Preparing for Tax Season

Navigating the complex landscape of federal taxes can be daunting, whether you’re an individual taxpayer or running a small business. Each year, the preparation of tax returns demands a thorough collection of various documents to ensure accuracy, compliance, and possibly optimize your tax situation. For individuals, this includes gathering forms that report income from employment, investments, and other sources, alongside records of deductible expenses. Small businesses, on the other hand, must compile a broader spectrum of documents reflecting their financial activities, from income and payroll to expenses and asset depreciation. Understanding which documents are necessary is crucial not only for fulfilling legal obligations but also for taking advantage of potential tax benefits. Below, we outline the key tax documents required, providing a roadmap to help both individuals and small business owners through the tax preparation process effectively.

For Individuals:

1. W-2 Forms:
   • For employees, showing wages, tips, and other compensation, as well as taxes withheld.
2. 1099 Forms:
   • 1099-INT for interest income.
   • 1099-DIV for dividends.
   • 1099-B for sales of stocks, bonds, or other investment transactions.
   • 1099-NEC for nonemployee compensation (previously part of 1099-MISC).
   • 1099-MISC for other miscellaneous income (like prizes, awards, or rental income).
   • 1099-G for unemployment compensation or state tax refunds.
   • 1099-R for distributions from pensions, annuities, retirement or profit-sharing plans, IRAs, insurance contracts, etc.
3. 1098 Forms:
   • 1098 for mortgage interest.
   • 1098-E for student loan interest.
   • 1098-T for tuition payments.
4. Receipts and Records:
   • Medical expenses.
   • Charitable contributions.
   • Casualty and theft losses.
   • Job-related expenses (if deductible under current tax law).
5. Other Income Documents:
   • Social Security benefits (SSA-1099).
   • Gambling winnings (W-2G).
6. Health Insurance Documents:
   • Form 1095-A if you have health insurance through the Marketplace

For Small Businesses:

1. Income Statements:
   • 1099-NEC or 1099-MISC for payments made to independent contractors.
   • Sales receipts or invoices.
2. Expense Records:
   • Receipts for business expenses like supplies, rent, utilities, advertising.
   • Mileage logs for vehicle use.
   • Travel and entertainment expenses.
3. Bank and Credit Card Statements:
   • To verify income and expenses.
4. Payroll Documents:
   • W-2s for employees.
   • Payroll summaries showing wages and withholdings.
5. Depreciation Schedules:
   • For assets like equipment, vehicles, or property.
6. Inventory Records:
   • If applicable, showing beginning and ending inventory values.
7. Business Use of Home:
   • If claiming home office deduction, records showing square footage of office space, utility bills, etc.
8. 1099-K Forms:
   • For businesses that process payments through third-party networks like PayPal or credit cards.

 

Additional Considerations:

• Previous Year’s Tax Return – Useful for comparison and carryovers like capital losses or NOLs (Net Operating Losses).
• K-1 Forms if involved in partnerships, S corporations, or some trusts.
• Records of Estimated Tax Payments made throughout the year.

Remember, the exact documents needed can vary based on individual circumstances, business structure (e.g., sole proprietorship, LLC, S Corp), and specific tax law changes. It’s advisable to consult with a tax professional to ensure all necessary documents are gathered and to stay compliant with current tax regulations.