HOW CAN I IMPROVE MY DEDUCTION DOCUMENTATION?
Protect Yourself by Supporting Your Deductions! (This is my important message to all clients.) I strongly recommend to my clients that they carefully document and protect their tax deductions, proactively, to prevent possible future problems, and increase the deductions and refund.
If you spend 4 hours preparing this information and your refund increases by $2,000, then you just made $500 per hour! You cannot get that rate of pay anywhere else, can you???
Four Important Components: 1) Checks, 2) credit/debit cards, 3) cash receipts, 4) calendar.
Pay by check or credit/debit card as much as possible. Use 1 credit card for these items only. Retain 12 monthly bank statements/w/checks, and 12 monthly credit card statements/w/slips. Put all receipts for cash expenditures into an envelope or a File, during the year. Sort by group at year end. Total by paper tape calculator. Staple paper tape on top of group. Summarize neatly on one page, with pencil, computer spreadsheet or word processor.
Medical insurance YTD deducted from paycheck will appear on last pay stub of the year. Save all receipts from 'Co-Pays' paid in cash. Checks or credit card are preferable. Save receipts in a 'medical file' for items bought in a supermarket, drugstore, or health store.
House of Worship where you regularly donate cash, give a check at least once per year. Various charitable orgs: Disease/cause of your choice, fundraisers, environment/animals/people ...
Search your checkbook/credit cards, and memory for contributions. Make a list. Get receipts for all non-cash charitable contributions. Prepare a list of items you donate.
[Put in File. Sort. Make List. Total. Summarize.] Work related gifts/party: Always carry several 3'x5' index cards, or PDA. Write a short note of each occasion, including who you gave how much money to, what date, why. List. This is called (legally) 'Contemporaneous documentation,' and is accepted by the IRS.
Magic Mantra: 'Give me a receipt, please.' Taxi, train, restaurant, postage, cards, gifts, etc.
Publications: Ask for receipts for daily/Sunday paper, newsstand magazines. Put in file. List.
Books: Search checkbook/credit card for Amazon.com, Barnes and Noble, etc. Make list.
Supplies: Search records for Staples/OfficeMax/Depot, teacher supply store, etc. Make list.
Flowers/Fruit Basket: Search checkbk/creditcard for FlowersOnly.com, FTD, etc. Make list.
Internet, cell phone, 2nd phone line, cable/satelite: Search checkbook/credit card. Make list. Union dues are on check stubs. Save the last one of the year, showing 'Cal. Year-To-Date.'
Meals: Use a calendar and save receipt. Record names, date and place. Summarize.
Mileage: Use calendar to record your driving, with destination/mileage, include between jobs.
Tolls: EZ-Pass is a convenient way to document (business/medical/char) tolls and destinations. It's passive. It's free. It also gets you through the tolls faster.
5 Important Items
Job Search expenses: Make list of mileage, transportation expense, meals, hotels, publications, etc.
Buy/Sell/Refi Real Estate: provide a copy of the HUD-1 Uniform Settlement Statement.
Sell Stock: provide date bought and cost, along with date sold and proceeds.
Tuition paid: Form 1098-T, payment amount, books cost, total mileage roundtrip.
Buy new computer/fax/scanner/printer/office equipment/furn: provide cost and purch. date.
Save your documentation for 7 years. Save your tax return until you're dead 3 years.
[ When? Feb. is much better than March is better than April! ] Make category lists on separate sheets of (8 1/2' x 11') paper, not little scraps. One side of paper only. Skip lines. Label clearly. No arrows, no spaghetti lines. Be clear and unmistakable.
Present information in a complete, non-fragmented and organized fashion, from a computer, if possible, instead of in hand-written form, which can be difficult to understand.
Please respond promptly to our requests for additional items of information. A delay in forwarding this information causes us to re-familiarize ourselves with the material before we can complete the return. We appreciate your efforts to answer my office without delay.
You have Questions? My Answer is the same: More paper is always better than less paper.
Computer records (optional)
Maintain your check register on computer using QuickBooks Use categories such as Medical/doctors/dental/optical/OTC/drugs/supplies/dental/other; Charity; Books, Publications, Dues, Entertainment, Gifts, Education, Tolls (EZ-Pass), Cable TV, Internet, Cell phone, Supplies, Job Search, Flowers, Furn/Equipment, etc.
At year end, simply print a complete 'General Ledger', expenses grouped by category. This option is:
2) an efficient use of your time
3) can make you money!
Prepare summary using Quicken/QuickBooks, word processor, spreadsheet, pencil in organizer. Accuracy and security through documentation is an important component of the Robert Greene CPA Tax Reduction Strategy. This is more accurate and safer than making 'reasonable' 'guestimates.' Your effort will result in higher deductions and larger refunds.
This is the year to take a step forward and take a step up. Do your homework. Prepare! Focus now. Get organized. I promise you: your effort will be amply rewarded - soon! Don't be Lazy! Don't be Sloppy!
This is my request to all clients. Please respond with specific planning and actions this year. I believe we all can improve.