This Is How Your Accountant Wants You To Prepare For Tax Season

  • Contributors:
  • Rebecca Postma
Couple reviewing and gathering tax documents for tax season

Do you ever wonder how your accountant would like you to prepare before each tax season? Their secret wish list for every client? Probably not. And that’s ok. We’ve thought about it and want to share some steps every taxpayer can take to make their accountant’s life – and their own – easier.

What’s the key takeaway? Don’t wait until the day before a deadline to share any huge updates or critical files. Communciate and prepare well in advance.



1. Gather your tax documents

As the end of 2020 approaches, you’ll begin to receive many documents needed to file your tax return. Designate a place to safely collect and store these documents. Then, as you receive your 1099s, W-2, IRS or state correspondence, put it all there. We recommend getting into this habit throughout the year too. Collect receipts, expenses, payments to contractors, etc., and store it all in one place. By the time you need to file your taxes, you’ve eliminated a lot of time spent tracking down these files.

You’ll also want to review the charitable contributions you made throughout the year. Gather all documentation and lists and make sure the fair market value of each donation is clearly stated. If you’re missing any written notice from the organizations, reach out and ask for it.

Pro tip: digital storage is best.


2. Organize your estimated tax payment details

If you made estimated tax payments in 2020, compile that documentation. Make sure you have the dates and amounts for every taxing authority – federal, state, and city.


3. Review your 401(k) and IRA contributions

Take a look at how much you’ve contributed to your 401(k), IRA, or other retirement plans. Can you contribute more or have you hit the maximum contribution amount? If you can contribute more, consider doing so before filing your tax return. It’ll help reduce your taxable income.


4. Max out your HSA contributions

If you contribute to a health savings account (HSA), try to max out your contributions for the year. Especially if you make HSA contributions via payroll deductions. This method saves you from paying the federal payroll tax on those contributions.

For 2020, the maximum annual contribution – including employer contributions – is $3,550 for singles and $7,100 for families.



5. Complete monthly bank reconciliations through the current month

Regular bank reconciliations allow you to submit your tax documents earlier. Once your December bank reconciliation and month is closed out, you can turn your focus to filing your tax return. If you delay the reconciliations and monthly close, it’ll delay your ability to file your return and any potential refund.


6. Ask your auditor and/or tax preparer if they need any new documents

If your accounting firm provides a client assistance schedule or a list of documents they’ll need to perform an audit or prepare your tax return, ask them if they need anything new for 2020. Being proactive can help streamline your audit and tax return preparation.


7. Send documents early

Why wait? If you’re ready and have all your documents together, send them to your accountant. (S)he will never say no to receiving your files early.

You may also notice that your return is filed quicker, you have more time to ask your accountant questions, and your accountants’ response time is faster. If you wait until the last minute, you may have to file an extension, delay a potential refund, and compete with others for your accountant’s attention.


8. Create a list of any major financial or operational changes

Did you make any big financial or operational changes throughout 2020? These could include doing business in new states or jurisdictions, selling products online, buying or selling a business, and real estate transactions. And new in 2020, did you receive a Paycheck Protection Program (PPP) loan or economic injury disaster loan? If so, your tax strategy may change.

You can talk through these changes with your accountant. Some may impact your audit or tax preparation. Some may not. Make sure to communicate these changes well before deadlines.


9. Talk about new accounting standards

If you implemented a new accounting standard, your accountant may need more time to analyze those changes. If you didn’t, it’s a good time to touch base with your accountant to see if any new accounting standards are on the horizon. Do they affect you? How? Can you adopt them early?


10. Create a plan to prepare account reconciliations to support your general ledger’s account balances

Ideally, the accounts within your balance sheet should be reconciled throughout the year. If you have accounts that haven’t been reconciled, be proactive. Review the accounts and resolve issues before tax season. This will help save everyone time.


11. Discuss the latest tax changes

Thanks to the CARES Act, a lot of tax provisions were passed, extended, or revised to help businesses through the COVID-19 pandemic. You can accelerate AMT refunds, use any current losses for a quick refund, claim a disaster loss refund, and more. But, you’ll want to take advantage of these tax incentives before they expire.

Schedule a time to talk with your accountant about the latest tax changes and any they see on the horizon. You may be able to benefit from additional tax savings.



12. Make a list of donors, distributions, etc.

In addition to numbers 5-8 listed above, identify donors who donated more than $5,000 and include the names and addresses of charitable organizations that received distributions. And, share any changes made to the board of directors in 2020 with your accountant.

If you have a private foundation, the foundation must distribute the 2019 undistributed income by Dec. 31, 2020, to avoid the additional excise tax on undistributed income.


That’s how you can prepare for the 2020 tax season! If you complete any item on this list, it’ll help streamline the tax process and/or your audit. And, your accountant will appreciate it.


Have questions about how to prepare for the 2020 tax season? Let’s talk!