What Documents Do I Need To Give Accountant for Taxes?

It is a relief to have an accountant as you can hand over the horrible job of preparing your tax return and filing it. However, it’s not always quite that simple.

If your paperwork is in a mess, then it’s going to take your accountant much longer to find the information they need, and this means your bill could be higher if you are not on a fixed charge service.

Keeping financial information organized throughout the year will make your accountant’s job much more manageable and could save you time and money. It also avoids that stressful scrabble to find all the information you need at the financial year-end.

Here is the crucial information your accountant will need.

Your EIN or SSN

Your accountant will need basic personal data, including your formal or legal name, current address, and social security number (SSN). It may be helpful to bring your physical social security card to the consultation in case they need to make copies of ID documents for verification purposes.

If you own a small business, are self-employed, or otherwise file as a business entity, you will also need an Employer Identification Number (EIN. You should bring this to the appointment and your legal business name. The EIN identifies your business to the IRS.

Previous Year’s Tax Return

Your accountant will use this as a reference tool to help compile the current return. It gives easy access to crucial information like the deductions your company has or has not been taking.

The previous year’s return also makes it easier for your tax accountant to identify any discrepancies and track changes to your finances or business structure.

The Appropriate Tax Forms

The correct form depends entirely on your business type and whether you are employed, self-employed, a sole proprietor, in a partnership, or a corporate entity.

You can check the IRS service page for forms and instructions to determine what is relevant to your situation.

The business type may impact the filing date, so check this out carefully, and if there are any questions, discuss this with your accountant.

Income Records

Your profit and loss statement will demonstrate income, but this must be supported and verified. Usually, this involves W-2s, bank statements, and sales invoices (for businesses).

A business entity will need basic financial reports for the past year, and these include:

• Profit and loss statement
• Balance sheet, which displays the company’s assets and liabilities
• Statement of cash flows which illustrates all the transactions on the cash account

The right software accounting program should allow easy and quick access to these reports, although packages vary.

Preparing all these documents is not something to leave until the last minute.

Business Asset Information

Your accountant will need information and evidence about assets you have sold or bought during the last financial year, including any assets that may have depreciated like stock.

You should put together any documents or reports related to your fixed and unfixed assets. Some accounting programs have a handy feature to run fixed asset listings or reports.

Expense Records

There are usually many different types of expense records your accountant will need to see.

Organize your receipts, bills, bank statements, credit card statements, and mortgage interest and property taxes form.

Every accountant dreads receiving a box of random receipts, so staying organized as you go along will pay you back in the long run. Chaos will just hit your pocket. Don’t pay your accountant to do something you could easily do yourself during the year.

Deductible Expense Information

Receipts are one thing, but your accountant may need more than those.

If you have a home office used exclusively for business (and this is much more common following the pandemic), you may be eligible for the home office deduction.

Unsurprisingly, the IRS heavily polices the home office deduction. Your accountant may need the square footage of your home and the office within it plus the amounts you have paid in mortgage or rent during the last twelve months and an estimate of how much of the time spent in that office is for business vs. personal use.

If you use your vehicle for business purposes, you could claim a vehicle deduction. This deduction requires an accurate track of your mileage during the year and any car expense receipts.

Business Loan Information

Bring along information on current business loans—payments, interest rate, balance—and any new loans within the last accounting year. Your accountant needs an up-to-date picture of your business liabilities.

Some small business owners took advantage of state and federal loan and grant programs during the Covid-19 pandemic. These schemes included the Economic Injury Disaster Loan (EIDL), the EIDL Advance, and the Paycheck Protection Program or PPP.

The PPP allowed eligible businesses to receive loans and qualify for loan forgiveness if utilized for qualifying expenses. These expenses include utilities, payroll expenses, and rent payments.

Whether your loan was forgiven or not, these funds are not counted as taxable income for your business, so while your accountant should be aware of their existence, they do not need inclusion on your return.

You can also claim deductions for any eligible business expenses covered by PPP funds.

All qualifying small business costs paid for with PPP funds can be written off, but you will need to provide receipts, invoices, and other relevant documentation. Claiming these deductions will lower your tax liability.

The same applies to an EIDL or EIDL grant—these do not form part of your taxable income. You can write off business expenses paid for using these funds and lower your tax liability.

Conclusion

Having all the essential documents ready can help make tax filing a breeze. Mi Tax CPA offers a professional and client-focused tax return service to take the heat out of the end of the financial year. Just ensure you keep good records during the year. Choosing the right accounting software package can go a long way toward simplifying the process.

Tax doesn’t need to be taxing! Contact MI Tax CPA and find out how we can help you prepare for your tax return.