Saturday, January 21, 2012

Tax Time Tips

Income tax documents are probably already available to you to start completing your taxes.  One excellent source for tax records is your credit card statement--specifically the year end one.  I just got a notification from Chase that my 2011 year ends are available.

Here is why they are good to have:

1-Purchases are categorized, such as charity, travel, dining, and entertainment.  If you engaged in any of those activities on a volunteer/non-profit basis, and itemize your taxes, they are a good back up to your receipts.  Be sure to verify that the organization is in fact a registered non-profit.

2-In a pinch, you can reference these documents while filing your taxes.  Receipts are cumbersome and clutter your filing records.  Year end statements, saved to a computer, are much more efficient.

3-In an audit situation, handing an auditor a print out of neatly categorized purchases is much better for appearances than a stack of paper, odd-shaped receipts.  Think about it.

I am sure there are other good reasons to keep your year end statements for tax purposes and I would like to hear from you on them.  In general, they also help with tracking where you spent money and for what purpose.

In closing, a good strategy for filing taxes painlessly, and at little expense, is to use a service such as Tax Act Online.  I have been using it for years and there is a lot of basic functionality that is available for free that will help you on your way.  Helpful functions include instant calculation of the refund or taxes due, filing tips, simplified language describing complex tax topics.