Income Sources
Self-Employment
& Rental Activity
- For greatest accuracy, business and rental activities should be maintained on accounting software such as Quickbooks and be reviewed by a tax professional.
- Bank statements should be reconciled for each calendar month to ensure correct income and expense totals.
- List all new fixed asset purchases of $500 or more with purchase date, description and purchase price.
- Determine if business qualifies to claim home office expenses.
- Check if there are any net operating loss carryovers from prior tax years to offset current taxable income.
- Provide your tax preparer with a year-end income statement and balance sheet for your business.
- If sole proprietorship, business activity will be reported on Schedule C of form 1040.
- If partnership or S-Corporation, business activity will be reported
W-2 Employees
- Make sure you have received your W-2 form from your employer.
- If you had multiple employers during the year make sure you’ve received all W-2 forms.
- Review name, address, social security number, income and tax withheld amounts for accuracy and contact employers if you discover errors.
Other Income
- 1099-INT forms for interest income
- 1099-DIV forms for dividend income
- 1099-G form for tax refunds or unemployment compensation
- 1099-B forms for proceeds from stock transactions *
- Schedule K-1 forms for partnership, S-Corporation or other investment income
- 1099-R forms for pension, annuity, IRA and other retirement investment income
- W-2G forms for gambling winnings
- Alimony is NO LONGER reportable income for recipients or an adjustment to income for payers adjustment to income for payers
Important note regarding itemizing deductions: Most taxpayers who are NOT homeowners aren’t able to itemize their deductions. A standard deduction applies in these cases, which would exceed the amount of deductions if itemizing. However, exceptions exist for taxpayers with substantial medical expenses and high income tax payers with a large amount of state and local taxes withheld from their earnings. **
Adjustments to Income
- Health or medical savings account statement for contributions and distributions
- Statements for contributions to IRAs, SEPs, SIMPLE plans and other retirement plans
- 1098-E form for student loan interest
- Educator expenses for teachers and certain expenses for reservists and artists
- Moving expenses for members of the armed services
- Penalties for early withdrawal of savings
Each of these items function similarly to deductions, but serve to reduce your adjusted gross income, which is used to determine the deductibility of certain itemized deductions.
Itemized Deductions
- Medical and dental expenses only if they exceed 10% of adjusted gross income
- Escrow statement if new home purchased during the year
- 1098 mortgage statement for mortgage interest paid (and real estate taxes and homeowner’s insurance if you have impound account)
Important note regarding itemizing deductions: Most taxpayers who are NOT homeowners aren’t able to itemize their deductions. A standard deduction applies in these cases, which would exceed the amount of deductions if itemizing. However, exceptions exist for taxpayers with substantial medical expenses and high income tax payers with a large amount of state and local taxes withheld from their earnings
Deduction for state and local taxes paid is limited to $10,000. This includes state and local taxes withheld from W-2 earnings, estimated state taxes paid, prior year state taxes paid in the current year, driver’s license renewal fees and the deductible portion of vehicle registration fees.
Other Documentation
ALWAYS BRING COPIES OF YOUR PREVIOUS YEAR’S FEDERAL AND STATE TAX RETURNS TO A NEW PREPARER!
- Statements from day care providers for child and dependent care expenses
- 1095 forms reporting health exchange subsidies and employer-provided health insurance
- A record of federal and state estimated tax payments for self-employed people or recipients of extraordinary income