When it comes to tax deductions, a lot of taxpayers miss out - not because they don't qualify for the deduction, but because they do not keep good records. Keeping good records throughout the year is the best way to not only save money on your taxes, but in some cases save money on the preparation of your return. I recommend keeping all of your documents organized and in one place - whether it be physical file or digital file.
What Documents Do I Need to Keep?
Anytime you claim a credit or deduction, you should have documentation to back it up. In addition to the W-2 you receive from your employer and Form 1099/1098 you receive from banks, you also need to have the following available at tax time:
- Receipts for charitable contributions of money or property
- Receipts for deductible expenses (for example, health care expenses paid from an HSA or FSA)
- Mileage log if using personal vehicle for business purposes and your company has not reimbursed you.
- Expenses and income related to any rental property
- Records related to a home improvement project or home purchase
- Receipts for dependent care expenses
- Receipts for taxes you've already paid (state sales tax, real estate taxes, vehicle license fee)
How Should I Document My Tax Information?
If you are not already using a program like Quicken or QuickBooks to keep track of your income and expenses, you can set up a spreadsheet document fairly quickly and easily. The document should have 3 sections - income, expenses & contributions. There are also several inexpensive or free programs and apps available to help you keep track of these items - just give us a call if you'd like a recommendation.
Go Paperless.
Scanning your documents throughout the year, then shredding your paper documents after tax season will save money and give back valuable space in your home or office. Just be sure you keep your information backed up with a secure & reliable "cloud" service. We have been paperless for 9 years and keep all of our client's data on file - Could you imagine if we weren't paperless?