Since today is April 15th, I know that this post is too late for you to benefit from this year. But, there are some great resources I would like to share with you so that you are better prepared for next April. These will provide you with some ideas on possible itemized deductions you can discuss with your tax professional. It’s never too early to prepare for the next tax season! I may balance my checkbook to the penny and know how to operate a financial calculator, but I am most definitely not an expert in this area. The following links have helped me personally, so I thought they were worth sharing! I hope you get as much help from them as I did.
An excellent place to start is at TACA. Their article on Tax Strategies is a great overview on various types of deductions. You will quickly realize that there are many things you may have been overlooking.
Another great article is from the wonderful educational advocacy organization, Wrightslaw.
The Arc Michigan created a 28-page Income Tax Guide that is downloadable in PDF format. It has a lot of detail and is well worth the time to review.
Once you know what you should be tracking, set up a system to tabulate these costs during the year rather than trying to crunch all the numbers at once and getting overwhelmed and stressed out. This can be easily accomplished by using a spreadsheet. I created one that I’ve used for the past couple of years, and I try to diligently enter costs as they occur. I have gotten quite detailed with mine, but in its most simple form all you have to do is create a spreadsheet with the following columns:
· Cost (only add up the deductible items from each receipt)
· Place (Doctor’s office, grocery store, etc.)
If you want more specifics, add in a Purpose column, which can be an informative way to sort your data for overview or to spot trends in your spending. At the end of the calendar year, add a Sum Function at the bottom of the spreadsheet and you’re good to go. Make sure you keep the receipts from anything you enter into the spreadsheet so that you have proof for your numbers.
This past fall I purchased some new software that will help me in this endeavor. I hate having zillions of receipts everywhere that can get disorganized and lost. A way for me to get some control over this problem was to purchase a NeatReceipts system. It’s a small receipt scanner that comes with built-in software to help you file and manage the paperwork you scan. If applicable, you can select a specific tax deduction category for your receipt. Those items will be tracked and you can easily run an end-of-the-year report. I also purchased Quicken software. I like that all of my financial information is in one place and is easily sorted in lots of different ways. I’m a spreadsheet junkie, so I love having all of this information at my fingertips and being able to run different reports. It gives me a nerdy thrill! I know I’m weird…
Both Quicken and NeatReceipts save me time and frustration, which made them a worthwhile investment for our family. Unfortunately, since I only purchased them in the fall, I didn’t get the full effect of how they could help me with my 2010 taxes. But, I can tell you that for the months that I had data entered, they did help to streamline my process. I’m looking forward to a much simpler preparation of my taxes next year!