You can avoid headaches at tax time by keeping track of your receipts and other records throughout the year. Good record-keeping will help you remember the various transactions you made during the year, which in turn may make filing your return less, ummm, taxing.
Records help you document the deductions you’ve claimed on your return. You’ll need this documentation should the IRS select your return for examination. Normally, tax records should be kept for three years, but some documents – such as records relating to a home purchase or sale, stock transactions, IRA, and business or rental property – should be kept longer.
In most cases, the IRS does not require you to keep records in any special manner. Generally speaking, however, you should keep any and all documents that may have an impact on your federal and State tax returns:
- Bills
- Credit card and other receipts
- Invoices
- Mileage logs
- Canceled, imaged, or substitute checks or any other proof of payment
- Any other records to support deductions or credits you claim on your return
Good record-keeping throughout the year saves you time and effort at tax time when organizing and completing your return. For more information on what kinds of records you should keep, check out my page Tax Strategies for Individuals and or Tax Strategies for Business Owners. Use the guides listed on the mentioned pages to learn how to lower your taxes with legitimate tax saving strategies and to find perfectly legal tax deductions that you may be missing.
A few other tips.
Asset Allocation Adjustments
Review the asset allocation of your portfolio. Increases and decreases in the value of your portfolio can upset the asset allocation you consider optimal. Should you shift some stock investments into or out of bond investments? Should you shift some funds into tax-free investments?
Health Spending Checkup
If your employer has a flexible spending arrangement (FSA), determine the balance left in the plan. Your plan may allow you to carry over a year-end balance for use early in the following year.
If your plan doesn’t allow unspent money to be carried over, then you may want to incur discretionary medical, dental, or optical costs prior to year-end. If you do not participate in such a plan, find out if one is available at your company. Also find out if you are eligible for a Health Savings Account.
Review Budget vs. Actuals
Compare September income and expenditures with your budget. Make adjustments as appropriate to your October expenditures. Make sure you have invested your planned savings amount for September.
Estimate Your 2010 Tax Liability
Total up your taxable income, capital gains, and deductions through this date. Estimate the amounts expected through year-end. Determine where you stand, and what steps, if any, you should take prior to year-end to minimize your tax liability. Please feel free to call us for help.
© 2010, Bruce Mc. All rights reserved.
