Life is full of things you love to avoid. Why bother with insurance, going to the dentist, or paying for car repairs when you would rather do just about anything else. Taxes may be high on your long list of “to-don’ts.” And while we know they are about as fun as flossing, your annual tax return isn’t something you can ignore.
A tax checklist is one way to make your annual filing less of a chore. By staying organized, you may find you actually enjoy the process — especially as you find new ways to save money. We have covered exactly what you need to craft the ultimate 2019 tax checklist.
The easiest place to begin: last year’s tax return
With last year’s tax season behind you, it may be easier to take a candid look at where you can improve. Before drafting your 2019 tax checklist, jot down how you felt about last year’s tax return.
We have written a few questions to get you started:
- Did you owe money because you withheld too little from your paychecks?
- Were overwhelmed by the changes from the prior year’s tax reform?
- Did you overlook credits or deductions from major life events?
- Were you scrambling to find missing forms as the deadline approached?
- Did you regret not hiring a tax professional sooner?
Chances are, there is a little room improvement. By identifying these opportunities, you are already one step closer to saving money in 2019.
Staying organized with your 2019 tax preparation checklist
Be honest: if gathering paperwork for this year’s return was a less than perfect process, it may be time to create a better system. For self-employed tax filers, staying on top of receipts can be an even bigger burden.
Without a simple process, it’s all too easy to throw bills, receipts, and important tax documents into a pile as they arrive. It’s no surprise they are impossible to find when you need them. Investing a small amount of time now may save you many hours, and headaches, later.
- Pick a place for physical paperwork – Create a spot for physical paperwork – These days, it’s common to receive a mix of digital and physical tax forms. For the paper ones, it’s important to keep them in a dedicated spot. A massive, intricate filing system may be overkill. But a single, labeled folder, stored upright on your desk, may be more than enough.
- Start a digital filing system – If your computer’s desktop is a mess, it may be difficult to retrieve digital files when you need them. Create a digital folder and get cozy with your scanner. By immediately scanning receipts, labeling, and filing, you may be less likely to misplace them.
- Set dates for regular maintenance – We get it. You have every intention of sticking to the process, but often, life gets in the way. Rather than scrapping your plans and reverting to old habits, set regular dates for catching up. Even quarterly maintenance will make a huge difference at tax time.
Once you have built a reliable system — and you are ready to stick with it — you can spend time creating your custom tax checklist. From there, you can decide how long you actually need to keep each document.
1. Personal information for each filer
Staying on top of your own paperwork is difficult enough. Filing for your family creates an added set of challenges. If you are filing tax returns for you and your spouse, you need the following personal details for each of you:
- Full name
- Date of birth
- Social Security number (SSN) or Tax ID number (TIN)
Dependents — like your children or other family members — need a few more things:
- Full name
- Date of birth
- Social Security number (SSN) or Tax ID number (TIN)
- Childcare records
- Each dependent’s income (if applicable)
- Form 8332 to show who which parent takes an exemption* for your kid(s)
Tip: Tax fraud is a growing concern. The IRS suggests a few ways to combat tax-related identity theft:
- Protect your family’s Social Security records.
- Be on the lookout for scams.
- Report ID theft promptly to law enforcement.
- After filing a police report, complete an IRS Form 14039 Identity Theft Affidavit.
- Be prepared for data breaches.
- Contact the IRS for additional assistance.
*Because of the Tax Cut and Jobs Act (TCJA) there are no personal exemption deductions through 2025, but this form is still important. It may impact other areas of your tax return.
2. Sources of income
If your family are W-2 employees, this step may be a breeze. But for everyone else, tracking down forms for each source of income can be a challenge. Once you know what you are looking for, it’s easier to collect and file each one. Here is what you should be looking for:
- Employment – W-2 forms
- Unemployment – 1099-G
- Investment income
- Broker and barter exchange transactions – 1099-B
- Dividends – 1099-DIV
- Health savings account (HSA) or Medical Savings Account (MSA) – 1099-SA
- Interest – 1099-INT
- Long-term care reimbursements – 1099-LTC
- Original issue discount – 1099-OID
- Real estate sales – 1099-S
- Records of date and value when you purchased
- Schedule K-1 – 1065
- Stock sales – 1099-B
- Other income
- Retirement plan income
3. Adjustments to your income
Adjustments are one way to lower your taxable income. You need to keep track of the following things if you want to include them as adjustments on your return:
- Receipts for K-12 classroom expenses for educators
- Business expenses for reservists, performing artists, and fee-basis government officials – 2106
- Health savings account (HSA) deduction – 8889
- Moving expenses for Armed Forces – 3903
- Part of self-employment tax – Schedule SE
- Self-employed SEP IRA, SIMPLE IRA, qualified plan deduction
- Self-employed health insurance premium deduction
- Penalty for early savings withdrawal
- Alimony paid (including your ex-spouse’s SSN)
- IRA contribution deduction – 5498
- Student loan interest deduction – 1098-E
To learn more about how adjustments impact your federal tax, check out lines 23-35 of Schedule 1. Your total adjustments are added and subtracted to calculate your adjusted gross income. It’s important to keep track of your adjustments because they may reduce how much tax you owe.
