It is that time of the year when ads for tax software and national tax firms are beginning to appear, reminding us that tax filing season is quickly approaching. Before you get too anxious, remember half the battle is getting organized. To help those whose records are a little scattered, we have compiled some helpful hints in getting organized:
- Have trouble hanging on to receipts? Opt to pay by check or credit card for easy record keeping. Better yet, if you have lots of deductible expenses, opt for a separate account for deductible versus personal expenses.
- Wonder how long to keep those tax records? Generally the IRS has three years from the due date of your return to audit and ask for more documentation. Be safe and keep everything for 5 years. After that, feel free to toss (or shred) supporting documentation. Keep the return itself forever as you never know when it might come in handy.
- Paid Cash & No Receipt? Not deductible. Period.
- Donation of more than $250? Be sure the organization acknowledges the gift in writing AND states that no goods or services were provided in exchange for the gift.
- Do not undervalue your non-cash gifts (Goodwill, Salvation Army, Etc). Use an aid such as Deduct It, Deduct It! to properly value your donated items.
- Ask your medical facility and pharmacy for a summary of all expenses incurred during the year. This is a great way to save time adding up receipts.
- Transportation costs to and from medical care are deductible. Keep a log of medical miles with the date, # of miles, and facility visited.
- If you refinanced your home, do not forget mortgage interest for the old loan and the new loan. Even if they are from the same bank, you may get separate reports on interest paid.
- Many counties provide records of Real Estate Tax paid. Champaign County has records available here.
- If you bought or sold your home, closing documents may be needed to determine who (buyer/seller) paid how much in taxes.
Reviewing your prior year return might help remind you of items you may need for this year. If your tax situation is more complicated, such as those with rental properties or consulting income, consider tracking your expenses with programs such as Quicken™ or Mint.com.