APRIL 15th is Over – Now What? (Part Two)
This year is almost ONE THIRD OVER! What can you do now to be in top shape for next April 15th? Last time I covered the basic thought that Organization is the key. Do you use the “jumble” method of keeping your receipts? Is your jumble kept in a box or a bag or an envelope? YOU are the one to sort these papers into categories. Why wait until tax day? Get a jump and do your sorting all year long. If you haven’t already started a simple way of collecting your important tax papers, begin that new habit today. Use a table, the bed or even the floor to make little piles of receipts by category. Then you can put that now neat stack of receipts into the container of your choice. This will make for easy reference come tax time. You will see how convenient it is to put things were they belong so you can find that certain document when you want to, when you need to. When a new client comes to my office with their own jumble of records, I tell them the same thing I’ve just told you. YOU know how you spent your money. I need to know how you spent your money. There are different pages to a tax return and the deductions that belong on one page usually do not also appear on another page. My job is to prepare your proper and accurate tax return. I need your help to do this. Last time I promised to talk contributions. Do you get a receipt for every contribution you make? When you make an offering to your house of worship, do you write a check? Do you just put cash in the offering plate or basket? Do you use their gift envelope system? Internal Revenue Service wants to see evidence of what you claim as your deduction or expense. I remember hearing from a fellow auditor that a taxpayer being audited was claiming substantial cash contributions. When asked for his documentation, he said that was a matter between him and God. The auditor agreed and said that his deduction would also be a matter between him and God. The auditor determined that his deduction was disallowed. That is a favorite term at the IRS. His deduction was NOT allowed. He owed tax as a result of that audit. Records are your defense in a tax audit. Not just your best defense, they are your ONLY defense. Whether this audit is by the IRS or your state department of revenue or treasury, or by the sales tax division or by the unemployment division, PROOF is what they want to see. Timely (at the time of the contribution) records are necessary and your best friend. SO many reports can be audited. Even if you do not file a report you are required to file, the agency expecting that report can file one for you. Lack of knowledge is no defense. My objective is to help you increase your knowledge and increase your defense. I want you to avoid that audit. Keep a list of personal items you donate to a qualified charity (not the corner collection box) from your closet or home. Next time I’ll spend more time discussing this favorite deduction.