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Documents Required for Preparation

What Documents Do I Need to Bring to My Tax Preparer?

Get Your Paperwork Together Before Tax Time

BY WILLIAM PEREZ

Updated July 11, 2018

If you’re like many people, the thought of doing your taxes—or even just getting everything ready so someone else can do them for you—stresses you out at least a little. Hiring a preparer to prepare your tax return is always the easiest route, but you know that they are inevitably going to ask you for some document that you didn’t think to include in that briefcase full of paperwork you arrived with.

​Take the stress out of this tax season by consulting our checklist before you leave home. Yes, it looks long and tedious, but take a deep breath—not all these documents will apply to you. As you go down the list, simply cross off those items that have no place in your personal financial picture.

Take Your Social Security Card With You (only for new clients)

This is unnecessary if you’ve used the same accountant in previous years, but if you’re seeing someone new, he’ll want to verify the spelling of your name. He can do this at a glance if you bring your Social Security card. Be sure to bring cards for your spouse and dependents as well.

​If you absolutely can’t lay your hands on your Social Security card, it might be worth a visit to your local Social Security Administration office to get a replacement card because you’ll inevitably need it for something else sooner or later. But if you just don’t have the time, at least take a copy of a previous year’s tax return with you, one that bears your current name and address if possible, as well as your Social Security number.

Prior Year’s tax returns (only for new clients)

Try to bring your last two tax returns filed.

Income-Related Documents

​Now it’s time to begin collecting all those income documents. Toss them in your briefcase as they begin landing in your mailbox in January and February.

  • Form W-2 (wage and salary income)
  • Form W-2G (gambling winnings)
  • Form 1099-A (foreclosure of a home)
  • Form 1099-B (sales of stock, bonds, or other investments)
  • Form 1099-C (canceled debts)
  • Form 1099-DIV (dividends)
  • Form 1099-G (state tax refunds and unemployment compensation)
  • Form 1099-INT (interest income)
  • Form 1099-K (business or rental income processed by third-party networks)
  • Form 1099-LTC (benefits received from a long-term care policy)
  • Form 1099-MISC (self-employment and other various types of income)
  • Form 1099-OID (original issue discount on bonds)
  • Form 1099-PATR (patronage dividends)
  • Form 1099-Q (distributions from an education savings plan)
  • Form 1099-QA (distributions from an ABLE account)
  • Form 1099-R (distributions from individual retirement accounts, 401(k) plans, and other types of retirement savings plans)
  • Form 1099-S (proceeds from the sale of real estate)
  • Form 1099-SA (distributions from health savings accounts)
  • Form SSA-1099 (Social Security benefits)
  • Form RRB-1099 (Railroad retirement benefits)
  • Schedule K-1 (income from partnerships, S corporations, estates, or trusts)

It’s possible that you might have received income during the course of the year that’s not reported on any of these forms. ​For example, you might be a sole proprietor with your own business. Someone may have paid you $500 for work. This doesn’t require that the company or individual submit a 1099-MISC form to you or on your behalf because the threshold is $600 since 2017. But you nonetheless have to report and pay taxes on that income.

Make note of all such payments or any others that didn’t result in a specific income reporting document. Let your tax preparer know what the money was for and how much was received. Other examples of income that might not be reported on one of these tax documents include investment income from foreign financial accounts and rental income.

Expense-Related Documents

You may also receive some tax documents relating to money you spent that can affect your tax picture. You’ll want to bring these with you as well or, if you didn’t receive a document or form, make sure you have an accounting of the payments you made because they may well be tax deductible.

  • Form 1097-BTC (bond tax credit)
  • Form 1098 (mortgage interest)
  • Form 1098-C (charitable contribution of vehicles)
  • Form 1098-E (student loan interest)
  • Form 1098-MA (homeowner mortgage payments)
  • Form 1098-T (tuition for higher education)
  • Business expenses (summarized by type and amount)
  • Child care expenses (summarized by provider and amount)
  • Gambling losses
  • Medical expenses
  • Personal property tax, such as car registration paid
  • Real estate tax bills
  • Realized gain/loss report for any stocks, bonds, mutual funds and other capital investments sold during the year
  • Receipts or acknowledgment letters for gifts to charity

Many tax professionals will provide you with a printed organizer to help you collect all this data so it will be at your fingertips when you’re ready to file next year.

