|by Frederick Dean, Jr.|
|Ready or Not, It's Tax Time!
Yes, it's that time of year again. A whole year has flown by, making today the perfect time to start preparing for the time-honored tradition of filing your tax return.
The easiest place to start is by compiling a list of the things you need by looking at the type of income and expenses reported on your return from last year. If your family or employment status has remained the same, last year's return may contain clues to the statements and information you need to watch for this year. After reviewing last year's tax return, bring it with you to your tax appointment. Your professional tax preparer can spot things on the return that you may have overlooked.
Next, gather all your income statements. This includes all your Forms W-2, Forms 1099, and Schedule K-1s for taxpayers who are owners of an S corporation or a partnership. A Schedule K-1 is also issued to taxpayers who received income as a beneficiary of an estate or trust. Often, the Schedule K-1 is not mailed until later in the filing season, so if you are expecting one of these, wait to receive it before you file.
Other income items may include profits from selling an asset, such as stock, your home, or any other property you own. It's important to know how much you paid for the assets, how they were acquired, and when they were acquired. Only the profit is taxable. If you can't determine the cost of an asset, the Internal Revenue Service (IRS) will assume it is zero. This results in the entire gain being taxable, and you will wind up paying more in taxes than necessary.
Be careful not to overlook any medical expenses, property taxes, mortgage interest, employee business expenses, and charitable contributionswhich are the most common deductions. Bring in all the expenses you incurred during the year along with documentation showing when you paid them. If you made charitable contributions of $250 or more at a time to one organization, you must obtain a statement from the charitable organization before your return can be filed. You must also have written documentation (such as receipts or cancelled checks) of all cash donations, regardless of the amount. Other deductible expenses include moving expenses, casualty losses, and costs incurred for the care of your children while you work.
Whether you prepare the return yourself, or hire a professional to do it for you, being organized pays off. A professional tax practitioner can help you sort through the mounds of paper you have gathered and look for information that will allow you deductions under the new rules.
Frederick Dean Jr. is a chartered retirement planning counselor, Tax and financial adviser at Restylement.com. For more information, call 302-236-6700.
LETTERS From CAMP Rehoboth, Vol. 18, No. 01 February 08, 2008