Getting Organized for Your 2021 Tax Return

It’s that time of year—holiday decorations are being packed away, New Year’s resolutions have been made, and now it’s time to keep a watchful eye toward the mailbox in anticipation of the arrival of those year-end tax documents. They will arrive one by one, but what do you do with them? What is the best way to organize these documents? Below I share with you a step-by-step approach to year-end tax organization.

1) Get your hands on a tax organizer. Many tax professionals (myself included) provide each of their clients a tax organizer every year. In the digital age, tax organizers will likely be emailed to you, but they can also arrive by mail. These organizers will show your information from last year and will lead you on a path to remembering all of the documents you need to locate. To request your free tax planner, email us at office@SiskMorrisCPA.com. 

2) Pick a place to work. Find a spot in your home or office where there is plenty of room to spread out all of your documents. Many use their home offices and some find the dining room table is a great spot to spread out.

3) Purchase a 6 or 12 tab plastic folder organizer. Label the outside of it with the tax year. You should label each of the tabs by categories you use such as: W2s, 1099s INT or 1099 DIV (banks and brokerage statements), Health Insurance 1095, Itemized Deductions (charitable giving, 1098 mortgage statement, medical expenses, and property tax), education deductions/ 1098T/ student loan interest, business income, business deductions etc. Some of my clients find color coding their documents helps them stay organized. After you have filed your taxes, your finished tax return can be placed in this folder once it is completed. Now all of your documents will be in one spot for future reference.

4)  Review your documents. Make sure you have all of your W2s, 1099s, and 1098s. You should receive these by January 31st.

5)  Pull out your receipts and credit card statements. If you have deductible expenses or donations, make sure you have your receipts and statements highlighted and organized and summarized by each category. The more organized you are, the easier and faster it will be to get your tax return prepared.

6)  Retirement contributions. You will receive year-end statements showing how much you contributed to your 401 (k) plan, traditional IRA, Roth IRA and SEP IRAs. Keep those statements to ensure the retirement deduction is made. If you have additional funds that are available for retirement contribution to an IRA, make sure you tell your tax preparer so they can calculate the tax savings for you. You have until April 15th to put those funds in your IRA account.

7)  Health Insurance/ Affordable Care Act or Obama Care. Regardless of what type of health insurance you have, your carrier will send you a year-end summary indicating who is on the plan and what months you are covered. This document (Form 1095) is now an important component to everyone’s tax return.

8)  Business Income and Expenses. If you are partially or entirely self-employed, you will need to close out your year-end books. Your tax preparer will need to know your total income along with total expenses for your business. If you use tax software like QuickBooks, I suggest you print out the Income Statements and Balance Sheets. You can also backup your QuickBooks files to a thumb drive to pass along to the CPA (Certified Public Accountant) if you are using QuickBooks Desktop. You can share digital access if you are using QuickBooks Online.

9)  Organize Your Questions. Time is short during tax season for all tax preparers. Make a list of all the issues or questions you have, and ask your tax provider at one time so that they can help you as efficiently as possible.

10) Call your CPA and make an appointment. Once you are all organized, now is the time to get your documents to your tax professional. The sooner you get your information to them the sooner your return will be filed. Many CPAs (myself included) have secure file portals where you can upload the documents as opposed to dropping them off at the office. This is a great resource during tax season for busy individuals. It also offers a COVID-19 safety precaution as you prepare your tax return. 

11) Stimulus Payments. This year, like last year, it is important to know the date and how much you received for any stimulus payments received in 2021. We will likely have to input that into your tax return like we did in 2020.  Although we hope the IRS will send us a statement, they did not last year, and there is no guarantee they will this year.   

Remember, it is easier to organize your taxes throughout the year instead of preparing them a week before they are due. You can begin to set up your 2022 files now so that your 2022 tax time doesn’t have to be stressful. Being organized helps you to be ahead of the time crunch.

By Alicia Sisk-Morris, CPA, ME

Author Bio

Alicia Sisk-Morris is a Certified Public Accountant (CPA) with over 20 years’ experience with an office located between North Asheville and Weaverville. Her firm services individuals, small businesses and not-for-profit clients. Her firm's clients range from solo-entrepreneurs to artists, alternative and traditional medical professionals, Airbnbs, long-term rentals, construction firms, engineers, real estate professionals, schools, business executives, and start-ups. Additionally, Alicia is an instructor for Small Business Administration workshops and the Western Women's Business Center, as well as an accomplished public speaker and trainer. She regularly addresses accounting, tax, and other topics related to contemporary business challenges, solutions and opportunities. Besides her CPA credentials, Alicia holds an undergraduate degree in Business Administration from the University of North Carolina - Chapel Hill and a Master of Entrepreneurship Degree from Western Carolina University, where she was a Jacob Spencer Medford Scholar, a WCU Distance Graduate Scholar, and was honored as the Outstanding Master of Entrepreneurship Student of the Year award recipient. Learn more at: www.SiskMorrisCPA.com.