Taxpayers can easily increase deductions by following a few simple tax organizing procedures before preparing and filing a return.
To begin, start gathering your records by finding any documents needed for filing your taxes – receipts, canceled checks/check registers, documents received in the mail such as W-2’s and 1099s.
Taxpayers need to fully understand what revenue was received and what deductions were paid throughout the year to make sure all allowed items are included in the tax return. One easy way to organize the tax information is to obtain an accordion file (use that year end, and during the year for record-keeping) and separate the information into categories such as medical and drug payments, taxes paid, sales tax paid on large purchases, mortgage interest paid on your primary residence mortgage, second mortgage or line of credit, and on a second home, donations made both cash and non-cash items, and any other employee-related expenses not reimbursed.
A review of each month’s bank statement for checks written and debit charges listed that are possible deductions will point out items that were previously overlooked. Also, a review of all credit card charges made during the year will add to allowed tax deductions. All of these items should be listed so that they are included on your tax return.
A small business can help reduce your taxes by permitting the deduction of business-related expenses against any income received. Operating a small business out of your home also permits a home office deduction, where a portion of household expenses can be deducted from revenues received.
Remember, to reduce your taxes or increase your refund, the government wrote the tax rule book, the IRS is the umpire, and you need to learn to play the game very well. That means keeping good tax records that maximize all allowed deductions that are permitted.
Ahwatukee Foothills resident Ken Lindow is a certified public accountant with offices located in Ahwatukee Foothills. Contact him at Ken@LindowCPA.com or (480) 940-8351.