Tackle Tax-Related Clutter With This Checklist of Important Documents

I dread taxes -- not just paying them, but also writing about them. Tax laws are so intricate and riddled with nuance that I stew over every word in every sentence to be sure I don't misrepresent the rules.

Not even the IRS sugarcoats the complexity of its code. It admits (right around page 80 -- yes, 80! -- of its Form 1040 instruction booklet) that it will take the average taxpayer at least 11 hours to complete and file a simple return.

No wonder more than half of us call on professional tax prep help every year. A learned shoulder to lean on is particularly handy if you fall into any of these categories:

• You own a business. Company owners or contractors may need guidance from someone who knows tax laws related to specific jobs or industries.
• You've had a major life change. Marriage, divorce, kids, caring for elderly parents -- each involves areas of the tax code that may be new to you.
• You've had a transaction-heavy year. Buying and selling a home or investments (and how you structure your transactions) will affect how much you owe Uncle Sam.
• Your records are not great and/or you anticipate tax troubles. Finding a tax-code pro who can represent you in an audit can be a lifesaver.

That said, don't blindly cede the work to others: At The Motley Fool, we often remind folks that even if you hire outside help -- for doing taxes, writing a will, or fixing a car transmission -- ultimately, it's your neck on the line.

So much for shirking all responsibility, eh?

Prepare to prepare

Preparation is the key whether you hire an in-the-flesh tax pro, use software, or fill out your tax return longhand. Shoeboxes filled with loose receipts and random documents strewn about the room will cost you, regardless of who prepares your return.

What kind of coin are we talking about? Well, if your tax preparer has to do your financial housekeeping, you'll be charged for the extra time it takes -- which can run you $100 or more per hour. Going it alone, average taxpayers overpay the IRS around $400 because of overlooked deductions or credits they missed while rifling through shoeboxes filled with loose receipts and other accounting detritus.

Make your date with Uncle Sam go more smoothly -- and don't pay more than your fair share of the tab. Start with the simple three-folder tax filing system I previously proposed in this column. (Use it to tackle that overflowing Buster Brown box.)

To ensure that you don't skip over any significant deductions and credits, use this rundown of common reference materials and official documents needed to complete a tax return:

Income Records

• Form W-2: wages, salary, and tips
• Form 1099-MISC: freelance and/or contract income
• Form 1099-G: refund, credit, or offset of state/local taxes, unemployment income
• Form W-2G: gambling/lottery winnings
• Form K-1: profits from partnerships, trusts, small businesses
• Bank, brokerage statements
• Rental income (proof of payments)
• Alimony received
• Hobby income/prizes/awards

Investment Records

• Form 1099-B: proceeds on the sale of stocks and/or bonds
• Form 1099-DIV: dividend and distribution income
• Form 1099-INT: interest income on bonds/treasuries
• Form 1099-R: distributions from pensions, profit sharing, IRAs, insurance
• Form 1099-SA: health-care reimbursements
• Form 1099-SSA: social security benefits
• Form 2439: undistributed capital gains from mutual funds and/or REITs
• Year-end brokerage and mutual fund statements
• Security trade confirmations
• Nondeductible IRA contributions (use Form 8606)

Deduction Records

• Form 1098: mortgage interest and points
• Form 1098-E: student loan interest
• Birth dates and social security numbers for all dependents claimed
• Alimony paid
• Child/dependent care costs (Form W-10, get provider's TIN and/or EIN)
• Charitable contributions (bank record/written acknowledgement from the charity for all cash donations; receipt and description for non-cash donations in "good condition or better") (See irs.gov/pub/irs-pdf/p526.pdf for more on the IRS's charitable contribution rules.)
• Out-of-pocket expenses for charity work (receipts for gas, parking, and tolls, or mileage log)
• Records for unreimbursed job-related expenses (union dues, education, moving expenses)
• Rental property expenses (proof of expenses for operating the property)
• Receipts for real estate and personal property taxes (if not included in Form 1098)
• IRA contributions
• Receipts for health care expenses (if total is greater than 7.5% of your AGI)
• Property losses due to casualty or theft (police/insurance documentation; receipts for work)
• Gambling losses (written log, receipts, or other proof of wager)
• Receipt for last year's tax prep fees
• Receipts for large purchases if deducting state and local general (as opposed to income) taxes
• Investment expenses

Credit Records

• Form 1040-ES: estimated taxes already paid
• Form 1098-T: tuition payments used for Hope/Learning credits
• Form 1099-INT/DIV: taxes paid on foreign investments
• Form 8880: retirement savings contribution credit
• Telephone excise tax (Form 8913 if claiming actual expense and not standard)

Fool.com consumer finance expert Dayana Yochim says one of her best investments in peace of mind (particularly come April) has been a two-drawer standard filing cabinet. It sure beats the shoebox filing system she used for tax years 1992 through 2006. At The Motley Fool, we're fluent in IRS tax code and are celebrated for our translations into plain English.