Every year will introduce certain tax reporting scenarios that are unique to your personal life. But for the 2021 tax reporting, things can be even trickier.
Whether it’s the economic recovery payments, unemployment benefits, or your family’s advance child tax payments—you’ll likely have a few extra items to review. Running through this checklist will help you stay organized.
5 Tips for Organizing Your 1040 Tax Return
To start, you’ll want to create specific folders either digitally on your computer or as hard copies in your filing cabinet. You can organize them according to the categories listed below.
Keeping all of the documents that are related to each other in one place will make it easier to reference and share important details with your tax professional or local accounting firm when you’re getting ready to file. The less stress, the better!
1. Income and Business Activity
In this file, you’ll want to include copies of any W-2s and 1099s that you’ve received for the tax year. You should also add your Social Security statements, interest income, K-1s, and any documents for your investment activity in this file.
Next, pull the records you have for any business activity or income-earning hobbies. When necessary, you should put a copy of your business mileage log here too.
2. Proof of Itemized Deductions
This file will hold your property tax statements and proof of your mortgage interest expenses. It’s also the place for your state income tax documentation.
3. Annual Charitable Donations
If you made any special charitable contributions last year, make sure you have those documents at the ready for potential tax credits. It often helps to split this section into both cash and non-cash donations. You can even record your mileage log related to any charitable activity here, as well.
4. Medical and Dental Expenses
Once again, make sure you tally up your mileage for potential tax credits. Your medical-related driving miles have their own rates, just like your business and charity mileage. Any documents for your medical expenses last year should also be kept for your 1040 tax return.
5. Additional Expenses and Credits
You can keep everything that’s left in a miscellaneous folder. These will be the documents for any educational expenses, whether that’s for yourself or your children. Copies of tuition invoices or other fees regarding education are always important to keep. Even invoices for music lessons or textbooks and other educational materials count!
Finally, don’t forget to hold on to information regarding any payments from the government for COVID relief or the advanced child tax credit. Your Form 1095s and even receipts for daycare expenses can also be added to this folder, as well as any other tax documents that you’re unsure about.
Check for What’s Missing—NSO & Company Can Help!
There’s a lot to consider when filing your 1040 tax return. So remember that you don’t have to go at it alone! Partnering with a great accountant and other tax professionals will help ensure that nothing gets overlooked.
NSO & Company works with individuals and families all throughout Central Indiana. Whenever you have questions, please don’t hesitate to reach out to our team! We’re in business to help you keep your tax liability as low as possible—and to reduce the risk of getting audited down the road. We’ll always be happy to collaborate with you and review your existing tax documents and previous tax returns. Just let us know what’s on your mind!
