The much-awaited season is almost there!
The tax season can often have the small tax firms worked up. As the overload of filing and preparing taxes approaches, these firms find themselves at the forefront of a complex and demanding period. As the teams continue to hustle, the need for a well-organized and efficient system becomes imperative. When teams put a process in place and streamline their foreseeable tasks, it becomes easier to tackle the madness that this season is.
To begin the process of streamlining, there is a list of critical documents that the tax preparer needs to report. This includes bank statements, payroll (in the case of a business), different sources of income, and so on. The goal of the preparer here is to minimize the deductions and tax credits legally. The more thorough the picture you have of your client’s financials, the more effective and less time-consuming the process becomes for the team.
Choosing the right technology, making informed decisions in tax filings, and dealing with the pre-existing tax issues in each file, how do you resolve them?
In this blog, Finsmart Accounting – one of the best outsourced accounting services providers in India – is here to share everything you need to know about Tax season and creating custom checklists.
Read on and discover a step-by-step guide on it.
Understanding the Sources of Income
To begin the process of streamlining, there is a list of critical documents that the tax preparer needs to report. This includes different tax documents as per sources of income like:
– Employment Income
– Equity Compensation
– Business Income
– Capital Gains
– Dividend Income
– Interests Income
– Rental Income
– Exempt income
– Personal and business deductions
The goal of the tax preparer here is to optimize taxes to avail maximum benefits. Delving into the checklist and achieving your tax goals faster can seem lucrative.
Preparing the Tax Season Checklists
Individual tax returns are simple and they involve few complexities. Use the below checklist to prepare simple individual income tax returns (Form 1040, U.S. Individual Income Tax Return). IRS requires all taxpayers to answer all income questions and give suitable disclosures. Form 1040 should be filed annually by all US Taxpayers. The due date to file this is April 15th. Here is the information that a tax preparer will need:
1. Who is Filing the Return? (Basic Information)
– Name, SSN or ITIN, and Date of Birth.
– Details of Dependents, Spouse (as applicable)
– Last Year’s Return – hard copy or PDF file.
– Estimated Taxes Paid.
2. Income Information
– Form W-2s – wage and tax statements.
– Form 1099s – includes dividend income (1099-DIV),
– Interest income (1099-INT & 1099-OID),
– Capital gain transactions (1099-B), Investment Transactions
– Retirement plan distribution (1099-R), Retirement Contributions
– Sale of home or real estate (1099-S)
– Social Security Benefits Forms SSA – 1099
3. Additional Income and Adjustments to Income
– Distributions from an HSA, Archer MSA, or Medicare Advantage MSA (1099-SA)
– Student loan interest (1098-E)
– Unemployment compensation (1099-G) / State and Local Income Tax Refunds.
– Business (Schedule C) or Farming (Schedule F) Income – Profit / Loss Statement, Capital Equipment Information.
– Merchant card and third-party network payments (1099-K),
– Miscellaneous income (1099-MISC),
– Rental property income/expense—profit/loss statement, rental property Information (Schedule E)
– Schedule K-1s – partnership, S Corporation, and estate or trust income.
– Gambling Income / Expenses W2G
– Alimony Received
– Foreign Earned Income
4. Itemized deductions and credits
– Form 1098s – includes mortgage interest (1098)
– Form 1095s – includes health insurance marketplace statement (1095-A),
– Education Fees 1098T
– Real Estate Taxes
– Charitable Contributions
– Education Expenses
– Medical and dental Expenses
– Vehicle (Personal Property) Taxes Paid
– Business or Employee Expenses
– Child and Dependent Care Credit -Details of Child Care provider, Tax ID and amount paid.
– Energy Credits
– Casualty and theft losses
5. Other Information
– Foreign Taxes Pai
– Moving Expenses (only if you are a member of the Armed Forces – on active duty and due to a military order, you move because of a permanent change of station.)
– Bank Information (Account and Routing Number for Direct Deposit/Withdrawal)
– Foreign Bank Account Information – the name of the bank, account number, address, highest value of the account t during the year
– Prior year’s Self-Select PIN or Prior year’s AGI (Adjusted Gross Income)
– Driver’s license
The above checklist will help you and your clients stay stress-free and not make unwanted errors due to rush at the final hours.
The Use of Technology
A small tax firm must stay at the top of the game to ensure that they file the taxes for their clients in due time and do not end up paying penalties or falling into a legal pothole. Automation plays a key role here. The client portals used by small tax firms ensure seamless document sharing, enhance collaboration and help avoid unnecessary back and forth. These software are designed to help align the specific needs of small tax firms within the US.
Client Awareness and Empowerment for Successful Tax Season
For small tax firms, encouraging client participation in the tax preparation process not only helps save the time of the preparer but also strengthens the bond.
An informed client is more likely to provide accurate information, reducing the risk of errors and ensuring compliance with US tax regulations. Keeping the clients informed and involved helps better, especially when you outsource your tax tasks. This is a critical part of every tax season checklist!
Handling Tax Season Like a Pro: Conclusion
Preparing tax can be a complicated affair, but not when the teams are aligned and know how to streamline the processes in the right way. For a small tax firm, that handles multiple jobs at the same time, this checklist can come in extremely handy. It not only helps you stay organized, but saves time and prevents chaos. If you struggle with the intricacies involved in the tax system, outsourcing your taxation jobs might be the solution you are looking for. At Finsmart Accounting, we have a team of tax preparers who have all the means and knowledge to handle the pressure and stress of the tax season correctly.
Still got questions to ask regarding tax season checklist? Send them at connect@finsmartaccounting.com and get a quick reply from accounting experts.
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Director Growth Strategy & Alliance
Maanoj Shah is a finance and outsourcing expert with strong Business Strategy and Scaling-up experience. Over the last 20 years, he has incubated multiple businesses and helped build global enterprises in verticals as diversified as hospitality, technology, and healthcare.
