The Essential Documents for Income Tax Return Preparation

It’s tax season, and I know this very well may be your least favorite season of the year. But, it doesn’t need to stress you out! I’m here to help you navigate this season with confidence and ease, specifically when it comes to knowing the required documents for income tax return success!

So, grab a cup of coffee, put on your favorite playlist, and let’s tackle tax season together. Here is a list of all the documents & information you should provide to your tax preparer for your personal (and business) income tax return.

Quick note: If you’ve been working with the same tax preparer, you won’t need to provide some of these documents every year. But, if you’re working with a new tax preparer, expect to provide most, if not all, of the documents listed below.

Quick disclaimer: other documentation may be required based on your specific circumstances, so please ensure you ask your tax preparer if you need to provide anything else!

Personal Documents for Income Tax Return:

1. Social Security Numbers (SSN):
   • Provide a copy of the social security cards for yourself, your spouse, and any dependents
2. Prior Tax Returns:
   • Some tax preparers will request the past 3 years of income tax returns. This is because the IRS puts certain limits on deductions or credits where you are not allowed to take them after so many years. By reviewing prior year returns, your tax preparer can also get a better picture of deductions and credits you’ve been able to claim in the past to help ensure you’re able to claim them again if you’re able!
3. Personal Information:
   • Copy of your & your spouse’s driver’s license
   • The full legal name and date of birth for you, your spouse & any dependents
   • Any changes to your marital status or dependents during the year
4. Income Tax Documents:
   • W-2s for any job you may have outside your boutique business (and FOR your boutique business if you have elected to be taxed as an S Corp)
   • Documentation of any other income sources, such as rental income or investment dividends. Oftentimes, these tax documents begin with “1099…”
5. Deduction or Credit Records:
   • Tax documentation showing tuition paid (known as a 1098-T)
   • Any documentation showing childcare expenses
   • Tax documentation showing contributions to retirement plans or health savings accounts
   • Documentation showing interest paid on student loans
   • Documentation showing mortgage interest paid
   • Any receipts for charitable contributions (must have been made to a 501(c)3 non-profit organization)
   • You can check out this list on the IRS website for other potential personal tax deductions & credits

Business Documents for Income Tax Return:

1. Employer Identification Number (EIN):
   • Provide your boutique’s EIN, if applicable
2. Business Ownership Information:
   • If you own the boutique with someone else, gather their personal information and SSN.
3. For S Corp businesses, your CP261 letter:
   • If you have elected to be taxed as an S Corp, you should have received a confirmation notice from the IRS called a CP261 notice that states the effective date of the election.
4. Profit and Loss Statement (P&L):
   • This document summarizes your boutique’s revenue, costs, and expenses over a specific period (i.e. the prior year)
   • For a handy guide on what’s a deductible business expense, you can check out this free download
5. Year-End Balance Sheet:
   • This document gives a snapshot of your business assets, liabilities & equity as of year-end (12/31). If you operate a partnership or an S Corp, a copy of your balance sheet needs to be submitted with your tax return. But, even if you operate a different entity type, sending a copy of your balance sheet to your tax preparer can help them identify any changes that can provide additional tax deductions.
6. Inventory Records:
   • Detailed records of your boutique’s inventory at the beginning and end of the tax year, and the total inventory purchases for the year
7. Mileage Log:
   • If you use your personal vehicle for business purposes, maintain a mileage log for deductible expenses, that includes the business purpose of the miles driven. Keep in mind that your normal commute to/from a brick-and-mortar location cannot be included in your mileage deduction.
8. Home Office Expenses:
   • If you operate your boutique from a home office, document your home office expenses for potential deductions. This can include any amounts paid for rent or mortgage interest, utilities, phone & internet. You’ll also need to provide the square footage of your office, and the total square footage of your home/apartment.
9. Employee Information:
   • If you have employees, provide a copy of the W-2s issued and the W-3 transmittal for the year to verify all related payroll deductions.
10. Asset Sales and Purchase Records:
    • If you paid over $1,500 for any item that you expect to use for over a 12 month period, you may need to list it as an asset in your bookkeeping records. You can provide any receipts for these purchases to have a tax preparer review and help determine if you can expense & deduct it all in the current year, or if the cost of that item will need to be spread out and depreciated over several years.
11. Tax Forms:
    • Any tax forms received or issued, such as 1099-Ks from payment processors and 1099s issued to independent service providers or landlords
    • NOTE: You do NOT need to wait for these forms to file your taxes. You can simply use your own bookkeeping records to report your income, but you should double-check the 1099’s are accurate as they come in.

Remember, organization is the key to a stress-free tax season. By having these documents ready, you’ll not only make your tax preparer’s job easier but also ensure that you’re maximizing your deductions and credits.

If you want to feel a little more confident in the numbers on your boutique financial reports, then check out my free masterclass, The 5 Step Framework to Feeling Confident in Your Bookkeeping.

Now, go ahead and conquer tax season like the boutique boss you are! And remember, you’re not just running a business; you’re building a legacy. Cheers to your success, and may your tax returns be as fabulous as your fashion finds!