Don’t throw out that receipt! Or should you? Paper can overwhelm you when it starts to pile up. Here’s the short answer: Tax time is always coming. If you intend to claim an expense as a deduction, save that receipt.
Of course, you will first need records of your income, including:
- Your W-2 forms from your employer/s
- 1099 forms from any contractual work
- 1099 forms detailing your investments: Your financial institution will provide these, often virtually.
Then what about other items that you collect all year long? Which ones will you need at tax time?
Items to Save Throughout the Year
It pays to be ready for any IRS second-guessing (or an audit). Here’s a list of basic items you should save. Scan these, or download them from your bank, your employer, and other sources to create a virtual file. If you prefer hard copies, obtain some accordion files and organize your receipts by tax year. (Binder clips come in handy.)
- Charitable contribution receipts
- Healthcare expense receipts: Don’t forget! Your co-pays are deductible, and so are some other medical expenses. Scan them or ask your physicians to send you virtual copies and store them. Keep copies of all your medical payment receipts. You don’t want to get caught short as health reform takes shape.
- Job-search expenses: If you have been looking for work and you want to take these deductions, make sure you can detail everything you spent toward this effort.
- Work expenses: If your employer did not pay your mileage, your conference fee, or the cost of a work-related item, that’s deductible.
- Home or other real-estate purchase closing documents
- Home improvement receipts
Not sure about other items that could be write-offs? Here are some to think about:
- Home office expenses, including the cost of Internet service, a portion of your utility bills, and supplies.
- Your volunteer service: If you drive to coach your kids’ soccer team or buy supplies to feed the homeless, these expenses are deductible, albeit at varying rates. We can help!
How to Track
If you don’t already have one, create a spreadsheet and start logging the amounts of your claimed expenses. Include expense category, check number (if applicable), the name of entity receiving the money, the amount, and the date of the expense. Don’t forget to back up your information on an external drive or cloud account!
Mileage is a challenge to track. To make it easier, try tools such as MileIQ, available via Smartphone or iPhone, to track your business- or volunteer-related trips. An old-fashioned notebook and pen in your car works, too. Don’t forget to note your beginning and ending odometer reading for each trip.
Other Documents to Save
While they may not be directly related to filing your income taxes, it’s always good to keep track of these items:
- Social Security card
- Childcare services receipts
- College savings plan documentation
- Mortgage statements
What About Audits?
The IRS can audit you three or more years after you file your return. So seven years of documentation should be enough to answer any questions. Then, after seven years, shred old documents including tax returns. You may still wish to keep electronic copies indefinitely.
Click here to learn how to file for an income tax filing extension.
Got questions? Contact us at 513-576-6770 or contact.us.@donohoocpa.com.