By Neil Seidler, CPA, CMA
It’s tax time again, so I wanted to talk about getting ready for completing and filing your income tax returns. Whether you use one of the tax preparation software packages that are available, or use a tax professional, you’ll want to have your paperwork together and have it organized. Spending a little time up front to have things in order will save you time, and money, in the long run.
It’s time to get ready for your 2020 tax filing, if you haven’t already. You should compile any business income and expense statements and keep them with your invoices and receipts. Keep a file or envelope with the tax information slips that you will be receiving in the mail or by email. If you made any charitable donations throughout 2020, you will want to put those receipts together with any that you have received this year. These could be from organizations providing you with an annual receipt, such as your church. For 2020 you can claim up to $300 in cash charitable donations even if you don’t itemize. So make sure you include all those cash donations you made. You will also want to put together any medical bills you had for the last year.
If you didn’t get the 1st or 2nd stimulus payments, or didn’t get everything you were entitled to, you can claim them as a refundable credit on your 2020 tax return.
Time to get ready for 2021 taxes
It’s also time to start organizing your 2021 income tax information. Keeping an envelope or a file folder with your receipts in it is a good start. A spreadsheet summarizing everything that is in the file is even better. Keep each category of item together and have a separate column on your spreadsheet for each. For example, medical bills paid, charitable donations made, interest paid or received on private loans, childcare expenses, investment advisor fees, etc.
By having a summary of the amounts paid and/or received, and having the supporting receipts saved, you’ll make your tax time job much easier. You can save the receipts either in a file folder or saved electronically as a .pdf document in a file on your computer. If you enter the amounts throughout the year as they occur, it will always be up to date and it won’t be a big job at year-end to get it together. A little time throughout the year can save a lot of time at the end of the year. It also helps reduce the likelihood of having any lost or misplaced receipts. After all, lost receipts equal lost deductions.
Get organized and save time and money
Even if you take your shoebox of bills and receipts to your tax preparer and have them prepare your return for you, doing a little sorting and organizing before you go will make their job easier and save them time. That will ultimately save you some money on tax preparation fees.
We welcome your questions and inquiries. If you have tax-related questions, or any other questions that we may be able to address, please email us or comment below and we’ll try to answer them in a future article.
If you need assistance with your tax filings or other accounting matters please feel free to contact me. I’m happy to help. You can email me at Neil@profitprocpa.com. My business website is ProfitPro Accounting and Tax.
The material presented here is for informational purposes only and is not intended to provide, and should not be relied on, for tax, accounting or legal advice. Readers should consult their own tax, accounting and legal advisors to discuss their own personal matters.