What an Accountant Needs for Your Tax Return

Gathering the right documents for your accountant simplifies the tax process. Organized preparation saves time and helps ensure accuracy. Understanding the specific information and forms an accountant requires is important. Complete and accurate documentation allows your tax professional to assess your financial situation and apply tax laws.

Gathering Personal and Identifying Information

Your accountant needs personal and identifying details for all individuals on your tax return. This includes full legal names, Social Security Numbers (SSNs) or Individual Taxpayer Identification Numbers (ITINs) for yourself, your spouse, and any dependents. Dates of birth and current mailing addresses are also needed.

Providing a copy of your prior year’s tax return, typically Form 1040, is helpful. This document offers a historical overview of your filing status, dependents, and income sources, which helps ensure continuity and identify significant changes. For dependents, details such as their relationship and evidence of support, like school enrollment verification for education-related credits, may be necessary. Bank account information, including routing and account numbers, is required if you opt for direct deposit of any refund or direct debit for taxes owed.

Collecting Income Documentation

Accurate tax reporting requires income documents. For wages, salaries, and tips received as an employee, you will need Form W-2, Wage and Tax Statement, which employers issue by January 31st each year. This form reports your gross earnings and the amount of federal, state, and local taxes withheld.

Investment income requires specific forms. Form 1099-INT is for interest income from banks, typically for interest earned over $10. Form 1099-DIV reports dividends and distributions from stocks and mutual funds. For proceeds from broker and barter exchange transactions, including sales of stocks and bonds, Form 1099-B is provided by your brokerage firm. This form details the sale of securities and helps calculate capital gains or losses.

If you received distributions from pensions, annuities, IRAs, or other retirement plans, Form 1099-R will be issued. Social Security benefits are reported on Form SSA-1099. Government payments, including unemployment compensation, are detailed on Form 1099-G. For less common income sources, such as gambling winnings, you will receive Form W2-G.

For nonemployee compensation, such as fees or payments for services as an independent contractor or freelancer, you should receive Form 1099-NEC. Form 1099-MISC is used for other miscellaneous income types, including rents, royalties, and prizes. If you have an interest in a partnership or S-corporation, you will receive a Schedule K-1 detailing your share of the entity’s income, deductions, credits, and other items.

Compiling Deduction and Credit Information

Documentation for eligible deductions and credits is important. For itemized deductions, medical and dental expense records include receipts and statements from healthcare providers, hospitals, pharmacies, and insurance premium statements. State and local taxes paid, such as property tax statements and records of state income tax payments, are also necessary.

Homeowners claiming the mortgage interest deduction will need Form 1098, which lenders issue for interest paid totaling $600 or more. Charitable contributions require receipts for cash donations, acknowledgment letters from organizations for non-cash donations, and mileage logs for volunteer driving. These records validate the amounts claimed.

Certain adjustments to income, often referred to as “above-the-line” deductions, reduce your gross income before calculating adjusted gross income. If you paid student loan interest, Form 1098-E will report the amount. Records of contributions made to a traditional IRA are also needed. For Health Savings Account (HSA) contributions and distributions, you will receive Forms 5498-SA and 1099-SA, respectively.

Tax credits directly reduce your tax liability, dollar for dollar. For education credits, Form 1098-T, Tuition Statement, is provided by eligible educational institutions, reporting tuition and fees. Receipts for other qualifying educational expenses should also be retained. Information on qualifying children or dependents is necessary for credits like the Child Tax Credit or Credit for Other Dependents. For the Child and Dependent Care Credit, you will need the care provider’s name, address, and Taxpayer Identification Number (TIN) or SSN, along with the total amount paid for care. The Earned Income Tax Credit (EITC) does not require a specific form but relies on your overall income documentation to determine eligibility. Receipts for qualifying home improvements, such as energy-efficient upgrades, support residential energy credits.

Organizing Investment and Asset Details

Complex investment and asset transactions require specific documentation. For investment sales not reported on a Form 1099-B, such as inherited stock or private sales, you will need detailed records. This includes the purchase date, original purchase price (cost basis), any commissions or fees paid, and the sale date and proceeds. For inherited assets, the cost basis is typically the fair market value on the date of the original owner’s death, or an alternative valuation date chosen by the estate.

Cryptocurrency transactions, including buying, selling, or trading, must be meticulously documented. Records should include the date, value, and cost basis for each transaction. The sale of real estate requires closing statements, such as Form 1099-S, which reports the proceeds from real estate transactions. You should also provide records of the property’s original purchase price, any significant improvements made, and selling expenses, as these affect the gain or loss calculation.

For individuals with foreign financial accounts, specific reporting obligations may apply. Information necessary for FinCEN Form 114, the Report of Foreign Bank and Financial Accounts (FBAR), includes details of any foreign accounts exceeding certain thresholds.

Preparing Business and Rental Activity Records

Self-employed individuals, independent contractors, and rental property owners require comprehensive record-keeping for their tax returns. For self-employment or independent contractor income, you will need all Forms 1099-NEC received from clients.

Detailed records of business expenses are essential for claiming deductions. This includes receipts for office supplies, travel expenses, business meals, professional development, and advertising. Mileage logs are necessary for documenting business use of a personal vehicle. Receipts for large asset purchases, such as equipment, are required for calculating depreciation deductions.

Rental property owners must maintain thorough records of all rental income received. This includes regular rent payments, advance rent, and any expenses paid by tenants that are considered rental income. Documentation for all rental expenses is also crucial, such as mortgage interest, property taxes, insurance premiums, repairs, maintenance costs, utilities, and property management fees. Information on the property’s acquisition date and cost is needed to calculate depreciation. Maintaining these detailed records helps ensure all allowable deductions are taken.