From Paperwork to Planning: Navigating Tax Season
As tax season gets underway, you may be wondering what documents to gather and how to stay organized throughout the process.
At Fairlane Financial Advisors, we work closely with our clients and their CPAs to help make the filing process as smooth and efficient as possible. When everyone has clear, complete information, it reduces stress and allows for more thoughtful financial planning.
Your CPA will need documents that report income you received during the year. This often includes W-2 forms if you earned wages and various 1099 forms reporting interest, dividends, investment sales, Social Security benefits, or retirement distributions. If you are involved in a partnership, S-corporation, or trust, you may also receive a Schedule K-1. Business owners should gather records of income and expenses as well.
In addition to income documents, your CPA will likely need records that support deductions. Common examples include mortgage interest statements, property tax records, charitable contribution receipts, medical expenses, and education-related expenses. If you receive a tax document and are unsure whether it applies to your situation, it is usually best to provide it so your CPA can determine its relevance.
Being organized is helpful for more than just filing an accurate return. When we review your investment-related tax documents, we may identify opportunities to better align your tax situation with your broader financial plan. For example, realized capital gains can lead to conversations about managing future gains or harvesting losses. Retirement account distributions may prompt a discussion about long-term income strategies or the potential benefits of a Roth conversion. Charitable giving activity can sometimes be structured in a more tax-efficient way.
Having complete information early allows for proactive planning rather than last-minute decisions.
It is also important to maintain good records for the future. We recommend keeping purchase documents for your home, records of investment purchases for assets you still own, copies of prior year tax returns, and the documents used to prepare those returns. These records can be essential when calculating cost basis or responding to IRS inquiries.
From an organizational standpoint, many clients find it helpful to maintain a separate folder for each tax year, either digitally or in paper form. Secure digital storage or password-protected cloud backups can make retrieving documents much easier if they are needed later.
Tax season is not only about reporting what happened last year. It is also an opportunity to ensure your financial plan remains aligned with your goals. If you would like us to review your investment-related tax documents or coordinate with your CPA, we are happy to help ensure everything stays aligned with your broader financial strategy. If you have questions or would like to schedule a conversation, we are here to help. A little organization today can reduce stress tomorrow and support better decisions throughout the year.
