Ways to Prepare for Taxes – Part 2May 19, 2013 - 4 minutes read
Gather and organize RELEVANT receipts. Examples include:
- Charitable Contributions* – You must have a written acknowledgement from the charitable organization to support donations of $250 or more.
- Medical Expenses* – If you believe your unreimbursed medical expenses for 2011 exceeded 7.5% of your adjusted gross income, you will need to add up the receipts for all of these out of pocket costs. If your medical expenses weren’t that much, don’t bother.
- Sales Tax* – You can elect to deduct state sales tax paid during 2011 in lieu of state income taxes. The IRS provides a table for calculating your state sales tax deduction based on your income for the year. If you prefer, you can add up the actual sales tax you paid on all of your 2011 receipts to calculate your deduction. If you made a major purchase, like buying a car, the actual sales tax paid on this transaction can be added to the amount from the IRS table. So, you should at least find the receipt from your car purchase.
- Real Estate Taxes* – Keep the receipt for the real estate taxes you PAID in 2011. If your real estate taxes are paid through your escrow account, your deductible amount will probably be reported on the 2011 Form 1098 that you receive for mortgage interest.
- Unreimbursed Business Expenses – Receipts are needed to claim this deduction.
- Child or Dependent Care Expenses – Request a statement from the care provider reporting the expenses you paid during 2011. You may be eligible for a tax credit.
- Energy Efficient Home Improvements – You may be eligible for a tax credit if you made energy efficient improvements to your home during 2011. You will need the receipt evidencing payment for these improvements as well as a tax credit certification statement from the manufacturer of the improvement property. Here are more details on the credit: http://www.irs.gov/newsroom/article/0,,id=249922,00.html
*Note: These deductions are only applicable if you can itemize.
- If you are a business owner, landlord, or farmer, hopefully you have kept track of all of your 2011 income and expenses from these business activities. At the very least, you should use a separate checking account for each business you operate. There are many types of accounting software that can help you record the business activity. Talk to your CPA if you have questions about accounting for your business income and expenses.
- Keep the 2011 year end statement from your Health Savings Account and Individual Retirement Account. Your contributions for 2011 may be tax deductible. Also, you have until the due date (without extension) of your income tax return to make deductible contributions for 2011.
- If you made quarterly estimated income tax payments to the US Treasury for 2011, list the dates paid and amounts paid. These will be subtracted from your total tax liability. Remember that the fourth quarter estimated tax payment for 2011 is due January 17th, 2012.
These steps will help you whether you prepare your own return or provide this information to your CPA. Don’t hesitate to ask your CPA if you have any questions. Good luck!