Tax Season Made Easy: Tax Document Checklist

Nothing can trigger an intense emotional response quite like tax season. Whether you’re filing your taxes yourself or seeking assistance from a professional, having the right paperwork is crucial for maximizing deductions, minimizing errors, and avoiding potential issues with the IRS.  At Prudent Investors, we understand the importance of thorough preparation when it comes to taxes. That’s why we have compiled a comprehensive tax document checklist to help you navigate tax season with ease. 

Tax Document Checklist

To ensure that you have all the necessary documentation at your fingertips, we categorized the checklist into different sections. By following this tax document checklist, you’ll be that much more prepared to file your personal taxes. 

Income Documents:

• W-2 forms from all employers
• 1099 forms for freelance work or independent contractor income
• Income from rental properties or investments
• Brokerages are required to send 1099s that show interest, dividends, and realized gain/loss information
• Any employment compensation received, like bonuses or commissions
• Social security benefits
• Alimony received
• Trust income
• State refunds (You should receive Form 1099-G if you received a tax refund from the state)
• Retirement Distributions received from retirement accounts (Custodians will send Form 5498 for retirement distributions received)
• Documentation of jury duty income

Deduction Documents

• Mortgage interest statement (Mortgage services are required to provide Form 1098 that will show interest and taxes paid. However be aware that mortgage servicing departments can change.  If that happens, be on the lookout for documents from both service providers)
• Property tax statements (Property tax statements can normally be located online through your county’s website. However property tax statements will not necessarily align with our tax year.)
• Dependent information on each person you will claim
• Medical expenses (Medical expenses can be deducted if the expenses exceeded 7.5% of that tax year’s adjusted gross income.)
• Charitable contributions
• Education expenses, including daycare or babysitting fees
• Student loan interest
• Retirement account contributions (Custodians will send Form 5498 for contributions made in the prior year.)

Financial Accounts

• All active bank statements
• Investment account statements
• Cryptocurrency or NFT sales (Note that cryptocurrency custodians do not normally send 1099-B statements of sales. They will send 1099-MISC for staking rewards.)
• Retirement account statements
• Record or property sales
• Health Savings Account or Flexible savings Account contributions

Miscellaneous Documents

• Receipts or itemizations for home improvements or energy-efficient upgrades
• Record of large item purchased, like cars or boats
• Records of gambling winnings or losses
• Record of monetary prizes or awards
• Documentation of job-related moving expenses
• Records of alimony paid
• Documentation of any federally declared disaster assistance (FEMA)

Remember to also come prepared with your personal information, like name as it appears on your social security card, social security number, and the bank account and routing number if opting for a refund by direct deposit, so that the IRS can accurately verify your filing. 

Keep in mind, this recommended tax document checklist is for your personal tax return. The tax situation for a business owner or freelance worker is a bit more complex and these professionals will need to prepare additional tax documents and records of their income and expenses throughout the tax year. 

Tax Documents for Estates and Trusts

Aside from personal tax filing, estates and trusts have their own unique tax filing process. Filing requirements can vary depending on the type of trusts, its income level, and the jurisdiction’s tax laws. Generally, trusts are required to file certain tax documents to report income, deductions, and distributions. 

Here are the key tax documents you’ll need to prepare to file a tax return:

Form 1041

Form 1041 is used to report the trust’s income, gains, losses, and distributions to beneficiaries. This form is required for most irrevocable trusts and some revocable trusts that generate income or have gross income of $600 or more in a tax year. 

Beneficiaries are also provided with this form to report their share of trust income on their personal tax return. 

Form 1099

If the trust receives certain types of income, such as interest, dividends, or rental income, it may need to issue Form 1099 to report those payments to the IRA and recipients. 

Decedent estates

If you are the trustee or administrator of an estate, there are separate tax forms that are required when the trustor passes away. We examine all required tax forms for decedent estates here. 

Since filing taxes on behalf of an estate or trust can be nuanced, a qualified financial advisor and accountant can help you tackle your taxes with confidence. 

Be Prepared for Tax Season

Aside from preparing all aforementioned tax documents, you should also consider ways to optimize your financial situation by reducing your overall taxes. Implementing tax strategies, like tax loss harvesting and tax diversification, can help you keep more of your hard earned dollars and improve your overall financial situation. 

If you find yourself overwhelmed or unsure about any aspect of your taxes, don’t hesitate to reach out to Prudent Investors for guidance. Our team of experienced financial advisors is dedicated to helping you achieve financial success and security. 

Investment advice through Prudent Investors, an SEC-registered investment advisor. This blog is general communication being provided for informational purposes only. This information is in no way a solicitation or offer to sell securities or investment advisory services. It is educational in nature and not to be taken as advice or a recommendation for any specific investment product or investment strategy. This does not contain sufficient information to support an investment decision. Any investment or investment strategy mentioned may not be suitable for all investors or in their best interest. Statistical information, quotes, charts, references to articles or any other quoted statement or statements regarding market or other financial information is obtained from sources which we believe reliable, but we do not warrant or guarantee the timeliness or accuracy of this information. All rights are reserved. No part of this blog including text, graphics, et al, may be reproduced or copied in any format, electronic, print, et al, without written consent from Prudent Investors. Prudent Investors does not provide legal or tax advice. Please be advised to consult with your investment advisor, attorney or tax professional before making any investment decisions.