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Get Ready for Tax Time

Posted by Range Officer Rhonda on January 3, 2010

More tips will be coming along as the years go by, but I want to post a timely subject that can help you in the here and now. All of the last thought things you could have done at the end of 2009 have passed, but hopefully, you will take advantage of the things you have learned and carry them forward to all future years.

 To make thing a little easier for your tax preparer, whether a paid person, spouse or even yourself, there are a few things you can gather together to help make the job easier. Once you have all the ‘gathering’ done – the rest is only a matter of a few minutes of data entry into your favorite software system.

 First step – find last year’s tax return. Look at it carefully with a note pad at your side and jot down things that may have changed. Did you move? You’d be surprised how many people just ‘assume’ their tax person knows they have moved and find later on that the address is incorrect. Moving on down the form – who are you claiming as dependants? Your children – parents – a brother? If any of their [the dependants] situations have changed, you need to jot that down as well. Just because you are paying for your child’s college doesn’t mean they won’t rush out with a W-2 in hand and get someone to file a quick refund for them – and they will claim themselves and totally mess up your return! Are you now the caregiver for a parent? Even if they have to file a tax return on their retirement and earnings, you could be able to claim them as a dependant. Is your brother or sister out of work and staying with you? Maybe you can claim them, if they don’t need the deduction or even their children if you are helping to support them.

 The first item on your return is the W-2 or job income. Even though there is a myth out there that you have to get this by Jan. 31st, it is exactly that – a myth. And employers are waiting later and later to send these out. Wait until the end of Feb. to make sure all of your statements have come in or start calling suspected employers and see if they are even going to send one out. You CAN file a return with your last pay stub, but with all the pre-tax and unusual benefits employers provide these days – it is not a guarantee thing that your final pay stub is going to have the same numbers on it as the official W-2 that is what the IRS and Social Security Administration look at.

 Compare the list of all banks and brokers you had last year. Did you add one, drop one maybe? Make sure you have all the statements from the prior year and look for any new accounts you may have set up or changed over the year. These two lines, for interest and dividends, cause more IRS letters, changes, additional tax charges and audits than any other item on your return. And most of these don’t even start to get mailed until February. With all the confusion and changes in the laws the past few years, it is not unreasonable to expect 2 or even 3 different statements on your account; the last one generally is the most correct, not the first.

 Employee expenses and self-employment income: First, before anything, go out and write down the odometer reading on your vehicle, if you haven’t already.

Write down your vehicle Odometer readings! Oh, and yes the canoe is a deduction too!

 Every single person who works in any way should do this for every vehicle and every year and provide it to your tax person. Collect all your receipts, expense statements, balance your check book and put your credit card statements in order. You could use a shoe box, a spiral notebook or even an expensive bookkeeping software program to gather all your numbers together. The most important thing is to gather everything, put it in order and use a system that YOU completely understand. If you want to jot it all down on a legal pad with a pencil – then do it so that you can understand it. If you want to rubber band all your receipts together and run an adding machine tape on them – do it for your understanding so that it is easy for you to explain. Spread sheets are nice – if you understand your own system and are consistent with it. Bring your check book register and make sure it is at least balanced with the last bank statement of the year. Copy all of your expense reports that you have turned in to your employer and then make a list of things they may NOT have reimbursed you for, such as magazine subscriptions, dry cleaning, toll roads, tools, books, gifts to co-workers [up to $25 per person per event without a receipt needed], decorations for your desk and walls….a lot of hidden deductions are there and you just don’t think during the year to look for them.

 And finally, the itemized deductions.

Total your medical bills, be sure and include any and all insurance payments, deductibles, health club memberships, dentists, eye exams, vitamin supplements – sometimes even a hot tub will count! Weight loss, healthy exercise, personal trainer or stop smoking programs? You bet!

 For taxes – any personal property taxes or local taxes for your vehicle. Know your local sales tax rate and list any ‘big ticket’ items you may have bought such as that new energy efficient A/C unit, siding on your home, a vehicle trade in and more. Also, make sure if you are turning in your mortgage statement with interest that you have listed on it any property taxes on your home[s] or provide a separate statement showing where you have paid this.

 Interest on your home[s] – be sure you provide all statements, especially if your mortgage was sold to another company. If you have purchased or refinanced a home, bring the closing statement so your preparer can find those hidden, prorated costs that are deductible.

 And last, but not least – charity. MY FAVORITE. Bring all receipts or list the ones where you are missing receipts. Did you know that for every bag of clothing that you donate to church or a place like Goodwill you could claim from $250 to $500 PER BAG of donated goods? The average person, in America, claims a donation of approximately 15% of their gross income in donated goods and you are allowed to claim up to 50% of your income in donations. Be sure you are taking advantage of your legal right to claim all donations. In fact, the government LIKES you to claim these things as some organizations are not reporting everything that they are receiving. But most of the time, these are worthy groups and they do good works with your help. If you do not know how to properly value your donation, ask a professional for help and do not attempt to do this on your own.

 As with all items for income or expense, this discussion should be used to make you think and discuss this with someone that is properly trained in identifying and classifying taxable and deductible items. Please do not use this discussion as your basis for proof in preparing your own taxes, but seek professional help.


5 Responses to “Get Ready for Tax Time”

  1. Thanks Rhonda. Good advice. You reminded me of a few items I would have forgotten.

  2. What a good service you offer Rhonda to provide tax advice. Any tips specifically for artists and writers?

    Janet Riehl

    • Range Officer Rhonda said

      Janet, thanks for stopping by. If you check the link on my blog for ‘Tax Tips’, you will see a few entries over the past couple of months that specifically apply to writers, and, in most cases, also apply to any artist. The main Tip: Treat it as a business.

  3. … keep up the great posts.

    • Range Officer Rhonda said

      Thanks, Sam. And I checked out the browser question you brought up, others don’t seem to be having that problem, but thanks for bringing it to my attention.

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