For many Americans, the enjoyment of the holiday season is quickly erased by the realization that tax season is right around the corner. If you are not organized and diligent, the first quarter of the year and specifically tax time can be a very time consuming and frustrating couple of months. In addition to any pending financial liability, you can spend most of your time searching for documents or bracing for reality. The best way to brace for this is by getting organized and getting out in front of the situation. Achieving your business goals in 2014 will rely heavily on how you approach tax season.
Ideally, you would have separated any documents, facts and figures by property throughout the course of the year. If that is the case, you are certainly ahead of the game. If not, all is not lost, but you will need to get organized before you can think of providing any information to your tax preparer. Most investors have an existing relationship with an accountant. As you know, or will find out, they can be the biggest asset you have in preserving any wealth or keeping you out of trouble. Most preparers have a tax organizer or checklist available in the coming weeks. Once you get one you can begin your work.
By the end of the month you will receive any W2s, 1099s or any other records of income. It is important that you keep these in a dedicated place and can easily retrieve them. The next step is to start to separate any documents specific to any property you may have bought, sold, rented or refinanced over the course of the last year. Your expenses are not lumped together, rather separated by property. If you have kept records during the year, break them down by each property and go from there. Simply handing your accountant a large envelope with receipts will not do you any good.
The better grasp you have of your expenses the more efficient your accountant can be. If you do not know how many miles traveled or repairs made, you may get confused. Also, if you give incorrect information, you may be subject to an audit that will be much costlier. Getting a refund or minimizing the damage in terms of what you have to pay is great, but not at the expense of getting audited. Anyone that has ever been audited knows that is not a very fun experience.
In addition to sifting through your record keeping, it is a good idea to make a list of any questions or changes you have made throughout the year. Any change in address, LLC information, marital status or rents received is important and must be noted. The more information you can provide your accountant the better they can do their job and ultimately save you money.
Getting your taxes ready can be overwhelming, but if you take it one property at a time and accumulate as much documentation as possible, it is not as bad as you think.