Thursday, January 24, 2013

Tax Prep

It is that time of year again. I am one of those people who does itemize. What should you save if you itemize?  Receipts, of course, but not just a wad of receipts, they have to have a narrative to go along with them.  Here’s an example: Target Receipt: four bags of assorted candy 12.46. I write on the receipt: Work 4/20/2013 Biology Bingo. Everything is there including the date and purpose.


Simple Work Related Deductions

1.       Wardrobe, but only if it is uniform related, and you had to buy it.

2.       Dry cleaning-if it is reference to your work. An example might be military or police uniforms.

3.  Special trips for work mileage-it helps to keep a notebook in the car for starting and ending mileage. Normal commute time cannot count. The boss wants you to attend a workshop in the next state that can count, but not if you are reimbursed by the company.

4.  Cellphone, Laptops, & Internet service are deductible if you can prove it is 100% work related.  Most of us can’t, so it isn’t worth trying.

5. The home offices causes the most audits, I would avoid it. I have a home office, but never declare it.

6. Supplies-do you have to provide supplies to perform your job. Keep the receipts.

7. Food and Drink- entertaining clients, or you are at a work related function.  This gets tricky. Alcohol can’t be written off. On your receipt, you need to note whom you were with, and what aspect of business you discussed.


Household Deductions

This year was a moving year, but I didn’t get the moving deduction. (Sigh)

1.       Moving Deduction-you have to prove it is work related by moving at least 50 miles closer to work. This works out well if you receive a new job elsewhere. Keep the movers or U-Haul receipts, all the receipts for packing supplies, and mileage there.

2.       Making your home more energy efficient- fixing furnaces, water heaters, etc. Putting in new windows, doors, and insulation counts too.

3.       First time homebuyers qualify for a deduction, as do people who pay mortgage insurance, and mortgage interest.


Charitable Deductions

 Remember those twenties  in the offering plate, or dollars you put in the red kettles, they don’t count. If there isn’t a paper trail, and it isn’t a registered charity, it doesn’t count. It also doesn't count if you received some small gift for your donation. You are buying a cheaply made item for an inflated price.


1.       Goodwill/Am Vets/DAV/Salvation Army- you must know the store address, the date of drop off, and itemized list of items. Turbo-tax is good about giving you value for each thing. Don’t go crazy trying to remember.  Instead, keep a Goodwill Box with a list beside it. Write down the item, when you put it in the box.

2.       Churches-will give a record of donations if received with a name. That is why they came up with offering envelopes.

Not all institutions are charities, so you don’t get credit for donating to them.


Energy Efficient Car Deduction

Well, I thought I had that one, oops missed that one too.

1.       Think plug-in, if you can physically plug your car in to charge overnight, then you're good. Being a hybrid isn’t enough anymore.

2.       Building a charging station for your car is deductible.


Children, Childcare, and College

1.       Children are always good deductions. Divorced parents need to be clear on who gets the deduction year to year.

2.       Childcare receipts-you may pay a relative to watch junior. You need clear documentation to show this. Paying by check is the easiest way. 

3.       College-the college may not even send you the 1098T form. It is up to you to download it from the college. Do not forget to keep receipts for books and other associated fees. Make sure to write a narrative on each receipt.  Room and board doesn’t count.


You may qualify for tons of deductions I didn’t mention. Even if you just run to Meijers to buy Turbo Tax software, keep the receipt for next year. Complicated taxes, or perhaps you forgot to file previous years, then you really want to invest in a CPA.  If you only held down one job with taxes withdrawn every check, then you should be able to do your own.

Start getting organized for the 2013 tax year. Keep your receipts, but label them and organize them in an accordion style folder. You may find out some won’t count, but others do. You can wait until the end of the year to toss it if it is no good. If you do your homework now, it will make taxes much, much easier this time next year.

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