Taxing times: 10 survival tips
By BETH BENCE REINKE for Smart
The new year has arrived and that means the tax man cometh! January to April is the busiest part of tax season, said Grace Quartey, a certified public accountant who has her own firm in York. Getting a jump on your tax paperwork now can decrease stress and save time for both you and your tax preparer. Quartey gives these 10 basic tips to help you sail through tax time.
1. Watch the mail. “Anything that comes in the mail that says ‘important tax information’ on the envelope, do not throw it away!” Quartey said. This is particularly important during January and February.
Save it even if you think you don’t need it, she advises, and allow your tax preparer to decide if it applies to you. Schedule your tax appointment after all of the tax documents have arrived, probably by the beginning of March at the latest.
2. Keep all of your tax-related paperwork in one place. “Put everything in a large envelope throughout the year,” Quartey said. Separate your piles of papers into categories, and paper clip them together. For receipts, organize and total them by category. Start a new envelope now for your 2008 tax paperwork.
3. Communicate with your tax professional. “It is always good to have an open line to your tax preparer so they can best help you,” Quartey said. Compile a list of questions and call ahead so that you’re prepared for the tax appointment. If you are going to a new tax person, take last year’s returns along.
4. Save charitable donation receipts throughout the year. You need receipts for donations in excess of $250 per year, Quartey said. Receipts are also needed for non-cash donations like a car or library books.
5. Homeowners, keep statements about mortgage interest and property taxes you paid. If you bought or sold a home this year, Quartey says you should bring along settlement sheets to your tax appointment.
6. Gather all documents that show your income. That includes W-2 forms, 1099 forms, interest statements from bank accounts and dividends on investments, Quartey said. Tell your tax preparer if you have any other sources of income like lottery winnings or prizes, or if you bought or sold any stocks or mutual funds.
7. Provide documentation on expenses. For child care expenses, you will need the day care provider’s name, address, tax ID number or social security number and receipts for how much you paid. Quartey also suggests looking for any unreimbursed employee expenses you may have that are related to your job. “For example, if your employer requires you to travel to see customers and they don’t reimburse mileage, you may be able to deduct that,” she said.
8. If claiming dependents, like a new baby or other children, have this information ready: name, date of birth, Social Security number and how much of the year each child lived with you.
9. Supply paperwork on college savings plans. New in 2006, you can deduct up to $12,000 per child for 529 educational savings plans such as TAP, Quartey said.
10. Save your old tax returns in case you are audited. Quartey said the most conservative recommendation is to keep old tax returns plus supporting receipts and paperwork for seven years. “The law says keep them three years from the date filed plus extensions,” she says. “There are always exceptions to this rule, so consult your tax adviser about this.”
Quartey points out that these tips are just general guidelines. For tax advice specific to your individual situation, consult your tax professional or visit the IRS Web site at www.irs.gov.
Mistakes to avoid at tax time• Coming too early for a tax appointment before you have received all of the paperwork in the mail.
• Forgetting to tell the tax preparer that they bought or sold a home or something in a brokerage account like stocks or mutual funds.
• Failing to obtain receipts for charitable donations.
• Omitting sources of income, such as short-term or seasonal jobs.
• Missing opportunities to claim unreimbursed employee expenses.
Source: Grace Quartey, certified public accountant
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