What Do You Need to Bring to Your Accountant?
Accountants are number crunchers. They need hard data to perform their jobs, including income statements, assent and liability information, taxes paid and all of your other costs. At the base level, accountants need financial documentation for all of the inflow and outflow of money over the period being evaluated.
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Taxes Paid
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Accountants first and foremost must know how much you have already paid in taxes during a given period. Your company can provide you with a printout of your paychecks and how much money has gone to the government. If you are self-employed, keep track of the taxes paid quarterly so you will be prepared at the end of the year to show an accountant those records. Without this information, your accountant cannot compute how much you have left to pay or how much the government owes you.
Income and Investment Return
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Income and investment returns are another important metric to document for accountants. Income is taxed at a rate based on your status as a corporation or varies based on the personal income level. Investment returns are also taxed at 15 percent of the value of the return. Businesses may want to inflate income to raise their stock price while individuals may want to hide income from taxes. Accountants must make sure that all income and investments are accounted for when creating a tax profile. They need the documentation to prove where it originated.
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Costs
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Business costs are deducted before a final net income before taxes number is calculated. Costs must be for legitimate business purposes. A trip to Las Vegas for example, can not be expensed unless you are able to point to a business conference or meeting that you attended there. Similarly, business expenses costs for operations, cost of goods and interest which can be deducted before taxes are paid. However, each of the costs must be documented and provided to accountants.
Deductions
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Deductions are a crucial part of constructing a year-end tax picture. Accountants need all of the documentation for your deductions in order to complete tax forms accurately and prevent fraud. As of 2011, some important tax deductions include the mortgage interest deduction, philanthropy giving (to 501c tax-deductible organizations) and investment losses. Each of these, of course, requires documentation. For example, if you donate food to a local homeless shelter, it can provide you a receipt for the value of those goods which is then brought to the accountant.
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References
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