Keeping Good Records Reduces Stress at Tax Time


From the desk of: Robin L. Wdowiak, EA

Gathering your records together for tax time can be very stressful and some tax deductions can be overlooked if you are not well organized.  Keeping good tax records throughout the year can reduce this stress and ensure you get all the deductions you are entitled to.  Being well organized also ensures that you can answer questions should your return get selected for examination.

Here are some tips on good record keeping and tax organization

In January grab a folder or a large envelope and mark it ‘Taxes”.  Put it in a readily available place such as a desk or bureau drawer.  As the year goes on, simply drop all of your tax receipts in. 

Charitable donations-make a photo copy of the canceled checks as your monthly statements come in.  Try to avoid ‘cash’ donations as they typically do not come with a receipt. 

Out of pocket employee business expenses-teachers expenses, union dues, steel toed boots, work related memberships, scrubs…whatever your expense is, drop that receipt or canceled check in your designated spot.  Be sure to write on the back of the receipt what you purchased as you may not recognize the charge later.

Tuition and books-deductible in the year paid.  Keep a copy in this envelope as you pay it.  This will save the hassle of asking your school for a transcript of payments or looking back thru your credit card charges.

Real estate or excise taxes-mark your bill paid with the check number and date on it.  Attached the canceled check or have the town hall mark the date it was paid.  Drop it in.

Deductible mileage-mileage logs are an important record keeping tool and can be a large tax deduction if you take the time to document it.    Many times they are often overlooked because they can be a hassle.  If you are not technically savvy with some new app, keep a spiral notebook in your car to log each business trip you make noting where you went and what the purpose of your trip was.  Remember a mileage deduction can also be used for charitable purposes if you volunteer your time and itemize your deductions.

At the beginning of the following year, as the tax documents start coming in the mail, use this same folder or envelope to collect these as well; w-2’s, mortgage statements and investment statements. When it comes time to do your taxes, everything is all in one place.

Other things to keep in mind

The IRS will not accept a credit card statement or a bank statement as proof of a deduction.  You must have a copy of the receipt which details what you purchased. 

Restaurant receipts should have noted who you shared a meal with and the business purpose of the meeting.

Tax deductions or credits are based on when they are PAID not when they are DUE or in the case of real estate taxes, what fiscal year they apply to.  If you paid it this year it can be used against income in the same year.

Individual taxpayers should keep records to support deductions or credits claimed on your returns along with the tax returns for three years.

Being well organized may result in paying less income tax and keeping more money where it belongs; your pocket!

Robin L. Wdowiak is the President of AJE Financial Services located in Ludlow.  Ms. Wdowiak is an Enrolled Agent specializing in the field of taxation and certified to represent clients before the Internal Revenue Service as well as all 50 states.

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