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Your Taxes: Off to a good start this tax year?

by Michele Knight, CPA

I imagine that I speak for tax preparers, and taxpayers, around the US when I say I’m relieved April 15th has come and gone. It’s time to sit back and take a day, or a few weeks, off to forget about the past, and then come back ready and energized to prepare for next year. At this time in the year, I encourage all taxpayers to take some important steps to prepare for their own taxpaying future, because next tax season is only eight months away! Did you get a big refund and wish you had filed earlier so you didn’t have to wait so long? Did you owe money and wish you didn’t have such a shocking surprise at year end? Consider the following tips as safety nets for either situation, and give them a try.First and foremost, use a debit or credit card at all times! I charge everything from gum to furniture on my credit card because I then have a written record of all purchases. I save my receipts in a manila envelope until year end, when I close the envelope and save it for at least seven years, but by charging everything I don’t need to worry about small receipts because I have everything listed on my bank and credit card statements. One of the most frequent questions I get is, “how long do I save stuff for?” Seven years is a minimum, but if the receipt relates to an asset that you are still holding, such as a home or rental property, you must retain receipts for as long as you own that asset.While I always recommend using a software like Quicken to track your personal finances, there is a second method I suggest that’s as simple as a pad and paper. I recommend that you get a small spiral notebook or a legal pad and leave it on the desk, table or nook where you pay your bills most frequently. Take one piece of paper and label it “medical expenses.” Across the top, write the following headings: prescriptions, co-pays, supplies, insurance premiums, and mileage. Then, any time you go to the doctor, pick up a prescription or pay some other medical bill, you should record that expense as well as the corresponding mileage. By year end, I promise you will have captured significantly more expenses than you would by reviewing receipts once a year.Using the same pad and paper method, you can also track important expenses like charitable contributions and charitable mileage, car ownership tax, real estate taxes, and any unreimbursed employee expenses that you have. Granted, you can always find these figures again at year-end, it’s much easier if you just capture them throughout the year and you’ll leave your accountant’s office with far less of a to-do list each year!I’m sure these tips sound very basic and obvious, but they really do work. Rather than spend your January, or your April 14th, scrambling around looking for all your deductions and most likely overlooking some tax savings, just take a few moments now to set yourself up for success! You’ll be thankful that you did when next year comes around!Michele Knight, owner of Knight Accounting & Technology, is a CPA and QuickBooks ProAdvisor based in Dillon. For more info and to contact her, visit http://www.cpamichele.com.


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