YOUR TAXES
What? Me Worry? Give Yourself the Gift of a Worry-Free Tax Season
There's a reason many of us panic in the face of tax season: we have piles of paperwork to wade through. Follow these steps to keep track of important financial information year-round, and you'll waltz into April with a smile on your face and a spring in your step. Maybe even wearing some new boots.
Records to hold on to:
- General financial documents: Pay stubs, W-2 forms, receipts for big dollar items such as the purchase or sale of an automobile or home, records of investments along with contributions to retirement accounts, bank and brokerage statements, and 1099 forms.
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Receipts for deductible items: Keep records of deductible purchases (such as purchases for your business): record the check number, dollar amount, payee's name and date of the transaction. Keep credit card statements with these purchases. If you make a payment in cash, get a signed and dated receipt showing the amount and reason for the payment.
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Medical records: Hold on to papers regarding medical expenses along with dates, what you paid for, and when you paid for it, and any insurance reimbursements.
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Casualty or theft loss: Document the loss, including value of the damaged or stolen property, the date and type of loss (fire, flood, theft, etc.), insurance reimbursements, the amount paid to purchase the property, and proof that it was yours.
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Gambling records: Gambling records should state the type of gambling activity, the amount won or lost, address or location of the establishment, names of others present with you, and the date.
- Charitable records: To deduct charitable donations, new tax laws require a taxpayer to have a bank record or a written communication from the charity showing the name of the charity and the date and amount of the contribution. For payroll deductions, keep your pay stub (which you should be keeping, anyway), W-2 wage statement, and any other document from your employer showing the total amount withheld for charity, along with the pledge card showing the name of the charity.
Keep it simple: find the best way for you. If it's too complicated, you won't be able to keep up with it during the year. Most find a simple expandable file on an easily accessible desk or table in your home, broken into categories, the best way to make filing a habit. That way, you are readying your tax work without even thinking about it. It's also a good idea to store these yearly files away in boxes or on shelves for later reference. Save them a minimum of three years, but for other uses such as insurance claims or proof to creditors, seven years.