Are You Ready For The Next Tax Season?
September 30, 2018 in Tax Planning
With another tax season seemingly always on the horizon, what’s the best tax advice that one can receive? The answer: when it comes to filing income tax returns, the earlier start you can get, the better. Anxiety and stress is only increased by putting off tax return completion until the last minute.
So how does one “get ready” for tax season? Here’s some advice from the experts.
Many of you already know that the miles can add up quickly when you use your car for business. Did you also know that as a taxpayer, you can make a legitimate claim for a personal vehicle mileage deduction. Keep in mind that at audit time, the IRS is going to want a mileage diary. Sometimes, people are hesitant to include this kind of deduction because they are worried about accuracy penalties. But there is a solution.
In a dashboard or driver door cubbyhole, keep an inexpensive, small diary with an attached pen. You will write down your odometer mileage in this expense booklet alongside a date. Now it will be easier to keep track of mileage, dates, reasons for the trip, etc.
You may want to specify in your diary beginning and ending odometer readings that were for business and which were for pleasure. Make it a habit that every time you get in your car, you log an entry (beginning mileage). Every time you get out of the car, you log an entry (ending mileage).
A Manila Reminder
Next to your computer, place a manila folder. This folder will be your reminder that you need to print out transactions such as mortgage statements and copies of other important papers. Also in this folder you can insert bills or statements that you have received through the mail. Another folder or envelope should find a home next to where you empty out your purse or pockets at the end of the day, which will be expressly for assorted receipts.
A Glove Compartment Envelope
Keeping an envelope in your glove compartment will provide a place for you to put receipts that don’t make it into your pocket or purse. This can be any receipt whatsoever including doctor visit receipts, over-the-counter drug purchases, dinner and a movie, etc. While the envelope next to where you empty your pockets works when receipts make it all the way into the house, this will serve as a catchall when you don’t want to use your pockets or your purse.
You may want to put a couple of different envelopes in your glove compartment for this purpose. One could be for purchases that you make for a rental property that you own. Another envelope can be for gas receipts (as mentioned earlier) and another for charitable donations such as the Salvation Army, churches, etc. There can be another envelope for client entertainment (i.e., dinner, movie, the ballet or opera, etc.). And of course, there should be an envelope expressly designated for business trips. This may seem excessive and redundant but if the IRS starts asking questions, you will be sufficiently prepared.
Keeping records like this takes mere seconds out of your day and, if practiced on a regular basis, will become second nature.
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