Get a Jump on Next Year's Taxes!
FILE - In this Nov. 13, 2010 file photo, Myanmar's pro democracy leader Aung San Suu Kyi addresses her supporters from her compound after her release from house arrest in Yangon, Myanmar. Twenty-four years ago Aung San Suu Kyi left Europe for what was then a military-controlled nation called Burma. She returns Wednesday, June 13, 2012 the icon of Myanmar's democracy movement to a continent eager to hear from her whether the country's recent reforms truly spell the end of its cruel dictatorship. (AP Photo, File)
Whether you're recovering from this year's bout with your return or still in the midst of it, it's never too early to make things less taxing for you in the future, starting with the return you file in 2011 for the current tax year.
On "The Early Show Saturday Edition", Redbook columnist Beth Kobliner, author, of "Get a Financial Life," shared tips for the tax -challenged that could help guarantee many happy returns:
Tip #1: GET ORGANIZED -- Use an Accordion File for Key Paper Receipts
Keeping your receipts organized will enable you to easily add up your expenses to see how much you can deduct come tax time next year. Use your credit card statements to help.
If you use paper receipts, try to organize them by expense type; you'll need to tally up the dollar amount in each expense category. (If you use your credit card statement, make multiple copies and circle the expense and file it in the respective folders.) That will save you time when you're filling out the tax forms (when you'll have to enter your expenses by type), and it will ensure that you've included every deductible dollar in your tallies.
Put your file in an easy-to-access place at home, and just pop your receipts in there as they're acquired. That means no scrambling through your wallet and envelopes scattered all over the house next year.
You don't provide receipts to the IRS when you file but you want to have them on hand in case you're audited.
Keeping Your Receipts
Use a Shoe box: If you're really lazy, at least use a shoebox, though it's time-consuming and expensive to sort through.
An Accordion file folder, tabbed by type of expense
It's very tricky and you have do your own research. Use the Internal Revenue Service Web site. The IRS describes legitimate business expense as something that is "ordinary and necessary" for your business. If your employer reimburses you, it is not a deduction. Deductible expenses can include travel for work that you wouldn't have normally taken, sbscriptions to trade publications, union dues, a tuxedo if you need it for your business (one accountant I spoke with said if you're a band leader and you need a tux or you're required to go to black tie benefits, but you wear it to your sister's wedding once, it's still deductible)
Expenses that aren;t deductible: A suit or dress you're going to wear to work; your briefcase; meals; commuting expenses. The point being: You'd have to feed and clothe yourself and get to and from work, no matter what. And that Tuxedo you wear to company holiday party because you choose to? Not deductible
Tip #2: E-FILE: The Software is Deductible and Helps You Organize
There are so many people who are tech-phobic. If you're one of them, make 2010 your year to get over it. It's common to pay hundreds of dollars to a tax adviser. Many people tell me how surprised they are to learn how programs like Turbotax, Tax Act and H&R Block at home offer prompts such as, 'Do you have kids? Are you self employed?' Etc. And that makes it easy to get deductions and credits you qualify for.
You get your refund in half the time if you file online. If you ask the IRS to direct-deposit your refund (an option available with e-filing or paper filing), you'll get your refund at least one week faster. The software is tax deductible when you itemize. You can even import data from Quicken directly into TurboTax, for example.
Tip #3 PART-TIMERS AND FREELANCERS: CONSIDER USING AN ACCOUNTANT; You're at Higher Risk for Audit
With the unemployment rate continuing to hover just below 10 percent, many people are trying to make a go of working for themselves, full- or part-time. Most part-time and freelance workers file as "sole proprietors" of their business, which requires attaching a "Schedule C" form to their 1040.
Since your taxes are more complicated than the average, it may be a good investment to hire an accountant. They can often save you more than you make! Look for one who specializes in freelancer issues.
Be aware that the IRS tends to audit self-employed workers more frequently, so you'll want to back up your expenses.
Self-employed people often have to pay estimated taxes every quarter
Take advantage of the home office deduction, but be careful; it's tricky! You may be able to deduct a portion of rent, utilities, insurance, etc. but it's still very tough. It must be used exclusively and regularly for business and has to be your primary place of business or a separate structure not attached to your home. One example: You may be able to deduct a particularly percentage of your rent, etc. based on the square footage of your home that qualifies as an office.
If you sit on your bed with your laptop, don't think it's easy to claim your bedroom as a home office!
Other possible deductions: meals or drinks for clients, travel expenses, and health care premiums.
Segregate business expenses from personal expenses. Have separate credit cards and bank accounts. This will help with deductions. Start tracking purchases with Mint.com. Consider also maintaining a separate phone line.
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