How to combat tax season stress for both you and your CPA!

By The Lerner Group on March 15, 2023

Tax season can be a stressful time for many. There was even a phobia created to characterize this behavior called Forosophobia^1[1]. This phobia is commonly described as a fear of taxes, resulting in procrastination and anxiety around tax time. The importance of getting everything over to your accountant on time and making sure you aren’t missing any crucial details that would pertain to your return can be a stressful time for both you and your CPA. To help you avoid that feeling, we put together a helpful guide to organize your information clearly and make preparing for your taxes as stress-free as possible.

What documents should you have ready for your CPA?

All tax professionals will need detailed records of all income earned and deductible expenses incurred throughout the year. You should have the following documents and details ready for your tax preparer[2]:

Helpful Tip: If possible, scan the documents and e-mail them to your accountant. This way, you do not have to worry about them getting lost in case needed in the future.

• Income sources include, but are not limited to…
  • Employment and self-employment (e.g. W2, 1099-NEC, 1099-K)
  • Unemployment (e.g., 1099-G)
  • Investments (e.g. 1099, 1099-INT, 1099-DIV, 1099-B)
  • Retirement or disability (e.g., 1099-G, 1099R, SSA-1099)
  • Income from flow-thru entities (e.g., K-1s from Partnerships, LLCs, S Corps and Irrevocable Trusts)
  • Other
    • Scholarships, Lottery, Alimony, etc.
    • Other income received for which you did not receive a 1099
• Deductible Expenses include, but are not limited to…
  • State Income and Real Estate Taxes
  • Investment interest and interest on your home
  • Charitable contributions, both cash and non-cash
    • Helpful Tip: If total value of non-cash contributions exceeds $500, you will need a description of each gift, the original cost, the current value, and how acquired.  If you exceed $5,000 you will need a qualified appraisal.
  • Expenses related to your self-employment income (e.g. supplies, computers, internet expenses, home office)
• Life Events.  Did any life events take place during the year and, if so, what pertinent information will the CPA need of those?
  • Newborn or adopted children (names and dates of birth)
  • Marriage (date of marriage)
  • Divorce (date of divorce and copy of property settlement agreement)
  • Death of a spouse or dependent (date of death)
  • Children graduating college or reaching certain ages whereby they no longer qualify as dependents (birthdates and year of graduation)
• Gifting.  Did you make gifts during the year?  Be sure to have your tax preparer review whether gift tax returns are required.

Tax professionals get busier as the filing deadlines get closer so the sooner you provide the data, the less likely you will need to extend the due date for filing.  Ask your CPA what important deadlines they have to be certain your returns will be filed in a timely manner.  Partnerships, LLCs, Corporations and S Corporations are due 3/15/2023.  Individuals and trusts are due 4/15/2023.  Exempt organizations are due 5/15/2023..

How to better prepare for the years ahead?

Set a meeting with your CPA outside of tax season. We often see missed opportunities because there needed to be more planning ahead of time. It doesn’t hurt to loop in your financial professionals along the way to talk about potential opportunities as they arise. In addition, keep a log of events as they transpire throughout the year. This will help you keep track of important dates, details, and documents you may need to locate later for your return.

Tax time shouldn’t be scary or stressful if you are well-prepared. Having the necessary documents for your CPA will help make this process easier. Always feel free to connect your investment professionals with your accountant. Your investment professionals can help facilitate the delivery of documents directly to your accountant. Feel free to reach out to our team if you have additional questions. Happy tax season!

[1] https://www.psychologytoday.com/us/blog/machiavellians-gulling-the-rubes/202102/forosophobia-fear-of-taxes-and-the-irs

[2] https://www.taxoutreach.org/blog/what-to-bring-to-a-tax-appointment-tax-checklist/

Hightower Advisors, LLC is an SEC registered investment adviser. Securities are offered through Hightower Securities, LLC member FINRA and SIPC. Hightower Advisors, LLC or any of its affiliates do not provide tax or legal advice. This material is not intended or written to provide and should not be relied upon or used as a substitute for tax or legal advice. Information contained herein does not consider an individual’s or entity’s specific circumstances or applicable governing law, which may vary from jurisdiction to jurisdiction and be subject to change. Clients are urged to consult their tax or legal advisor for related questions.