Tuesday, February 28, 2012
Even though I’ve been doing my own taxes for almost 20 years now, it doesn’t mean that I don’t need a little help occasionally along the way. As often as the U.S. tax code and our personal situation changes, it’s important to have some resources to rely upon when it comes time to again tackle our family’s contribution to the welfare of our great nation.
Here are four resources that I find instrumental in helping me do our annual tax returns and that make my job just a little bit easier.
Previous Years Tax Records
While some people may feel forced to retain their tax documentation for years (probably the ones that don’t do their taxes themselves), I prefer to keep previous years’ tax documents. As my tax situation -- and the tax code itself -- changes from year to year (other than when I was a teen, I’ve never had two consecutive years where I could follow the exact same tax format), these items provide a reference guide of sorts to help me refresh as I do my current year’s taxes.
An entire year is a long time, and having those previous years’ records as documentation to help remember how I did things last year, what deductions we took, what schedules we needed to file, and similar information just to jog my memory, makes my job filing taxes for the current year just a little bit easier and less time consuming.
For many people, their income documentation comes by way of their W2 form and possibly a 1099 form for bank paid interest. However, as a self-employed individual, my income derives from multiple streams and requires a bit more attention when it comes time to file taxes.
My wife is one of those people with the W2 and 1099-INT from the bank, so her income statement compilation is easy. However, I tend to pair multiple 1099 forms from various employers, with other, lesser incomes that don’t always come with a 1099. This means that I must track these incomes on a spreadsheet throughout the year in order to be able to give a proper accounting of my full income. This also means that my income tracking spreadsheet becomes an integral part of my tax resources come year’s end.
I’d estimate that I spend several hours each year on the Internet buffing up on the latest trends or adjustments regarding the U.S. tax code or researching new aspects or areas that might be involved in doing our taxes. This year, such time spent involved researching the moving deduction (since we moved to the state of Washington, but since we didn’t meet the time requirements for living there before moving back to Illinois, we weren’t eligible to claim the deduction), and property tax payment implications on the sale of our home.
While I have found numerous valuable resources to help me with tax questions on the Internet, I’m careful not to take them all at face value, and I tend to reference what I read with specifics from the IRS, ensuring the website I visit ends in “.gov”.
Records and Receipts
You just can’t be sure when certain records or receipts might come in handy at tax time. I’m usually very good about saving any documentation I feel might be necessary to claim or prove a tax deduction or credit. Items like business expense receipts, charitable donation records, and similar items usually comprise much of this documentation. This year however, I may have dropped the ball.
Due to our lower earnings, my wife’s higher medical bills as a type 1 diabetic, and my paying of our own insurance as a self-employed individual, we might have been eligible for the medical expense deduction this year. However, since I wasn’t retaining medical expense receipts and records for the entire year, it’s very difficult to compile the necessary information regarding this aspect of our expenses. As a result, this year I’m attempting to save receipts from all aspects of our spending lives, not only for tax purposes, but as a written record to reference in an effort to better educate ourselves to our spending habits.