Are you looking forward to just drop all paperwork that you can find for 2022 to your Tax Preparer for the 2023 Tax Filing Season? Are you giving your Tax Preparer documents that you received in the mail which you think are important? Do you think that you can just give your Tax Preparer a W-2 Form and that is it?
Think again.
Please note that it is the individual Taxpayer who has the responsibility to submit all income tax documentation and/or information on a timely basis to his or her Tax Preparer, whether the information and/or documentation is requested by the Tax Preparer or not.
The individual taxpayer is ultimately responsible for the completion and accuracy of his or her return – not the Tax Preparer.
This taxpayer responsibility is best exhibited by submitting ALL supporting income tax documentation and information to the Tax Preparer on a timely basis and on a Completebasis. Submit it all at once. You can do this if you are prepared.
All information that is not supported by information documents and other statements should be written in summary form on a sheet of paper. Such information includes charitable donations and medical and/or dental expenses.
Your Tax Preparer may still have questions despite your best efforts to provide complete and accurate information and/or documentation. Please provide a dollar amount as the answer for such additional questions. For example, your Tax Preparer may ask you if you have additional education expenses in addition to what is on the form 1098-T during 2022. Please do not respond Yes, especially if answering through email or text. Your Tax Preparer wants to know the dollar amount of your additional education expenses during 2022. That is the whole point of the question. Your Tax Preparer does not check off a box on your tax return indicating that you incurred additional education expenses during the year. A dollar amount is what is reported on the tax return.
The Taxpayer needs to anticipate what information and/or documentation is necessary for the upcoming Tax Filing season especially if you have been filing individual income tax returns for the last 20 years or so!
There may possibly be extra charges from your Tax Preparer if you do not follow the above advice. Also, the returns will take longer to prepare, Review and electronically file.
Please submit any information documents or statements for the correct year as asked by your Tax Preparer. Do not send in a 2021 social security statement, for example, when your Tax Preparer inquires one for 2022. This may also increase fees, charges, and the time to complete the returns.
Cryptocurrency information is also the responsibility of the Taxpayer. Please do not just submit raw cryptocurrency data to your Tax Preparer and expect him or her to apply their magic to such raw data. Again, additional fees, charges, and the time to complete the returns will increase if this is the case.
As per the above, the following is a list of some information and supporting income tax documentation to give to your Tax Preparer if it applies to you, based on your individual income tax situation.
- Form W-2. If you worked for any employer or employers for any length of time during 2022. It is the individual Taxpayer’s responsibility to obtain all applicable W-2 Forms from all employers. You have the responsibility to report any Form W-2 even though you may not have received it from your employer. Please provide a Form W-2 form in response to a question from your Tax Preparer about whether your spouse worked or not during 2022. A simple answer of YES to this question is not appropriate. Please do not provide numbers. Submit the federal form W-2 itself. Do not write numbers on a preprinted W-2 Form. These written amounts will not be reported on your tax returns. Your amounts reported will be compared with the W-2 received by the Internal Revenue Service. You will receive a Notice from the Internal Revenue Service if the amounts on the W-2 form do not agree with what was reported on your federal individual income tax return. Please review your W-2 Form as soon as you receive it to see if it is correct to you. If not, contact your employer or employers with the correction or corrections. Your employer, if they agree, has the responsibility to send you a corrected W-2 statement as well as to the Internal Revenue Service. You can then present this W-2 corrected statement to your Tax Preparer when you receive it. Do not look at your W-2 for the first time on April 15, 2023!
- Form 1095-A. Please note that you would receive a Form 1095-A if you had health insurance through the marketplace exchange for any part of 2022. This form is very important for your return. Your returns will be electronically REJECTED if you do not have this form in the return if you had health insurance coverage during 2022 through the marketplace exchange. Please note that the States of California and New Jersey require health insurance coverage for all 12 months of 2022, and they will send you statements documenting this. Please give these to your Tax Preparer as well. The lack of health insurance for any month or months during 2022 for residents of the State of California and the State of New Jersey will pay a penalty on their state income tax returns for all months without such coverage.
- Rental Property. Please do not wait for your Tax Preparer to contact you to ask for rental income and rental expenses information. Prepare such schedules ahead of time and give them to your Tax Preparer. Please note that Bookkeeping can be performed on the income and expense transactions for the year per rental property. This will make things tremendously easier for both the Taxpayer and the Tax Preparer.
There is other information pertaining to a rental property that is needed as required to be reported on the individual income tax return. Such additional information includes the address of the rental property; how many days was the rental property rented during the year; is the rental property also the principal residence of the Taxpayer; the type of rental property such as apartment, Single Family House and/or commercial rental property; the date that the rental property was put into service; any major work that was done to the rental property during the year; and the purchase of appliances and/or furniture for the rental property during the year.
Again, not following the above may increase your Tax Preparation fees and your individual income tax returns will be delayed.
- Prior Year Returns. Please provide a copy of your prior year returns that you filed for 2021 if you seek out a new Tax Preparer to prepare and file your 2022 individual income tax returns. Do not wait for the Tax Preparer to ask for it. It will be needed by the Tax Preparer. Also, provide any Password that is needed to access such prior year 2021 individual income tax returns in advance. You should upload every single page of your 2021 federal individual income tax return that was filed as well as every single page of every State return that was filed for 2021. For a newly Married couple during 2022, please provide a copy of BOTH individual returns prepared and filed for 2021. There is no need to upload supporting income tax documentation for the prior year 2021. A copy of the return is fine. Please provide a copy of these returns. Do not say that my Accountant from last year has a copy. It is the responsibility of the Taxpayer to contact his or her prior year Tax Preparer to obtain, retain and submit such a copy. This is NOT the responsibility of the Tax Preparer. Please note that your 2022 individual income tax returns have the risk of being incomplete and/or inaccurate if a prior year return is not presented to your new Tax Preparer.
