The time to start getting ready for filing your taxes is the day you file your current taxes. If you keep receipts and stay organized throughout the year, your taxes – whether you do them or an accountant does them – will be less painful.
1. Create a Filing System
Create a filing system, whether digital or paper. If you do prefer digital, make sure you have a backup, preferably in the cloud. As you receive receipts scan or file them in the appropriate folder so they are easy to find when it comes to tax time. You should have folders for donations, taxes, repairs, vehicle maintenance, travel, medical and other tax-deductible items.
2. Social Security Numbers and Tax ID Numbers
Make sure you have your family’s social security numbers on hand. If you have a business and use a tax identification number, be sure you have that handy, too. Leaving out a social security number or a tax ID number could slow down the processing of your tax return and could even cost you money.
3. Keep Records of All Income
Be sure to keep records of all of your income. You’ll need it if you don’t get the tax forms from the employer or institution. Income is not only what you earn from working, but it also includes interest on accounts, royalties, rental income and alimony.
4. Charitable Donations
Keep records of all charitable donations. If the amount is over $250, you should get a receipt from the charity. However, if it’s less, you’ll have to keep track of it. Ask for a receipt if you donate clothing or other items worth less than $250. The deductions for those donations add up, so don’t discount them.
Also, you may not be able to deduct the time you spend helping a charity; however, the mileage traveling to and from your volunteer work is deductible. Keep track of the number of miles you drive to help charities.
The mortgage interest you pay on your home and a second home or vacation home is also deductible. Your mortgage company should forward you a 1098 with this information on it. Some repairs are also deductible, so keep track of how much you put into your home.
6. Home Office
If you work out of your home, you may deduct a portion of taxes, interest, utilities you pay. These deductions are taken separately; however, you cannot count them twice. Tax preparation software will ask you questions about your home office and will let you know where to claim the portions for these items so that you don’t deduct them twice.
7. Self-Employment Income
When you work for someone else, doing your taxes is a bit easier. However, you have a little more work to do if you are self-employed. Be sure to keep all business expense receipts, as many of them are deductible, including advertising expenses, bank fees, mileage for work purposes, entertainment costs for business purposes and other business expenses. If you are claiming a home office, be careful that you don’t claim things twice. Your self-employment income is usually figured on Schedule C. These receipts should be kept separate from personal expenses.
If you have a large business or are very unfamiliar with business taxes, it is better to hire an accountant to do your taxes. Even with an accountant, you may run into problems with the IRS, in which case, it is prudent to retain a tax attorney.
8. Keep Abreast of Tax Changes
If you use programs such as TaxAct or H&R Block, the interviews keep up with the tax changes. If you do your taxes on your own, you’ll need to explore the tax code for changes. However, if you do your own taxes, you could miss important changes that could cost you money.
Contact France Law Firm
If you have questions about tax law, including personal taxes, rental income or business income, you should retain a tax attorney to advise you on how to proceed. Other situations that may require a tax attorney include how divorce and bankruptcy may affect how you file taxes, the probate of a friend or relative, large purchases and large sales, such as the sale of a home or a business. France Law Firm will be able to advise you on how to proceed in some of these special situations.