Tax File Organization

0
400

If you have been in tax preparation you have likely seen or developed a million ways to organize your client files. And, if you are new to the profession, you are likely curious about an efficient organization method. I find that business tax return workpaper files tend to be disorganized, inconsistent, and hard to follow.

Here is an example of how I organize my tax client folders:

Where to save tax workpapers:

  • File Share>Client File>Taxes> Year

Workpaper (WP) naming conventions:

  • WP Number; Date Client Name; Description
  • If the workpaper was provided by the client:
    • WP Number; Date Client Name; PBC Description
  • If it was an email saved as a PDF for the file use “EM” in the naming convention
    • 9000; Date of email Client Name; EM Description
  • If it was an excel sheet that has tabs that are provided by the client, rename those tabs to start with “PBC”
  • Name tabs in excel sheets using alphabetic ordering for referencing purposes, for example:
    • A – Book to Tax Reconciliation
      B – PBC Income Statement
      C – PBC Balance Sheet
  • The main WPs should be numbered as presented below, with related documents behind them using a XXXX.1 (and so on) numbering schema, for example:
    • 3000; 20XX-12-31 Client Name; PBC Salary Accruals
      3000.1; 20XX-12-31 Client Name; PBC Salary paid out within 2.5 months
      3000.2; 20XX-12-31 Client Name; PBC Vacation paid out within 2.5 months
  • If you prepare WPs for planning before the return, you should name them with the appropriate WP number and a P following, include DRAFT, for example:
    • 2000P; 20XX-12-31 Client Name; DRAFT Book to Tax Rec

Business Returns WPs Standard Numbering:

  • 1000 – Tax Compliance Memo – an overview of the client’s business and their tax positions (support to follow – research or memos, etc.)
  • 2000 – Book to Tax Reconciliation
  • 2500 – Book Income Statement (in PDF unaltered from client or our system)
  • 2600 – Book Balance Sheet (in PDF unaltered from client or our system)
  • 3000 – Tax Adjustment Support Schedules (e.g. detail on accruals and amounts paid within 2.5 months, detail on M&E if applicable, etc.)
    If these support WPs are provided in excel, please include them in the 2000 workbook. If there is additional information provided outside of excel, use the 3000 group and reference the numbers back to 2000A (the first tab should always be the book to tax rec).
  • 4000 – Tax Fixed Asset and Intangibles Schedules (support to follow)
  • 4500 – Book Fixed Asset and Intangibles Schedules (support to follow)
  • 5000 – Equity Worksheets
    • All returns should have an equity rollover that ties to the Schedule L and M-2
    • 1065 should also have partner basis calculations
    • 1120S should also have shareholder basis calculations
  • 6000 – Tax Credit Support
  • 9000 – All relevant client emails
  • 9500 – PBC List (sent to client before tax return prep begins)
  • 9999 – Open Items and Questions on Return (should be documented for next year PBC list preparation)
    • We should make sure that everything in here is answered and documented in the file before the tax return is signed off on.

Share in the comments how you organize your tax business client workpaper files!

Previous articleUphold and TaxBit Introduce Industry-First Suite of Tax Services For Cryptocurrency Users: 1099-B Tax Reporting
Next articleSetting Every Community Up for Retirement Enhancement Act of 2019 (Secure Act)
Liz Mason is a serial entrepreneur, a giant nerd, and an involved accounting vanguard. She is the Founder of High Rock Accounting, Rebel Rock Accounting, TheDepartment.Tax, and a few other related brands. Liz speaks on a national stage, guests stars on podcasts, publishes a YouTube show (The Hot Accounts), and writes frequently. To further her passion for the advancement of the accounting profession, Liz currently serves as a Xero National Ambassador and as the Content Strategist for Tax Practice News. Liz started her career in tax at Grant Thornton (at 20) and automated a portion of her job landing her in the national tax practice. She spent a decade in large public accounting firms working on highly technical tax consulting before branching off on her own. Liz utilizes her creativity and passion at her company to uproot traditional practices and replace them with innovative concepts. She finds joy in efficient technology and her core belief is that everyone and everything can continuously improve (she says "be better" too often). When Liz isn't planning world domination in accounting, she is a die-hard skier, down for any adventure, plays the ukulele, reads everything, and has a good sense of humor. If you're looking for her, you can find her traveling the world and enjoying new food and cultures with her husband and young son. Follow Liz and High Rock Accounting on Twitter at @LizzyNorMa and @HighRockCPAs.