Guick Guide to Preparing for your Annual Tax Return

Filing your taxes each year gives some people a sense of closure or purpose. In fact, some people even look forward to it, most likely if they are getting money back. If you are amongst the majority who dread the tax season, however, fear not: we’re here to help.

The secret to a stress-free tax season? Preparation, of course!

Collect and sort
First, once your tax forms start coming in from your employer, banker, broker, etc., keep them all bundled together in a file folder so you won’t be tearing apart the house later trying to find them all.

Next, start going through the other records and receipts that you have kept throughout the year. If you’ve already filed them neatly by date and purpose, great! If you’ve shoved them all in a shoebox, bite the bullet and start sorting. If you’re wondering, “Receipts? What receipts?” don’t panic: Make a promise to yourself that you won’t forget to keep them next year. The sooner you get yourself organized, the better, since you’ll need to identify what’s missing and get replacements where necessary.

Identify deductions
Next, you’ll want to make sure you’ve accounted for anything that could be useful to lowering your tax bill. We’re talking about deductions, of course! Here are some of the more common ones:

Charitable cash donations
If you donated $250 or less to a charity, a cancelled check is enough documentation. If more than $250, you do need a receipt. If you can’t find your receipt, call the charity and they will likely be able to issue you a replacement. If the charitable donation was made through payroll deductions at work, you’ll need a pledge card, receipt, or something other than your pay stub as documentation (again, only if the donation was over $250).

Charitable non-cash donations
Suppose you made a non-cash donation, like artwork. Here you may need more documentation. Experts recommend that non-cash donations with a value of $5,000 or more (except for stocks) should be professionally appraised. For art worth $20,000 or more, include a photo of the gift with your tax return. Finally, if you donate a vehicle in fair condition, use used car value guides and keep in mind that you can write off 14 cents per mile for each mile you used your car for charitable purposes (keep a mileage log!)

Child/dependent care
You may be able to claim a credit for child/dependent care expenses - for example if you paid someone to provide care. Ensure that you have the name, address, and taxpayer ID number or social security number of the care provider. Proof of payment must be shown through receipts.

Job search and moving expenses
Did you know that you can deduct the amount paid for long-distance calls, stationery, and other expenses incurred while job searching? Make sure you itemize and keep receipts! If you had to move more than 50 miles for a new job, you can also deduct moving expenses, including the costs of physically moving your belongings and yourself (travel/hotel). If your new employer paid your moving expenses, though, you’re out of luck: you can only claim what you paid for yourself.

Medical expenses
Most people can’t write off medical expenses because there is no benefit, since expenses must exceed 7.5% of your income. If you do meet this threshold but don’t have receipts, call your doctor, dentist, etc. as they should be able to provide duplicate receipts.

Tax preparation
If you itemize the costs of preparing your taxes themselves, you can write this off too! This includes tax prep software, books, and accountant, electronic filing, and other related fees. Keep all your receipts!

 

 

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