If you’re like most taxpayers, you find yourself with an overwhelming stack of homework around TAX TIME. And, although the task of pulling together the records for your tax appointment is never easy or fun, your effort will pay off when it comes to the extra tax you’ll save! When you arrive at your appointment and are fully prepared, you’ll have more time to:
- Consider every possible legal deduction;
- Better evaluate your options for reporting income and deductions to choose those that are best suited to your situation;
- Explore current tax law changes that affect your tax status;
- Talk about possible tax law changes and discuss tax planning alternatives that could reduce your future tax liability.
Where to Begin?
Ideally, preparation for your tax appointment should begin in January. Right after the New Year, set up a safe storage location – a file drawer, a cupboard, a box, etc. As you receive pertinent documents (such as W-2s from employers, 1099s from banks and stockbrokers, and K-1s), file them right away, before they’re forgotten or lost.
Other general suggestions to consider for your appointment preparation include:
- If you receive an organizer or questionnaire to complete before your appointment, make certain you fill out every section that applies to you.
- Review last year’s tax return. Compare your income on that return to the income for the current year. Compare deductions from last year with your records for this year.
- Make certain that you have social security numbers for all your dependents. The IRS checks these carefully and will reject a tax return without them.
- Write down questions you may have so you don’t forget to ask them at your appointment.
Some Transactions Deserve Special Treatment
It’s a good idea to spend a little extra time when you have had the following transactions:
Sales of Stock or Other Property: All sales of stocks, bonds, securities, real estate and any other type of property need to be reported on your return, even if you had no profit or loss. List each sale, and have the purchase and sale documents available for each transaction.
Vehicle Expenses: List the expenses of each vehicle you used for business purposes. The IRS requires that you provide your total mileage, business miles and commuting miles for each vehicle on your return, so be prepared to have them available.
Charitable Donations: Cash contributions (regardless of amount) must be substantiated with a bank record or written communication from the charity showing the name of the charitable organization, date and amount of the contribution. Cash donations put into a “Christmas kettle,” church collection plate, etc., are not deductible.
For clothing and household contributions, the items donated must generally be in good or better condition, and items such as undergarments and socks are not deductible. A record of each item contributed must be kept, indicating the name and address of the charity, date and location of the contribution, and a reasonable description of the property. Contributions valued less than $250 and dropped off at an unattended location do not require a receipt. For contributions of $500 or more, the record must also include when and how the property was acquired and your cost basis in the property. For contributions valued at $5,000 or more and other types of contributions, please call this office for additional requirements.
Our office provides a questionnaire or detailed tax organizer to clients to help gather tax information. Upon request, we will gladly email or mail you one right away.