.
1. Don’t Throw Away Your Records
Soon you will start to receive your 2020 tax documents from W-2s to 1099s. For all of these tax documents, please be sure to save them and provide a copy to us. Making sure that all of the correct info is reflected on your tax returns can definitely help to minimize chances of unwanted IRS questions. If you receive something and are unsure if it needs to be sent to us, send it anyways! Better safe than sorry.
2. Organize & Review Your Financials
Whether you do your own bookkeeping or have someone else do it, be sure to review your numbers before you send them off for taxes. You don’t need to look at every transaction that happened last year, but you do want to look at the big items. For example, does the net income look correct? If you sold a property, does the gain or loss seem accurate? Make sure your books are correct before you send them to us to avoid confusion and re-work costs.
3. Real Estate by Property
If you have rental real estate or if you are in the fix and flip business, your Profit & Loss statement needs to be shown on a property by property basis. If you identify any major issues with your income statement or balance sheet, be sure to contact your bookkeeper as early as possible to determine the most time and cost efficient way to make the appropriate corrections.
4. Don’t Forget the Balance Sheet
One of the financial statements that a lot of investors forget to look at is the balance sheet. What is a balance sheet? Simply put, it is a financial statement that shows a list of all of your assets and liabilities as of year-end. Not everyone needs to have a balance sheet, but it will be required for partnerships and corporate returns. So what you want to do now is print your balance sheet from QuickBooks and review it with your bookkeeper to see if the numbers make sense. Is the correct cash balance showing? Is the mortgage balance correct? If not, now is the time to meet with your bookkeeper to get that cleaned up before tax time.
5. Tax Organizer
Tax laws change every year and so do tax credits, so make sure that you review the information request carefully to ensure that nothing is missed.
6. Legal Entities
Did you form any new entities last year? Dissolve any entities? Change ownership in your entities? These are some major changes that can have a significant impact on how your taxes are filed, so be sure to let us know ahead of time regarding any entity-related changes.
7. Real Estate
If you bought or sold properties last year, be sure to let us know. To ensure that all of your costs are accounted for correctly, be sure to send in copies of the final closing disclosures so that we can capture all of your write-offs.
8. Major Life Changes
Marriage, divorce, babies, inheritances, and death are examples of major life changes. If you haven’t already notified us, be sure to let us know of any major life changes before we start working on your taxes so that we can help you file in the most beneficial way.
Tax time can be stressful for a lot of people, but with these simple tips, you can get ahead of the game and file your taxes with confidence this year! We wish you a wonderful and prosperous New Year!