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.