Well it’s that time of the year again. The time every American dreads every year. It’s time to do your taxes again, so I thought I’d write up a few tax savings tips.
Tip #1 Keep Documentation
Everything you claim in your taxes needs to be backed up with the proper documentation. By staying organized and keeping all of your records it will make your life a lot easier when it comes time to do your taxes. If you don’t have the record for a claim, then you can’t put it on your taxes, and that can cost you money. What sort of documentation do you need? Here’s a list to start with:
- 1099 if you’re self employed
- W2s
- Interest you’ve received on your bank accounts, money market accounts, and dividends from stocks
- State income tax refund
- Alimony receipts
- Capital gains or losses
- Bank Statements
- Rental income
- IRA distributions
- Unemployment
- Social security benefits
- Any income records
- Retirement contributions
- Medical and dental expenses
- Mortgage or investment interest
- Charitable donations, Haiti relief fund anyone?
- Theft losses
- Business expenses if you have a business
- Any other tax forms you might have
How long after you file your taxes do you need to keep your documents? In general the IRS can audit anyone for tax returns in the previous 3 years so you should keep them for at least that long.
Tip #2 Organize
Once you have all your tax documents file them away neatly until you need them. If you have a business like I do here’s an example of how you should organize your documents:
- Advertising Expenses
- Vehicle Expenses
- Contract Labor
- Depreciation of Assets
- Insurance
- Legal Fees
- Office Expenses
- Pension plans and employee benefits
- Rent expenses
- Office Supplies
- Travel, meals, and entertainment
- Employee Wages
Organizing your documents will save you a lot of time come April.
Tip #3 Create a Schedule
January is the perfect time of year to create your tax schedule. The estimated tax due dates are January 15, April 15 (also the deadline for filing your taxes as we all know), June 15 and September 15. If you have employees, January 31 is the due date to send out your W2s and 1099s, and is when payroll taxes are due.
These due dates are important because if you don’t adhere to them the IRS can penalize you so be sure to stick to these dates. If you follow these 3 tax tips your tax filing will go much more smoothly this year and every year.