- Brokerage Transactions. There are times when there are questions regarding a brokerage statement that a Tax Preparer has. It is the responsibility of the Taxpayer to contact his or her financial advisor at the brokerage place, if necessary, to ask these questions and to get the answers to such questions. It is not the responsibility of the Tax Preparer to do this. Only amounts printed on the brokerage statement are reported on the tax returns. This is what the Internal Revenue Service looks at to compare to what is reported on the federal individual income tax return. Do not write in numbers that you think are more correct on the brokerage statement. They will not be reported on your tax return. You should examine your 2022 brokerage statement as soon as you receive it to see if it is accurate. If not, it is the responsibility of the Taxpayer to contact the brokerage place to correct, and if so, a corrected brokerage statement will be submitted to you and to the Internal Revenue Service. Present any corrected brokerage statement for 2022 to your Tax Preparer on a timely basis. Do not wait until April 15, 2023 to examine your 2022 brokerage statement for the first time!
- Child and Dependent Care Credit. You need to gather information and documentation if you want to take a credit for the amount that you paid for childcare during 2022. Such information includes the following: Name of the Child Care Provider; address of the Child Care Provider; Employer Identification Number of the Child Care Provider; and the total amount paid FOR EACH CHILD OR DEPENDENT. This information can all be obtained from an invoice from the Child Care Provider. Please submit such invoice to your Tax Preparer and do NOT wait for him or her to ask for it. Other information needed is as follows: whether the spouse worked during 2022, and if the taxpayer worked during 2022; and whether the spouse and/or taxpayer went to school during 2022. All this information is needed to report on the federal individual income tax return and to allow the Tax Preparer to properly calculate the federal Child and Dependent Care Credit. Also, provide the social security number and date of birth of each child and/or dependent in which you are seeking a federal Child and Dependent Care Credit. A federal Child and Dependent Care Credit cannot be obtained on your federal individual income tax return if you do not provide the Employer Identification Number, or social security number, of the Child Care Provider. This includes any individual who you paid but the individual does not want to give out his or her social security number.
- Income Tax Payments. The Tax Preparer needs information from the taxpayer on whether, when and how much of the federal and State individual income tax liabilities from the 2021 tax returns were paid in 2022, or refunds received. This also applies to any estimated individual income tax payments made throughout 2022. Estimated individual income tax payments are prepayments of tax for the 2022 tax year as you go along through the 2022 tax year. Do not respond to your Tax Preparer, upon inquiry, that you think you paid the amount, but you are not sure. It is the responsibility of the Taxpayer to know if, when and how much such payments were made. Otherwise, you may get a Notice from the Internal Revenue Service if there are any discrepancies between the amounts reported for these items on the 2022 individual income returns and the amounts recorded by the Internal Revenue Service and/or State Tax Authority.
- Bank Account Information. Please tell your Tax Preparer up front whether you prefer electronic debit if you owe and/or direct deposit if you anticipate a refund. Such information includes the bank name, the bank account number, and the bank routing number; and whether the bank account is a checking or a savings account. Do not allow the Tax Preparer to guess your desire. Such information can easily be submitted on an Individual Tax Organizer. Such information can be obtained from a voided check. You can attach a voided check to the Individual Income Tax Organizer.
- Individual Income Tax Organizer. This is a packet that will sent to you by your Tax Preparer during early January of 2023 if you go to the same Tax Preparer to prepare your 2022 individual income tax returns that you did for your 2021 returns. You can summarize all the information presented in this article on this Individual Income Tax Organizer. It also shows your prior year information if you go to the same Tax Preparer. A checklist of important forms to provide to your Tax Preparer are usually on this Individual Income Tax Organizer, as well.
- Copy of State Driver’s License. State Drivers’ license information is required to be reported as part of the tax return preparation process in some states such as New York State. The driver’s license must not be expired. Please submit a copy of your renewed driver’s license to your Tax Preparer before your Tax Preparer asks for it.
- Multiple States. Some taxpayers for any given year live and/or work in more than one State throughout the year. Please provide an Allocation on a sheet of paper of the 12 months of 2022- not hard people – allocating the period during 2022 that you lived and/or worked in each State. For example:
January 01, 2022 – April 30, 2022 Lived in New York State
Worked in New York State
May 01, 2022 – September 30, 2022 Lived in Pennsylvania
Worked in New Jersey
October 01, 2022- December 31, 2022 Lived in New Jersey
Worked in Pennsylvania
The above information is important to the Tax Preparer to prepare accurate and complete multi state full year Resident, part year Resident, and Non-Resident individual income tax returns. Please provide the same allocation for the spouse if different and if filing as Married Filing Jointly. Please provide this information on a sheet of paper in advance before your Tax Preparer asks for it.
This article illuminates that a lot is involved by the Taxpayer to prepare by the end of 2022 for the upcoming Tax Filing Season of 2023. This will benefit both the Taxpayer and the Tax Preparer. Fee increases will be avoided, and the individual income tax returns will be prepared, reviewed and electronically filed much faster and quicker.
Author: Angelo Liberati for Accountants On Air