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Tax Prep 101 | By Kelly Twedell

12/01/2010 03:18PM, Published by Anonymous, Categories:



Pretty soon your important tax documents will begin arriving in your mailbox. Hopefully you’ve learned your lesson from years past, when you frantically searched high and low for those precious scraps of paper and related documents. Uncle Sam is ready, and you should be, too. If you have not implemented a file folder or large manila envelope to stash away receipts and other important documents throughout the year, here are some tips for getting it altogether in time for this year’s tax return – and to make next year run smoother. Start now and dedicate a place for these W-2’s, 1099’s, investment statements and year-end contribution statements. A folder or envelope is usually sufficient. If you haven’t received a W-2 by January 30th, call your employer. Whether you will be sitting at your computer with a calculator and some strong coffee or you are handing over a thick envelope to your tax preparer, get some sort of order to your documents. The days of bringing in a shoebox full of miscellaneous receipts are over. Separate your papers and receipts into categories: real estate, investments, income, business expenses, charity, childcare, medical and miscellaneous. Local firm Utley & Knowles suggests adding up and totalling the expenditures on a separate piece of paper and attaching the total to the corresponding stack of documents. This, they say, will save your tax preparer time, which will save you accounting fees. If you feel that your tax situation is more complex than the average person’s, perhaps you should start with a checklist to make sure that you don’t forget any documents or miss any deductions. Most tax software programs will have an extensive list you can use. You can also ask your tax preparer in advance for a preprinted organizer. Utley & Knowles has adopted this practice and mails such a list out early to their clients. They say that everyone benefits from the checklist as it allows clients to see their previous year’s tax information and helps them to not forget any miscellaneous items. For example: If you have young children who attend daycare, be sure to get the statement with the organization’s tax identification number and something in writing showing the dollar amount you paid for care over the year. Likewise, if you pay a babysitter or nanny, be sure to keep those records of payments or create some type of invoice to hand over to your accountant. The process of preparing your taxes does not have to be painful. After all, April 15 is tax day, year after year. You know it’s coming. So make 2011 the year to start some good habits that will save you valuable time in the end.

Make it count To legally write off any cash contributions, no matter how small, you need a canceled check, bank record or a receipt with the charity’s name and the donation amount on it. Timing is key as the deadline approaches. You can only take the deduction for your contribution in the year that you make it. For example, if you charge the donation on a credit card this month, but don’t pay the bill until Jan. 2011, the write-off is good for 2010. Also, contributions must be made to qualified organizations to be deductible. You cannot deduct contributions made to specific individuals, political organizations and candidates.

Volunteer services While you are scouring for deductions, don’t overlook any volunteer efforts. You can write off many out-of-pocket expenses you incur while donating your time, including what you pay for materials, supplies, uniforms, stationery, stamps, parking and tolls. While you can’t deduct the value of your time or services, you can deduct the cost of driving to and from your volunteer work, at a rate of 14 cents per mile. If you take public transportation, that bus or rail fare is deductible, too. Contributing household items Donating used goods such as clothing, electronics, appliances and furniture gets you a write-off for the item’s fair market value at the time you donated it.  In order to take this deduction the goods must meet the criteria to be in good condition or better. To claim a deduction for contributions of cash or property equaling $250 or more you must obtain a written acknowledgement from the organization showing the amount of the cash and a description of the contributed property, and whether the organization provided any goods or services in exchange for the gift. If you claim a deduction of more than $500 for all contributed property, you must attach IRS Form 8293, to your return. Taxpayers donating an item or a group of similar items valued over $5,000 must complete Section B of Form 8293, which requires an appraisal by a qualified appraiser. To make sure you value your used things properly, you may, for example, need to make the rounds of thrift shops or secondhand furniture stores. The IRS has a helpful booklet on this subject, Publication 561: Determining the Value of Donated Property.



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