Top 5 Documents your Tax Professional will need!
Magic Tax & Bookkeeping LLC
If you have delayed preparing your documents for Tax time here is a quick list for the new business or those looking for a quick refresher. Here is the list of the top 5 documents your tax professional will need.
1. Financial Statements
Financial statements are a basic set of financial documents comprised of a balance sheet, an income statement and a cash flow statement. For tax purposes, the income statement is the one most used by your accountant, but he or she will also want to see the company’s assets and liabilities.
2. List of Capital Asset Activity
If you bought, sold or disposed of any capital assets in the company during the year, you must account for it in your tax return. You need to keep a detailed list of activity regarding your capital assets. If your listing does not specify the exact nature of the assets being bought and sold, make notes in the margin.
3. Vehicle Log
If you sometimes use your own car for business purposes, you can claim a portion of the car’s operating expenses as a tax deduction against your business income. The IRS allows you to calculate this one of two ways:
a. The actual expenses method starts with adding up all of your vehicle operating expenses (i.e. loan interest, lease costs, gas, repairs and maintenance, insurance, etc.). Next, divide the miles driven for business by the total miles driven in the year, and apply the resulting percentage to the operating costs. This is your allowable deduction.
b. The simplified method allows you to apply an IRS-mandated mileage rate to the total business miles driven in the year. For tax year 2016, the standard mileage deduction is $0.54 per mile.
Under both methods, you are required to keep track of your business mileage in a vehicle log. This can be as simple as jotting dates, descriptions and miles into an excel worksheet, or you can use a smart phone app to keep track of your mileage and automate this deduction. Either way this is a very important document to provide to your accountant at tax time.
4. Summary of Home-Office Expenses
If your home office is your sole place of business, or if you regularly meet clients or customers there, you can generally claim home-office expenses.
These expenses include a percentage of your utilities, repairs and maintenance, home insurance, and mortgage interest or rent. You can calculate your home-office deduction by dividing the square footage of your office space by the livable square footage of your house, or by dividing the number of rooms your home office occupies by the total number of rooms in the house. Using either formula, multiply your total home expenses by the home-office percentage. Some accountants will ask for all of your original receipts, while others will only want the summary; be sure to ask what your accountant expects you to provide and prep those documents.
5. Form 1098 for Mortgage Interest and Property Taxes
Your mortgage company likely issued you a IRS Form 1098 at the end of the year that summarizes your mortgage-interest and property-tax payments throughout the year. Your accountant may ask you for this form to claim the mortgage-interest deduction that all homeowners are entitled to, and he or she will also need them as part of your home-office deduction. If you carry multiple mortgages, be sure to provide Forms 1098 for each one.
Need additional help, take advantage of Magic Tax & Bookkeeping LLC’s year end review’s for your books!!
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