Thursday, January 20, 2011


Here is what I, as a tax preparer, need to receive from my clients to properly prepare their tax returns – and what you should provide to your tax preparer.

Obviously start with all copies of all your W-2s, 1099s, 1098s and K-1s from all sources. I tell my clients to make and keep a photocopy of all W-2s. This information may be needed for college financial aid or mortgage applications, or for a variety of other reasons, and this way you won’t have to bother your preparer for the information.

Next is a detailed listing of itemized deductions, rental income and expenses, self-employment income and expenses, and child-care expenses. I don't need to actually see all the individual bills, receipts or cancelled checks for these items- a detailed list or worksheet will suffice. It is important to include the Social Security or Employer Identification Number of all child care providers. “Sam” will disallow the Credit for Child and Dependent Care Expenses if you do not provide an identifying number on the Form 2441.

I, and your tax preparer, will want to see all year-end statements, reports, booklets and other literature received from brokerage accounts and mutual funds. The statements may contain details on cost basis, purchases, dividend reinvestment, margin interest, management fees, etc., and booklets often include important information on income from US government obligations that will be useful in preparing the state income tax return.

If available, include the final pay-stub for the year for each employer. I use this to reconcile the federal wages to the state wages if there is a difference.

Provide the dates of birth for the taxpayer and spouse as well as for all dependent children. Taxpayers have always been allowed an extra deduction for being age 65 or older, or legally blind. Originally it was an additional personal exemption, so everyone received a tax benefit for being a “senior citizen” or blind. Since 1986 seniors and the blind get an increased standard deduction. Now qualifying taxpayers with excessive itemized deductions get no benefit.

Being a gentleman, I try to use tact in soliciting a client’s age. I recall one time when my mentor said to a long-time client, “Now make sure to let me know when you reach age 65.” The client tittered, both flattered and embarrassed, and told him that she was 68 years old! He promptly prepared amended returns for all open years. The next day a sign was hung prominently in the waiting room that read “Please Let Us Know When You Turn Age 65”.

There are other reasons to know the age of a client. For example, ages 55 and 59 are important in determining whether the distribution from a pension plan is “premature”. New Jersey offers a “retirement income exclusion” for taxpayers age 62 on the state return.

The age of dependent children is important to know because it affects various tax benefits, such as the Child Tax Credit, the Credit for Child and Dependent Care Expenses, the stimulus rebate amount, and the dependency exemption.

Special information and documentation is needed for special situations. Here are some examples of what your tax preparer will need in various situations:

IF YOU SOLD STOCK, BONDS OR MUTUAL FUND SHARES- The date of purchase and cost of the stock, bond or mutual fund shares sold. If shares were purchased over the years via dividend reinvestment the amount of dividends reinvested each year. If the investment was inherited the number of shares you inherited and the date of death of the person from whom they were inherited. If at all possible have your brokers provide you with (or send directly to your tax preparer) a "profit and loss" statement for the year's trades that reconciles to the 1099B for your accounts.

IF YOU SOLD REAL ESTATE- The Closing or Settlement Statements for both the purchase and sale of the property, plus the cost of capital improvements made to the property over the years.

IF YOU PURCHASED REAL ESTATE- The Closing or Settlement Statement for the purchase of the property. For rental property - the separate amounts of the "assessed value" for land and improvements from the tax bill (or the post card you received from the municipality).

IF YOU REFINANCED A MORTGAGE- If you paid any points and, if so, the amount paid and term of the new mortgage.

IF YOU ARE RECEIVING IRA DISTRIBUTIONS- The year-end statements for all IRA accounts.

IF YOU RECEIVED A DISTRIBUTION FROM AN IRA OR AN EMPLOYER PENSION PLAN- Did you roll-over the distribution to an IRA or did you just “take the money and run”?

IF YOU HAVE DEPENDENTS IN COLLEGE- The 1098-Ts you received, all the "Bursar's Reports" for the year, and a separate list of the cost of books and other “course materials”.

IF YOU DONATED A CAR TO CHARITY- The paperwork you received from the charity, including the Form 1098-C, the fair market (blue book) value of the car on the date of the contribution, and the original cost and date of purchase of the car donated.

IF YOU ARE PAYING ALIMONY- The Social Security number of the person to whom you are paying the alimony, the amount paid for the year, and any other required payments (i.e. health insurance premiums, real estate expenses) that you are making on behalf of your former spouse.

IF YOU PURCHASED OR LEASED A CAR, TRUCK OR BOAT- The amount of state and local sales tax paid.

IF YOU PURCHASED AN ITEM ELIGIBLE FOR AN ENERGY CREDIT– The cost, and description, of the item(s) purchased and the “Manufacturer’s Certification” you received from the seller.

IF YOU ARE A RETIRED POLICEMAN OR FIREFIGHTER- The amount withheld from your pension for the year for health insurance premiums.

I tell first-time clients to provide me with copies of the past three years federal and state income tax returns. The prior year return (2009 return when preparing 2010) is an absolute must. I also review all three open returns to see if I can get any additional money back by filing an amended return.

I have always said it is better to give me too much information than too little. I tell clients to provide me with anything else they think will be helpful in preparing the return.

The last few years I have also included the following statement in my annual client mailing –

I need specific numbers for deductions you are claiming. “Claim the maximum” or “Whatever I am allowed” or “Same as last year” don’t cut it. The maximum is what you actually paid – and you are allowed what you actually paid! It is very rare that an expense or number of miles driven for an activity is exactly the same as it was the previous year. I cannot make up numbers for you– I need you to tell me “$1023.50” or “$20.00 per week for 50 weeks” or “4638 miles”!

The more organized you are and the more detailed information you provide your tax professional the happier he will be, the more accurate your return will be, and perhaps your fee will be lower.

Fellow tax pros – did I forget anything?



Anonymous said...

I think this is a GREAT check list for all clients. The problem is that most of "our" clients won't read it, or if they do, they may not understand parts of it... Thank you for taking your time and writing this up!

Robert D Flach said...


Glad you found this post a helpful tool for your clients.

Good luck in the upcoming tax season!


Anonymous said...

Thank you! I am using a new tax preparer this year after buying a home on my own for the first time, and your post, combined with what my real estate agent has said and what I remember from the little I paid attention when I was married, has really helped me get a lot of things together to hopefully help my tax preparer work better for me. I appreciate you taking the time to post that list!

Anonymous said...

This was great and really helpful! I'm keeping this!

Unknown said...

Generally, my thinking has been to keep anything money related in a separate folder for when tax preparation comes around. I've usually kept receipts to keep track of expenses, but it might be easier to have some sort of spreadsheet for that instead. It's a lot easier to keep track of one spreadsheet over multiple receipts! I know that some people dread tax season, but if you're organized, it isn't that bad.