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Tips to Make Tax Season Less Taxing
By Karen Goldberg, CPA
 As we move into 2008, January is usually when we reflect on the past year, resolve to make changes in our lives, and look forward to new opportunities. For accountants, our attention turns to our busiest time of year-tax season. Make it part of your resolution not to procrastinate this year. Thinking about your taxes and getting the required paperwork together can help make this tax season stress-free for you and your accountant and possibly save you money.
Ready, set, organize. This is your first step in getting your tax documents ready. You should start receiving tax forms in late January (through mid-February). In addition, many banks and brokerage firms will have your forms available online for download. Plan ahead; if your records are organized, the less likely you are to overlook an eligible deduction.
What will you need to send to your accountant?
Here's a guideline of documents you will need. Keep in mind that this list is not all-inclusive, and some items may not apply to you.
A copy of your prior income tax return(s): If you are using a new accountant for your 2007 income tax return, bring or send a copy of your 2006 federal and state returns along with your 2007 tax forms. Comparing the prior year return to the current year can help uncover missing income or deductions. If you use the same accountant year after year, there is no need to send a copy, but you may want to review it yourself as a checklist, especially if you receive multiple forms (such as 1099-INT, 1099-DIV and K-1s).
W-2: The deadline for employers to issue W-2s is January 31st. You will need a W-2 from each employer you worked for during the past year. You should verify the information on the W-2 and compare the figures with your last paystub. If there is incorrect information, be sure to contact your employer as soon as possible to correct it-prior to handing your documents over to your accountant.
1099-INT: If your bank account or certificate of deposit (CD) account earned more than $10 in interest you will receive a 1099-INT. You will also receive one if you cashed in savings bonds.
 1099-DIV: Dividends from individual stocks in your portfolio, as well as dividends and capital gains distributed from your mutual funds and money market accounts, are reported on Form 1099-DIV. Even if the dividends were reinvested to buy additional shares of stock or mutual funds, you still may have to report and pay taxes on the income.
1099-B: You will receive this form if you sold any stocks, bonds, or mutual funds during the past year. This information is often combined on a Consolidated 1099 from your brokerage house. To figure out your gain or loss, you will need to provide the date you bought the shares and the cost basis. Your broker may keep track of this for you, so look for this information on the paperwork you receive, or give them a call to obtain a Realized Gain/Loss Schedule.
1099-G: If you had a refund of state and local taxes on your prior year return, you will receive this form. Depending on your tax situation, this amount may or may not be taxable on your current year return.
1099-R: This form is used to report pension, IRA and retirement plan distributions received. You will also receive a 1099-R if you converted a traditional IRA to a Roth IRA, or if you rolled over money into a retirement plan, such as a 401(K).
1099-MISC: If you are self-employed and received $600 or more from a company or person, you should receive a 1099-MISC.
Documentation of self-employment income and expenses: If you are self-employed, you should provide your accountant with a report of income and expenses for the tax year. If you received income in which a 1099-MISC form was not issued, it is still reportable to the IRS. It is unnecessary to send various receipts, credit card bills and other backup information to your accountant, but you should retain these records for substantiation if audited.
Schedule K-1: If you are a partner or shareholder in a partnership (including LLCs, LLPs and LPs) or S Corporation, your share of the income will be reported on Schedule K-1 (Estates and Trusts also report their income on Schedule K-1).
Form 1098: This form reports any mortgage interest paid. You may receive multiple 1098 forms. Your accountant will advise you as to the deductibility of the interest paid.
Employee business expenses: If you spent money on dues, uniforms, travel, meals or education for business purposes, and you were not reimbursed by your employer, you may be able to take a deduction.
Medical expenses: Only medical expenses in excess of 7.5% of your adjusted gross income are deductible, so many taxpayers are not able to take this deduction. Doctor visits, co-pays, prescription costs, contact lenses, eyeglasses, and hearing devices are all deductible expenses.
Childcare records: If you used a daycare facility or babysitter, you will need the name, address, amount paid, and EIN (Employer Identification Number) or Social Security number, for each care provider. Day camp facilities may also qualify for the deduction.
Other things to consider as it relates to your taxes:
Did you pay estimated tax payments during the year? Provide a list of dates and amounts paid, or provide copies of canceled checks.
Did you have a life-changing event? Did you get married in 2007? Did you have a baby in 2007? If so, be sure to provide the child's date of birth and social security number. Did you get divorced in 2007? You may want to include a copy of the divorce decree for your accountant, especially if the divorce agreement states who receives the dependency exemption and in which year(s).
Did you move in 2007? Provide moving expenses and mileage information about your move to your accountant.
Did you purchase or sell your home in 2007? If you purchased a home in 2007, make a copy of your closing document for your accountant-there may be tax deductible items (such as prorated mortgage interest and real estate taxes) you paid at closing. If you sold your home in 2007, you should receive Form 1099-S showing the sales price. You should provide your accountant with the date you originally purchased your home, as well as your cost basis.
Do you have a rental property? Be sure to provide your income and expenses for the rental property and the costs of any improvements made (provide receipts).
As a final review, go through your canceled checks, checkbook and credit card statements to make sure you haven't missed a deductible expense for your tax return. If you have any questions about what is and isn't deductible, ask your accountant.
Karen A. Goldberg, CPA, is a tax consultant at Grassi & Co., CPAs and is heavily engaged with clients in the real estate, construction, and other various industries, as well as high net worth individuals, helping to plan and minimize their tax liabilities. As a senior member of the firm's tax department, her work includes developing tax strategies for clients which enhance their cash flow. Skilled at entity structuring, she frequently advises clients on the most tax-advantaged entity structure for their businesses. Karen can be reached at (516) 336-2455 or via e-mail at kgoldberg@grassicpas.com.
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