Tax preparation can seem like a daunting task for anyone who doesn’t have a degree in accounting. Hiring a professional can help take a great deal of the burden off your shoulders, but a bit of effort on your part is necessary to give the tax preparation expert enough information to do his job. It will also ensure that you get the most money back from (or owe less to) the government in the end.
Tax-deductible activities, such as donating to a charity or buying needed prescription medication, can only be considered if the proper documentation can be presented as proof. Many people prefer to simply accept the standard deduction, which was about $5,900 for a single individual in 2012. But for those whose annual activities hold a sum of deductions greater than that amount, keeping records of what you spend could mean more money.
This proof can be in the form of bank statements, receipts, checks and more. As long as the activity has been documented, you can count it toward your refund. Therefore, filing taxes can be rewarding for those who take the time to do it properly. But the time to start is now. If you haven’t begun saving receipts, you will most likely end up one of two ways: Going through the endless headache of searching through bank statements to attach transaction details to specific deductible activities after they’ve been sitting there for a year or giving up the process and not getting the highest possible amount back because you didn’t get the necessary paperwork together in time.
But what should you start holding on to? The list is broad and varied, so here are just a few.
Any written proof of a charitable donation can be an itemized deduction. Cash donations are easy to track, but donated goods, such as clothing, toys or even cars, can be used as well. The monetary worth of each donation must be determined and should be put in writing by the organization to which you donated. That should be kept on file.
Receipts or invoices for any changes that would render your home more energy-efficient should be kept and used for an itemized deduction. These can include anything from big improvements like solar panels or skylights to small purchases like thermal curtains.
If you are one of the many unfortunate people who have suffered property damage or loss due to hurricane, flood or other natural disaster, you can have the damage assessed and claim the amount when preparing your taxes.
College students trying to better themselves by getting an education can receive a deduction if they keep track of school-related expenditures. Receipts for textbooks, calculators and tuition can be used to get some of that money back.
Finally, the last and possibly most important piece of advice: Stay organized. It does not take more than just a small file case and a few manila folders to keep everything sorted and in order. Keeping your paperwork organized will make your tax preparation a breeze when the time to file taxes rolls around.
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