Rental Expenses and Related Documents

  • Rental expenses (summarized by property, type, and amount)
  • See the Schedule E below for a list of all expenses
  • Also note that if you are not sure about the expense, bring it anyway.

The general rule for claiming any business costs for tax purposes, both for property rental and a business trade, is that the costs must be incurred ‘wholly and exclusively’ for the purposes of the trade. This means that you can generally claim for a business cost if you would not have incurred it if you were not in business. You cannot claim for any expense that was not incurred solely for your property rental business.

You might incur a cost where only part of it is an expense for your property rental business. If a definite part of a cost is incurred wholly and exclusively for the property business then you can deduct that part. At times, a cost can be incurred for both and private use. In this case the private element must not be claimed.

There have been lots of changes in the tax rules for property rental businesses in the last two years. In particular, the cessation of the 10% wear-and-tear allowance for furnished lettings and the restricting on claiming interest at your highest rate of income tax. Companies that own properties with interest costs are not affected.

Allowable expenses

You can claim for most ‘revenue’ expenses, which include the day-to-day running costs of the property, but you cannot claim for ‘capital’ expenses.

The following is not a comprehensive list. However, it will cover the most popular types of revenue expenditure that you can claim.

Bank and loan interest, but not the capital part of a repayment mortgage. From 6 April 2017, you

may not be able to claim for the interest cost at your highest rate of tax. You can still claim for the interest cost, but only at a maximum of 20%, on a reducing scale over the next few years.

General maintenance and repairs to the property

Water rates and council tax

Rent (if you sublet, ground rents and service charges

Light and heat e.g. gas, electricity & oil

Insurance for buildings, contents and public liability

Telephone calls

Stationery

Advertising for tenants

Letting agent fees and management fees

Accountant’s fees in the preparation of the rental accounts (but not for the Tax Return itself)

Costs of services, including gardeners and cleaners

Non allowable costs

Capital expenses are not allowable and cannot be claimed against your rental income.

The initial purchase of the property and its furnishings and equipment (e.g. beds, carpets, sofa, tables, chairs, washing machine, cooker etc) cannot be claimed as revenue or capital expenses. These items are described as ‘capital’ purchases. You can claim for the replacements or repairs later on.

Repairs will generally improve and increase the value of the property. That does not make them capital costs. A repair restores an asset to its original condition, sometimes by replacing parts of it. Replacing a part of the property with the nearest modern equivalent is still a repair if the improvement is incidental to the repair, such as replacing a single-glazed window with a double-glazed window.

Expenses are generally ‘capital’ expenses if they will be used in the business over a longer period of time, such as when you add something to the property that was not there before or substantially alter, improve or upgrade something that was already in existence. Common additions to the property that are not revenue expenses include installing a security system or replacing a kitchen with one of a much higher specification.

Even substantial costs can be classified as ‘revenue’ repairs costs, if you replace something that was already there. The key test is whether the property could be used for rental purposes without the upgrade/repair taking place. So a major central heating and boiler installation may be deemed as a property repair if it is only replacing an old system. You may be fined for not upgrading and maintaining electric and gas systems. That does not actually stop the property not being used. Therefore, the costs of bring electric and gas systems up to date may still be a repair, as the wiring and pipes existed beforehand. If a newly purchased dilapidated property had a major roof leak then this may be classified as a ‘capital’ cost as the property could not be used in its current state. However, if a major storm caused the same issue then you could claim for the repair as the property had an existing functional roof beforehand. This is a complex area of tax law so advice should be sought.

Up to 5 April 2016 you were able to claim a 10% wear and tear allowance instead of the costs of replacing movable furniture and equipment.

Travel expenses

If you travel ‘wholly and exclusively’ for the purpose of the rental business, for example, to deal with a complaint from a tenant, make a repair to a property or just to check its condition then you can claim the cost of travel from the place you manage the letting, which is often your home, to the rental property and back. If you use your own car then you can claim using HMRC’s mileage allowance at 45 pence per mile.

Capital allowances

The usual story that you will hear from HMRC is that you cannot claim capital allowances (tax depreciation) for equipment you buy for use in a residential letting business. That is not completely true. The law says that you cannot claim capital allowances for equipment ‘for use in a dwelling-house’ which means the equipment for use in the property by tenants.

