Tax season doesn’t have to be overwhelming. With proper preparation and organization, you can ensure your tax professional has everything needed to file your return accurately on your behalf. To assist you, we’ve created this guide to help you navigate tax preparation with confidence.
Start Collecting Documents Early
Tax documents typically arrive between January and March. Here’s what you’ll likely need:
- 1099-R forms: retirement distributions, including any required minimum distributions or Roth conversions, will be reported on a 1099-R.
- Year-end consolidated 1099 tax statements: for taxable investment accounts, year-end consolidated tax statements from your custodian will include 1099-B (proceeds from broker transactions), 1099-DIV (dividend income), and 1099-INT (interest income).
Note: Corrected 1099 forms are sometimes issued through mid-March. Your tax professional can advise on optimal filing timing to minimize the chance of needing to file an amended return.
Gather your Contribution figures
- IRA contributions
- HSA contributions
- Charitable contributions
Create a dedicated, preferably electronic and secure, folder to store all tax documents as they arrive.
Complex Planning Strategies Require Extra Attention
If you’ve implemented advanced strategies, pay special attention to the following:
Donor-Advised Funds (DAFs) Many clients use Donor-Advised Funds as a strategic way to plan their zakah giving, allowing them to organize charitable contributions, maintain compliance with Islamic principles, and optimize their overall giving strategy. If you contributed to a DAF during the year, ensure you receive documentation of the contribution date and amount. Remember that you receive the tax deduction when you contribute to the DAF, not when grants are made from the fund.
Charitable Lead Trusts (CLTs) can also be used as part of a broader zakat planning strategy. However, when using a CLT for zakat giving, proper tax reporting and adherence to trust requirements are essential. Make sure your tax professional receives complete documentation of trust income, charitable distributions, and any remainder distributions. The tax treatment varies depending on whether your CLT is a grantor or non-grantor trust. As a reminder, be sure you’re adhering to your trust’s distribution requirements.
Required Minimum Distributions (RMDs) If you’re subject to RMDs, verify that the correct amount was distributed by December 31st. If you made Qualified Charitable Distributions (QCDs) directly from your IRA to satisfy some or all your RMD, ensure these are properly documented. QCDs can satisfy your RMD while excluding the distribution from taxable income, and they may also be applied toward your zakat obligations if eligible.
Backdoor Roth Conversions. If you completed a backdoor Roth conversion, you’ll need your tax preparer to file your Form 8606 to report the nondeductible IRA contribution and subsequent conversion. If you made the contribution and conversion in different tax years, or if you have other pre-tax IRA balances, the tax treatment becomes more complex. Provide your tax professional with complete documentation of both the contribution and conversion.
Consider Filing an Extension When Appropriate
While the standard tax deadline is April 15th, filing an extension can be a strategic decision rather than a sign of disorganization. An extension gives you until October 15th to file your return and may be beneficial if:
You Need Time for Retirement Plan Contributions If you’re self-employed or a business owner, filing an extension gives you until October 15th to establish and fund certain retirement plans for the previous tax year. This includes SEP-IRA contributions and employer contributions to qualified plans, which can be made up to the extended filing deadline. This additional time allows you to finalize your business income figures and optimize your retirement savings strategy accordingly.
Trust or Complex Entity Returns Are Delayed If you have a Charitable Lead Trust, the trust’s tax return (Form 1041) must be completed before your personal return can be finalized. Trust administrators sometimes need additional time to prepare these returns. Filing an extension prevents you from filing an incomplete or inaccurate personal return.
Important note: An extension to file is not an extension to pay. If you owe taxes, you must still estimate and pay what you owe by April 15th to avoid penalties and interest. Your tax professional can help you calculate estimated payments.
Transform Tax Season into a Financial Review
Once your taxes are filed, use the momentum to strengthen your overall financial organization:
- Improve your recordkeeping system if you struggle to locate documents
- Review your withholding to avoid large refunds or unexpected bills
- Update your financial plan with your advisor, especially if circumstances have changed
- A larger-than-expected tax bill often signals an opportunity for better planning. Contact your advisor to schedule a proactive tax planning session.
For questions about documentation from Fidelity, Schwab, or Goldman Sachs, or any aspect of your investment accounts, please contact your advisory team.
