Don’t allow tax time to be a headache
Every tax season I vow to get everything organized earlier, to keep all those little pieces of paper filed away in the right places. The intention is there, but the execution is severely lacking, because it would actually involve keeping all those papers.
The stress triggered by crumpled bits of paper, lost or tossed stuff, and making sure everything is filled out exactly right so we don’t get audited starts to take its toll at our house. Some of the receipts are so faded or scrunched, I’m not sure what they were for in the first place, so they get tossed, and the official forms’ little boxes remain blank.
Thankfully, there are people in this world who love spreadsheets. And numbers. And they know all the rules and they’re able to account for every cent, which is why they’re called “accountants.”
While I would rather stab my eyes out with a dull No. 2 pencil than crunch numbers and fill in line-item paperwork, they actually choose this profession and I’m ever so grateful for them.
I’m sure that lost or overlooked papers have led us to forego possible deductions on our taxes. Simply keeping organized can help you take full advantage of your tax-deductible activities, said Gina Tallman, CPA senior accountant with Chadwick, Steinkirchner, Davis & Co.
“Keep all papers,” she said. “If it seems important, keep it.” If you despise piles of crumpled receipts, there are several apps to choose from for receipt management. Typically, they allow you to take a photo of the receipt and then you can insert notes about the expenses, or assign a purpose to the receipt for budgeting purposes.
For home expenses, Lemon is a user-friendly app that lets you export receipts to an Xcel document. People who like pie charts will love this app, because it categorizes your expenses and graphs them. If you want to face how much money you spend eating out at restaurants or on shoes, this is a way to do it.
People sometimes overlook non-cash charitable deductions when they’re preparing their taxes, Tallman said. Even if you donate something small to a thrift store, you might make many donations during the year and they can add up.
“Always collect those receipts,” Tallman said. “If you don’t have a receipt, chances are if you get audited, the IRS will disallow it.”
Some other often-overlooked deductions that could save your household money on taxes include the mileage deduction, Tallman said. Not only can you count mileage used for business purposes, but in certain cases, travel for medical reasons may be applicable. Commuting for work isn’t allowed, but work travel is deductible for 55 cents per mile in 2012.
Tallman advises clients to keep a mileage log for proof. Techies might want to check out apps designed to help you keep track of mileage with their phones — ones such as Trip Cubby and TripLog allow you to enter your own mileage. Others, such as Tap2Track Mileage, designed by Quickbooks creator Intuit Inc., include a GPS function.
If you haven’t started getting your taxes together yet, you still have time. Taxpayers expecting refunds who like to file early are encountering a delay this year, Tallman said. The recently passed “fiscal cliff” legislation delayed the process and the first e-filed returns were accepted two weeks later than usual this year.
“A lot of tax returns can’t even be filed with the IRS yet,” she said, noting that individuals with rental property income in particular have been delayed.
Of course, if the impending April 15 deadline seems like it’s still too close, you could file an extension. But Tallman said there’s still plenty of time to get matters in order for an on-time filing for most people.
“Most of our clients have another month before they might need to file for an extension,” she said, adding that she doesn’t file extensions until April 13. Although an extension gives a taxpayer a cushion of time, it does not exempt him from paying on time.
So if you find yourself needing more time, Tallman advised estimating how much money you owe and writing that check on time to avoid penalties.
Here’s one more piece of advice: If you feel lost, don’t wait until the last minute. “If you’re stuck, give your accountant a call and don’t just sit around wondering, ‘What do I do with this?’ ” she said.