By CPA SAM
Holidays and Taxes – Part 2
It’s time for year end planning! Most blogs at this time of year talk about financial moves you can make to minimize your taxes. I don’t think that bears repeating. If you are interested in that, here are a few other sites that can help.
http://www.accountingtoday.com/news/Tax-Saving-Year-End-Tax-Planning-Tips-56551-1.html
http://www.smartmoney.com/personal-finance/taxes/year-end-tax-planning-massive-uncertainty-edition/
http://taxes.about.com/b/2010/11/08/year-end-tax-planning-tips-if-you-think-tax-rates-might-go-up-in-2011.htm
http://businesswest.com/2010/11/year-end-tax-planning
I’m more interested in getting everyone organized for the upcoming tax season. The better prepared you are for tax season, the happier your accountant/tax preparer will be. After the holiday lull begins in late December or early January (depending on your love of football) take some time to look for your 2010 documentation.
1) Medical receipts. In order to deduct medical expenses on Schedule A, you must first be able to itemize and second have expenses that are more than 7.5% of your Adjusted Gross Income (AGI). The most important part though is that you have good documentation. Do you have receipts for any payments to physicians or hospitals or pharmacies? Did you pay with check or credit card? Having a copy of the statement showing your payment whether from your checking account or credit card is essential. If you cannot find all of your receipts or statements, now is the time to begin calling those who treated you in 2010. Most doctors can provide you with a printout of your account activity for the year. Keep an eye on the different codes from that system though. Any insurance payments on your behalf should not be considered your own payments.
2) Mileage logs. If you drive your vehicle for business, medical or charitable purposes, did you keep good logs of your mileage? It’s more than just noting starting and ending mileage and date. A good record of what you did and where you went is essential as well. Because there are three categories of mileage reimbursement, it is best if you can provide documentation for your tax preparer by category. By assembling and keeping good notes now, you will save yourself many headaches in case of a future audit.
3) Update your mailing address. If you moved this year, there are a lot of tax documents that are going to take the long road to your home. This of course slows down their delivery through our illustrious mail system. Make sure you notify current and former employers (W-2), banks (1099-int and 1098), student loan providers and investment providers of your new mailing address. Depending on the situation, this could drastically affect your withholding as well if you live in one of the states with local taxes.
4) Make a plan. What is your financial goal for 2011? Do you want to continue extinguishing your debt? Will you be saving up for a big purchase to avoid interest? Will you be moving or changing your family structure (marriage, divorce, kids etc)? Start thinking about your plan for next year now. If you don’t make any plans to reach that goal you always talk about, you will never reach it.
Any of these can be done at any time during the year. However, a little extra planning at year end before the tax documents start arriving can make tax season so much easier for you.
As the end of 2009 quickly approaches, it’s important for all tax payers to begin preparing for the filing of their 2009 tax returns.