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Part
I - Three ways to make preparing
your taxes easier next year
Mar. 21, 2001 - You
know the drill.
Whether
you do your taxes yourself or have them prepared by a
professional – it’s often the same scenario.
The
process typically begins with a crazed search through
drawers, wallets and file cabinets for receipts and
documents you will need in order to get the maximum refund
allowable.
Well,
now that you’ve gotten all your documents together and
have pulled your all your hair out in the process, you’ve
taken care of this year’s taxes. But Millian has a some
tips to help make doing your taxes next year a lot easier.
The key – a well-kept checkbook. Let’s get started.
1.
Pay
everything by check
It
sounds simple, but not everyone does. “Make it a habit to
pay for everything out of your checkbook,” she says.
“You can still charge things on your charge card, but pay
your charge card bill by check and keep the charge bill and
receipts.”
This
way, at the end of the year, you can just go through your
checkbook and charge account statements and pick out the
items that are deductible. “All you’ve got to do is make
a note in your checkbook of what the expense was for,”
Millian says. Expenditures that will remind you about
allowable deductions at the end of the year include:
-
Medical
expenses
-
Contributions
to charities (cash and goods)
-
House
payments (this will remind you to get you mortgage
interest statement)
-
License
tabs (these are a personal deduction too because the tax
is based on the value of the property, which is always
deductible).
-
Safety
deposit box fees
-
Fees
for last year’s tax preparation
-
Tuition
-
Employee
business expenses
2.
Deposit
everything
“Never
cash a check without depositing it first,” Millian says,
“especially if it’s a paycheck.”
Simply
deposit the check into your checking account and make a note
of where the money came from, i.e. – paycheck, a gift tax
refund, interest income and insurance reimbursements.
“That way at the end of the year, you’ll know what
documents you need to pull together for your return.” Two
of the most common documents you’ll need are W-2 wage
statements and interest income statements.
If
you must take cash out of a deposit, simply make a note such
as: “Payroll check less $200 cash.”
“So
not only are you making your life easier by keeping
everything in one spot,” Millian says, “but each entry
jogs your mind about deductions available and income you
need to report.”
3.
Reconcile,
reconcile
Always
reconcile your bank accounts monthly, Millian says.
Technically, if you find the bank made a mistake and you
don’t notify them within 30 days, they don’t have to
make the correction to your account.
“The
banks are only as good as the people who put in the
information,” Millian says, “and everyone makes mistakes
from time to time.”
If
you do find a mistake on the bank’s part, notify them
immediately and request documentation showing the error has
been corrected. If you find the mistake is on your end, make
the adjustment in your checkbook so that at the end of the
year, you don’t have to wonder what happened.
“If
you do these three things, you’ve got your whole financial
history in one spot – your checkbook,” Millian says.
“If someone did their checkbook this way, I’d never have
to talk to them. Everything I’d need would be right
there.”
Just
give your tax preparer the totals for deductible expenses
and income. You save her time and yourself some money.
Millian M. Toms
is a Royal Oak-based CPA and business advisor. She is also an active
member of the community including The Optimists and Greater Royal
Oak Chamber of Commerce.
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