Your accountant needs a complete, organized record of the year: income and expenses for each holding — each rental, brokerage account and business — plus interest paid, principal paid down, realized gains and losses on trades, and the official forms (W-2, 1099s, 1098). Group everything by holding and by tax category, separate personal spending, and include the documents behind each number. Keep the records at least three years after filing, longer for property and certain losses.
What your accountant needs
For each holding — every rental property, brokerage account, business or loan — prepare:
- Income: rent, dividends, interest, distributions, sale proceeds.
- Expenses: by category — repairs, insurance, property tax, management, fees.
- Interest paid on each loan, separately from principal paid down.
- Trades: what you sold, when, the cost basis and the gain or loss.
- Official forms: W-2, 1099-INT, 1099-DIV, 1099-B, Form 1098 for mortgage interest, K-1s from partnerships.
- Documents behind the numbers: closing statements, invoices for improvements, leases.
The rule of thumb: every number should have a holding, a category, a period and a document.
Organize by holding, not by month
Bank statements are organized by date. Tax returns are organized by source. A rental property goes on Schedule E (Form 1040), each property separately; sales of investments go on Form 8949 and Schedule D; wages and interest go elsewhere. If you hand over twelve months of statements, your accountant has to rebuild that structure — and you pay for the hours.
Group every transaction under its holding first, then by tax category. Mark personal spending clearly so it does not mix with deductible expenses.
A worked example: one rental property
A single-family rental in the US for a full year:
| Line item | Amount |
|---|---|
| Rent received | $26,400 |
| Mortgage interest (Form 1098) | −$9,800 |
| Property tax | −$3,600 |
| Insurance | −$1,500 |
| Repairs | −$1,900 |
| Management (8%) | −$2,112 |
| Depreciation ($300,000 building ÷ 27.5 years) | −$10,909 |
| Net for tax purposes | −$3,421 |
The property shows a tax loss even though it put about $7,500 of cash in the owner's pocket before principal — because depreciation is a deduction, not a payment. Whether that loss can be used this year depends on passive-activity rules; that is a question for your accountant.
What is not an expense
Three items cause most of the confusion:
- Principal paid down is not deductible. It reduces the loan, not your income. Only interest is.
- Improvements — a new roof, a kitchen — are not repairs. They are added to the property's basis and depreciated over time.
- Personal spending paid from the same account stays out, even if it went through the property's card.
Records are not a tax return. They are what makes the return fast and defensible.
How long to keep records
The IRS ties record keeping to the period of limitations — how long it can assess more tax or you can amend:
| Situation | Keep for |
|---|---|
| Most returns | 3 years after filing |
| Unreported income over 25% of gross income | 6 years |
| Loss from worthless securities or bad debt deduction | 7 years |
| Property and investments | Until the period of limitations expires for the year you sell |
| No return filed, or a fraudulent return | Indefinitely |
Keep copies of the filed returns themselves for good. They are what you compare against next year and what lenders often ask for.
When to prepare
Don't wait for April. Close each month or quarter: categorize transactions, attach receipts, note what each unusual item was. At year-end only the official forms are left to collect — most arrive by mid-February.
How to do it in AOS
Common mistakes
- Sending raw bank statements. Organize by holding and category first.
- Deducting principal. Only interest on the loan is an expense.
- Calling improvements repairs. They are depreciated, not deducted at once.
- Mixing personal and investment spending. Use separate accounts where you can.
- Throwing away purchase records. You need them until you sell — and for years after.
FAQ
Do I need receipts if I have bank statements?
A statement shows that money moved; a receipt or invoice shows what it was for. For larger expenses and anything related to property, keep both.
What about crypto?
Treat it like any other investment: each sale or exchange is a taxable event with a cost basis and a gain or loss. Keep the trade history from every exchange and wallet.
Can I keep records digitally?
Yes. The IRS accepts electronic records if they are accurate, complete and readable. Back them up in more than one place.
What if I find an error after filing?
Your accountant can file an amended return, generally within three years. Organized records make that quick.
Is this tax advice?
No. This guide explains what to prepare. How the tax rules apply to you is a question for a qualified tax professional.
Sources
This article is for information only and is not investment, tax or legal advice. Figures are given with their source and date.
