Brokerage and Mutual Fund Statements
Though you will receive year-end information on your investment earnings, you should also keep a special file for account statements as they arrive during the year. In most cases, investment income must be reported on your taxes.
Mortgage Interest and Property Tax
If you are a homeowner, make sure you have your mortgage interest statement and property tax information handy, since these are deductible items. You can generally deduct interest on a primary mortgage, as well as a secondary mortgage or home equity line of credit.
If you or any of your dependents are in college or pay student loans, you should receive student loan interest statements or a statement from the school regarding applicable tuition and fees paid during the tax year. These are also deductible.
It's important to keep track of money that you donate to charity, and most charities will send you a year-end statement. However, you can also deduct items that you donate such as clothing, toys, household items, and other goods. In general, you must assign a reasonable value to these items.
For all deductible expenses, you should maintain some sort of proof of payment. This might include canceled checks, invoices, or receipts. The proof should clearly show the amount paid, and whenever possible, what the payment was for. Apart from charitable contributions, child care payments, alimony, brokerage expenses, and union or professional dues are examples of other types of deductible expenses.
To recap, in order to file a return, you'll need the following income tax records:
When in doubt about whether or not to report certain income, or whether a certain item is deductible, it is a good idea to consult briefly with a tax professional. Sometimes you can even ask a quick question free of charge, or schedule a short, inexpensive consultation.
Turbo Tax offers a
tax preperation checklist which is an invaluable tool to help you organize your taxes. Print it out to use as a reference to organize your taxes.
Keeping Income Tax Records Organized
Most of these records will trickle in toward the end of the year, or early in the new year. When each important tax record arrives, be sure to immediately put it away in a place that you have set aside for year-end tax records. Label a large manila envelope or a file folder like the one mentioned above, and be sure to put these documents away as soon as they arrive to avoid losing them with stacks of other documents.
Keeping Records Throughout the Year
If you don't have a file cabinet, a banker's box that holds hanging files can help you keep income tax records organized. Whenever you pay a deductible expense, save the receipt (or other proof) and immediately put it into the hanging file box.
Another way to keep track of deductible expenses is with a spreadsheet saved on your computer. It's not as difficult or time consuming as you might think to maintain income tax records this way, since you will be creating one or two entries at a time throughout the year. Even if you don't know how to use complicated formulas, it's easy to use a spreadsheet to record the date, amount, and purpose of the transaction. Doing this will make it easy to calculate totals at the end of the year, and most spreadsheet programs have a function that adds a column of numbers with just one click.
Filing Income Tax Return: The Do-It-Yourself Approach
Now that you've got all of the documents handy for filing, income tax return preparation doesn't have to be complicated if you use the ultimate tool for keeping your tax return organized – Intuit Turbo Tax Deluxe.
This is one of the best tax preparation software programs available. It will lead you through all of the steps in the preparation and filing process so that all you need to do is refer to your documents to input the numbers as prompted by the program. The advantage of using Intuit Turbo Tax Deluxe is that it maximizes your tax deductions to make sure you owe less in taxes, or get the biggest possible refund.
Check it out for yourself. Just click on the picture to the above right to get more info.
The deluxe version of Turbo Tax does cost close to $50, but it's well worth it considering the helpful and user-friendly features it offers. It certainly costs far less than a typical accountant, and will provide you with the tools you need to optimize your return.
By keeping income tax records organized throughout the year, you can sail through tax time stress-free. And, by taking advantage of Intuit Turbo Tax Deluxe to file an optimized return, you'll avoid having to pay hundreds of dollars to a professional accountant.
back to top of page
Return from Income Tax Records to Penny Pincher
Return from Income Tax Records to Home Filing System
Return to Life Organize It