4. Itemized deductions
For most folks, tax deductions are an exciting part of their return. Like income adjustments, they may reduce your tax bill or increase their tax refund — score!
But ever since the recent tax reform, it’s more difficult to claim itemized deductions. That’s because the standard deduction is now double the size for both single and joint filers. This means you are more likely to pick the standard deduction vs. itemizing because it saves you more.
Even if you don’t expect to itemize, it’s still worthwhile to keep track of the paperwork. Here’s what you need to be saving:
- Medical expenses or dental expenses
- State and local taxes
- Local income tax
- Local sales tax
- Personal property tax
- Vehicle sales tax
- Home mortgage interest and points – 1098
- Investment interest
- Charitable gifts over $250
- Carryover gifts from previous years
- Miles driven for charitable organizations
- Property losses from federal disasters
- FEMA assistance (need proof of federal disaster area)
- Insurance reimbursements
- Records of losses
5. Tax credits
Tax credits are another way to reduce your total burden. They either lower your tax bill dollar-for-dollar or act like a deduction to slash how much you owe. If you are eager to claim a tax credit, it’s important to have proof you are eligible. Here are some tax credits you will need paperwork to verify:
- Adoption Credit
- American Opportunity or Lifetime Learning Credit – education expenses
- Child Tax Credit
- Credit for Elderly or Disabled
- Credit for Prior Year Minimum Tax
- Credit for Tax on Undistributed Long-Term Capital Gains
- Dependent Care Credit
- Earned Income Tax Credit
- Foreign Taxes Paid
- Health Coverage Tax Credit
- Low-Income Housing Credit
- Premium Tax Credit – Affordable Care Act
- Residential Energy Credit
- Saver’s Credit
Mistakes to avoid with your 2019 tax checklist
Revisiting your past tax mistakes isn’t easy. But if your 2018 errors were costly, it may be worthwhile to take some proactive steps now. There is still plenty of time to prepare for a successful 2019 tax season. Here are some of the best ways to avoid them most common mistakes.
- Revisit your withholding – If you had an unexpected 2018 tax bill, you may not have withheld enough from your paychecks. Now is the perfect time to give yourself a “paycheck checkup” with the IRS’ Withholding Calculator. If the amount isn’t right, you can fix it by filling out a new W-4 from your employer.
- Don’t overlook quarterly taxes – If you earn money as a 1099 employee, the government expects you to submit taxes every quarter. You will have to report your quarterly payments at tax time, so keep track of your 1040–ES forms.
Do yourself a favor by adding these 2019 deadlines to your calendar:
- Monday, April 15, 2019 (January – March)
- Monday, June 17, 2019 (April – May)
- Monday, September 16, 2019 (June – August)
- Wednesday, January 15, 2020 (September – December)
- Look for tax savings at work – Your company may offer a lot more than a 401(k). You may be able to contribute to a health savings account (HSA) or flexible spending account (FSA). They may also offer tax-free benefits like health, long-term care, life, and disability insurance. They may also pay for education expenses and transportation. You have nothing to lose by scheduling a meeting with your HR department to learn more.
- Be strategic about charitable donations – As we have mentioned, the higher standard deduction makes it more difficult to claim itemized deductions. But if you are charitable, you may still be able to save money. Some tax professionals recommend a “bunching” technique by combining multiple years of gifts in one year. This could push your total itemized deductions above the standard deduction — and may save you on taxes.
- Start working with a tax professional now – If your situation includes more than a couple of W-2s, it may be worthwhile to work with a tax professional. The best way to avoid mishaps is through a proactive, year-round approach. By locking someone in now, you may feel relieved as next year’s tax season approaches.
Keep your 2019 tax preparation checklist handy
It’s normal to breathe a sigh of relief after tax season. The heavy preparation should be over for several months, right? Wrong. If lowering your taxable income is a priority — and it should be — tax planning should happen year round. To be proactive, keep your 2019 tax checklist nearby. It may remind you to save tax paperwork before it disappears.
Disclaimer: the content presented in this article are for informational purposes only, and is not, and must not be considered tax, investment, legal, accounting or financial planning advice, nor a recommendation as to a specific course of action. Investors should consult all available information, including fund prospectuses, and consult with appropriate tax, investment, accounting, legal, and accounting professionals, as appropriate, before making any investment or utilizing any financial planning strategy.