Bye Bye 2016 Tax Returns

Hello 2017 Tax Planning

The 2016 tax return season is officially behind us. Well, unless you filed an extension. For many of my clients (and my staff), we’re breathing a sigh of relief. We’ve spent hours sifting through paperwork, downloading transactions, categorizing expenses, and preparing reports. If this year’s tax prep was a major drain (and pain), let’s look at what you can do now to make next year easier.

Set-up 2017 Folders

It doesn’t matter if you’ve decluttered your home or office of paper. You’ll still need virtual folders to organize documents as they drift in. For many of us, we still like paper records. To make categorizing expenses that may be tax deductible for 2017’s tax year, consider separating your virtual or physical receipts by:

  • Medical costs, including prescription receipts, doctor bills, and dental statements
  • Home expenses, especially if you have rental property. Don’t forget those property tax statements. While many CPAs are willing to the take the time to look up county records, having these figures on hand will save you time (and money on CPA fees if they charge you by the hour).
  • If you’ve purchased, sold or refinanced property, there are important documents that have tax implications. Thankfully many of these documents are signed electronically; you can easily save them for future reference.
  • For home remodeling projects, you need a separate file to tally up capital improvements (talk to your CPA or tax prep professional to understand the tax implications when selling).
  • For business expenses, you probably use software like Quicken or QuickBooks. Many business receipts — like restaurants and gas purchases — are on thermal paper which is notorious for fading. Get into the habit of regularly scanning these receipts and storing them electronically. Of course, make sure you have back-ups. If audited, the IRS wants to see proof of your expenditures. If you hire contractors, get their W-9 on file before you pay them. You’ll need this information to send out 1099s next year.
  • Miscellaneous tax deductible items like vehicle registration, charitable contributions and the like can be filed in a general folder. Or, if one category is particularly complicated, set up its own folder.
  • Financial statements – whether for a business or personal tax return, separate your bank statements by account now. You’ll avoid the mess of sorting at the end of the year.

Secure, Online Portals

Many CPAs are converting over to secure portals where you can upload documents. You can easily scan and upload documents without worry about privacy. Sending documents via email is not secure and not recommended.

If you know you’ll be using the same CPA or tax professional next year, ask them to create virtual folders for you. As documents come in throughout the year, you can upload them as you receive them. You’ll stay organized throughout the year and avoid the last-minute rush.

A Word About Donation Valuation

Did you know that if you claim a deduction of $500 or more for a used item, the IRS suggests getting an appraisal? Bankrate has a handy donation valuation guide so you can estimate the value of your donated household and clothing items. Some professional organizers suggest that you take a picture of your donation items and store with your receipt to provide additional proof should you need it.

Of course, keep your donation receipts as these are required written acknowledgment of your gift to a qualified charitable organization.

Do you have a car or other vehicle that you want to donate? The IRS has specific rules that dictate fair market value and how much you’re allowed to deduct. Your CPA or tax professional can help. This article from Edmunds explains how the IRA rules changed and how to deduct fair market value.

Ask For Help

Our lives can be complicated. Know when you need help. Fiscally Fit has a trained staff of professionals that ease the burden of getting and staying organized before, during and after tax season. Call me to set up a complimentary 30-minute consultation.


Photo credits: frankieleon, Paul Stumpr

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