You can claim capital allowances for equipment you buy to run your rental business. For example, tools with an expected life of more than two years, which you use to maintain your property. You can even include a computer if that is what you use to manage your rental business. However, you must limit your claim proportionately to account for any non-business use.

Furnished holiday lettings are treated as a trade for tax purposes. These lettings have different rules for claiming for furniture and equipment. You can claim capital allowances on the initial purchase of furniture etc on a furnished holiday lettings and also their ultimate replacements on the same basis.

In an IRS article, they list:

What Deductions Can I Take as an Owner of Rental Property?

If you receive rental income from the rental of a dwelling unit, there are certain rental expenses you may deduct on your tax return. These expenses may include mortgage interest, property tax, operating expenses, depreciation, and repairs.

You can deduct the ordinary and necessary expenses for managing, conserving and maintaining your rental property. Ordinary expenses are those that are common and generally accepted in the business. Necessary expenses are those that are deemed appropriate, such as interest, taxes, advertising, maintenance, utilities and insurance.

You can deduct the costs of certain materials, supplies, repairs, and maintenance  that you make to your rental property to keep your property in good operating condition.

You can deduct the expenses paid by the tenant if they are deductible rental expenses. When you include the fair market value of the property or services in your rental income, you can deduct that same amount as a rental expense.

You may not deduct the cost of improvements. A rental property is improved only if the amounts paid are for a betterment or restoration or adaptation to a new or different use. See the Tangible Property Regulations – Frequently Asked Questionsfor more information about improvements. The cost of improvements is recovered through depreciation.

You can recover some or all of your improvements by using Form 4562 to report depreciation beginning in the year your rental property is first placed in service, and beginning in any year you make an improvement or add furnishings. Only a percentage of these expenses are deductible in the year they are incurred.

Please also see Deducting Business Expenses for more information.

If You’re Missing Documents

You can get copies in several ways if you don’t have all your tax documents, so don’t panic if you misplace something or a company fails to send you a required form.

  • If you’re missing a W-2 form: Ask your employer to give you a new copy. Employers are required by law to keep copies of your W-2 forms and all other payroll information for at least four years. Some employers charge a nominal fee for a second form.
  • If you’re missing a 1099 form: ​These may come from several sources and replacing one depends on the type of income it should report. Banks may have tax documents available for download from their websites, or you can call their customer service number to get a new 1099-INT mailed to you. Investment brokers should be able to mail you additional copies of Form 1099-B and 1099-DIV to report stock trading and dividend activity, or you might be able to download copies from the brokerage’s website. Be sure to download a copy of your year-end statement or a realized gain/loss report because information in those reports can supplement the information found on the Form 1099-B. Contact your clients for missing 1099-MISC forms.

You Can Get Copies From the IRS

The IRS receives copies of all your tax documents, so either you or your accountant can request copies from this source as well. There are three ways to accomplish this.

  1. Use the Get Transcript Online application on the IRS website. Ask for a copy of your “Wage and Income Transcript.” Specify the year for which you’re missing documents. You’ll have to register with the website and take steps to confirm your identity. Keep in mind that IRS staff is as overworked as most other employees. The wage and income transcript for 2016 might not be complete and up to date until July 2017, so you or your accountant may have to file for an extension to pay your taxes after the April due date if you can’t get what you need in time.
  1. Mail or fax Form 4506-T to the IRS. This form is used to request transcripts of various tax documents. Check the box for line 8, “Form W-2, Form 1099 series, Form 1098 series, or Form 5498 series transcript.” The IRS will mail out the transcript, usually in about 10 business days.
  2. Visit a local IRS taxpayer assistance center. An IRS agent can print out the wage and income transcript for you.

If your accountant requests a copy of your Wage and Income Transcript, the IRS will fax it directly to his office, but you’ll first have to authorize your accountant to talk to the IRS on your behalf. This is a simple matter of preparing and signing either Form 8821 or Form 2848. Your accountant can advise you which form you need and prepare it for you.

The wage and income transcript is a computer printout of the information contained in your various tax documents. It won’t look like photocopies of your W-2 and 1099 forms. Instead, it will be a transcript of the data contained in those forms.

The IRS only retains the federal information on these forms. State and local tax withholdings won’t show up, so you might want to contact the institutions that appear on the transcript to obtain a copy of those original documents.

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