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What Does Your Accountant Need to Do Your Taxes?

February 5, 2024

Filing a tax return (federal or state) can be one of the most complicated financial matters you have to handle each year, especially if you’re self-employed or own your own small business. Complex codes, room for interpretation, and different rules for various situations can make filing your taxes a very involved process.

If you’re wondering about how to file taxes efficiently, hiring an accountant to help you can save you a lot of stress. Here’s a list of the basic things you should provide to your accountant. They may ask you for other specific documents that you need as well.

1. Identification Information

To prepare your taxes, an accountant needs certain identification details from you that can verify your identity. Your accountant will need your Social Security number and the Social Security number of each of your dependents. Every year the IRS sends back hundreds of tax returns because the names and Social Security numbers on the form don’t match.

You may also want to bring a second form of identification, like a driver’s license, military ID, or any state-issued picture ID card.

2. Your Most Recent Tax Return

While you may not qualify for the same tax deductions or write-offs as last year, providing your accountant with the previous year’s return can help them easily access information and calculate certain deductions without having to call you over and over again. If you’re meeting with a new accountant, this could also be a good opportunity to discuss any discrepancies that may exist between previous tax returns and what your best approach should be.

For W-2 employees, it’s essential to highlight any potential tax deductions for W-2 employees that may apply to your specific employment situation, ensuring you maximize your benefits within the legal framework.

3. Wage and Tax Statements from Employers

Employers will give employees a Form W-2 wage and tax statement. If an employee has not received this document from their employers by January 31, they should check in to ensure nothing has been mixed up.

Independent contractors and freelancers should receive a Form 1099-MISC from all of the clients they worked for throughout the year.

4. Additional Income Statements

Did you obtain other sources of income during the year? Maybe you accrued some interest and dividend income from investments, unemployment income, or social security income. If applicable, you should receive statements for each of these sources of income that you will need to take to your accountant as well.

5. Documentation of Real Estate Holdings

There are a lot of deductions you might be eligible for if you have real estate holdings. Bring any documents that pertain to a recent home purchase, proof of paid mortgage or home equity loan interest, or proof of paid real estate and personal property taxes paid.

6. Proof of Expenses

To get your deductions and credits you must hand over documentation that proves your expenses for the year which you’re filing taxes for. Bring receipts, invoices, medical bills, charitable contributions, IRA contributions, job-hunting expenses, mileage logs, educational expenses, self-employment expenses, and more to your accountant. It’s better to have too much documentation to provide than too little.

This article also includes information about:

5 Tax Deductions You Didn’t Know About

What Do Tax Accountants Do?

NOTE: FreshBooks Support team members are not certified income tax or accounting professionals and cannot provide advice in these areas, outside of supporting questions about FreshBooks. If you need income tax advice, please contact an accountant in your area.

5 Tax Deductions You Didn’t Know About

1) Sales Taxes

There is an option to deduct sales taxes or state income taxes off your federal income tax, if you itemize your deductions. The Tax Cuts and Jobs Act limited the amount of deduction you can take to a combined total of $10,000 for state, local income, and sales taxes paid ($5,000 if married and filing separately). The IRS has a sales deduction calculator you can use to find out what your deduction would be.

2) Health Insurance Premiums

Medical expenses can be very costly, but in some cases, the IRS is sympathetic to the cost of insurance premiums.

In the 2022 tax year, the IRS allows you to deduct total qualified unreimbursed medical care expenses that exceed 7.5 percent of your adjusted gross income (AGI). This deduction applies if the taxpayer uses IRS Schedule A (Form 1040) to itemize deductions.

Self-employed people who are responsible for their own health insurance coverage might be able to deduct 100 percent of their premium costs. This deduction is an adjustment to income, not an itemized deduction.

3) Teacher’s Tax Savings

Teachers often have out of pocket expenses associated with things they buy for their classroom.

The IRS allows K-12 teachers to deduct up to $250 for unreimbursed expenses for materials. This expense is deducted from income taxes when itemizing deductions on Schedule A (Form 1040).

4) Educational Expenses for Any Age

College students are not the only people who can deduct education expenses from their taxes. Graduates pursuing continuing education are covered too.

Students of any age can benefit from the Lifetime Learning credit which is 20 percent of the first $10,000, up to $2,000, spent on higher education. This credit is not available at higher income levels but does not have an age cap.

5) Self-employed Social Security

The hard part about being self-employed is that you have to pay the full 15.3 percent of your income for Social Security and Medicare taxes, a portion normally paid by both employee and employer. However, there is a bit of a break for the self-employed. You can deduct the 7.65 percent employer portion off your income taxes

What Do Tax Accountants Do?

Tax accountants have two primary roles – preparing tax returns and tax planning.

Whether a tax accountant is self-employed or working for an accounting firm, they specialize in assisting clients with tax return preparations. They meet with clients to gather needed documentation like paystubs, proof of investments, and other financial documents. To file these returns, an accountant needs to be familiar with current tax laws. They figure out how much tax is owed by looking at a client’s tax deductions and credits.

Accountants who do tax planning often work with larger companies that work internationally. The objective of tax planners is to develop a strategy for corporations to avoid tax ramifications and minimize income taxes owed. Internal and external accountants are hired by these companies to develop long-term plans to save them money over time.