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Getting ready for tax time: Relax, collect, organize, document

The holidays are over. It's cold outside. And yes, the winter doldrums have set in. Just when you're ready to hibernate in your Snuggie with a cup of hot chocolate, you go to your mailbox (virtual or otherwise) and there you see it, your W-2.  Oh no, it's tax time!

The butterflies start their Pilates class in your stomach. You may need to sit down. Ok, you may even need to go back to bed and pull the covers up. We all hate tax time; we all hate the process. But, why? To most people, tax time means money coming to them. So it's best to get ready early, and collect that door prize, otherwise known as, your tax refund.

Let's start those relaxation exercises, take a deep breath and relax.  Next, collect yourself.  Gather the documents that have filled up your mailbox, your W-2s, 1099 forms from banks, brokerage accounts, IRAs, and your mortgage statement(s). Use your previous tax return as a guide, or to make sure you've received all the items in your tax inventory This email address is being protected from spambots. You need JavaScript enabled to view it.for an organizer.

Next, organize your deductions. Remember that the primary deductions that generate refund dollars are the interest you pay on your mortgage and real estate taxes that you pay on your residence. So, if you're not a homeowner, you are likely to use the standard deduction ($5,700 for single people, $11,400 for married couples filing jointly), so your $500 donation of used clothing amounts to zero tax savings.

Medical: Remember that the first 7.5 percent of your adjusted gross income (AGI), line 37 on your 2009 form 1040, is not deductible for federal tax purposes. So, if your AGI is $100,000, the first $7,500 spent on medical expenses is not deductible. And, if your medical premiums are paid pre-tax through a cafeteria plan, they are not deductible regardless of the amount. The same is true for expenses paid from a flex spending account. (However, keep in mind that cafeteria plan premiums and amounts contributed to flex spending have already been deducted from your W-2.)

For those of you with work-related expenses, here's where that famous cache of receipts comes in. Any money you spend in order to generate income that is not reimbursed from your employer is deductible. So, office supplies, promotional items, tools, uniforms, seminars, these are the receipts you should gather. Use common sense things like umbrellas, or dress shoes are not deductible, because even though you use them for work, you also use them in everyday life.

Finally, document. Make sure all charitable contributions are documented, by receipt, cancelled check, and a letter from the charitable organization if the donation is $250 or greater. The IRS does not allow standard amounts for charitable contributions.  Same is true for donated goods.

Is it ok to give us a list of items, as opposed to the receipts themselves Certainly in fact, it's preferable. We don't keep the receipts, nor do we keep copies of them. But you may need them, in case the IRS has any questions later.

For those of you, especially salespeople, who travel to various work locations, the first place you look is your mileage log. Don't have one? No need to cower in a corner take a look at your calendar. All of your appointments are cataloged there, and it's an easy place to start calculating your business mileage and tolls. You'll be reminded of business lunches or dinners you paid for along the way. In addition, the calendar serves as gospel to an IRS examiner, because it puts you in each of those places. Similarly, if you travel via airplane for business, keep your boarding passes they physically put you on the plane.

One more item; if you have children in daycare, aftercare, preschool or summer camp, and both parents work full-time, you may be eligible for a child care credit. You need to know the facility's address and tax identification number. Sometimes they provide this on the bill. Further, if you take advantage of dependent care benefits, you need to supply this information as well; otherwise the dependent care dollars could become taxable.

Here's what not to do:

  • Don't list out your bank 1099s or other income items. We take the numbers from the original documents.
  • Don't write down the information from the original documents, instead of bringing them. Sometimes there are important codes listed, which you might miss.  If you're concerned about leaving your documents, give us copies of the originals. That's fine.
  • Don't bring a copy of last year's return. If we've prepared it, we have access to every return since 2002.

If you're unsure of what to bring, or if you have any questions, or concerns, we are just a call or an This email address is being protected from spambots. You need JavaScript enabled to view it.away.