By Chloe DiVita
Taxes are filed for 2005, so let’s turn our thoughts to 2006!
Chances are you’ve sent your tax returns out the door, and have put 2005 behind you, good or bad. Now it’s time to be sure you are on the right track for 2006. One way to assist in being prepared for the end of the year is to be sure to keep track of all the tax documents that can help you. We recommend creating a tax file to put anything tax related into throughout the year. This should prevent a last minute search of your house for financial info!
Your tax file should include the following items, although this is not a complete list by any means. Each person has circumstances that make the tax situation different for him/her. Know your history, and what items you may need to keep track of. Some may be listed here, others may not:
Medical receipts including co-pays, deductibles, medicine, and even things like acupuncture can be part of your medical expenses. Click here and then on “What Medical Expenses are Includible” for a full list.
Car Registration
Property Tax Statement, if the amount is not included on your Mortgage Interest Statement.
Charitable donation receipts, both made with cash and other property.
Education Expenses, for yourself and/or a qualifying dependent.
Expenses incurred for your job that are not reimbursed by your employer.
Self Employed Health Insurance Costs
And of course there will be all the year end forms to keep like your W-2s, 1099s – which you will receive for many different things from services provided to dividends earned on investments – 1098s, and things like any K-1s from investments.
Keeping all these things in one place throughout the year can make the hand off to your CPA much easier! Also, keep in mind that some expenses are not fully deductible. Medical expenses, for example, are deductible only for the amount that exceeds 7.5% of your adjusted gross income. Expenses for education and non-reimbursed job related expenses also have limitations. You can read about these on the IRS’s website, or check with your CPA. If you are in need of a CPA, we recommend the expert services of Cahill, O'Kelly & Associates in Boulder. The partners Ed Cahill and Patrick O'Kelly can be reached at 303.440.0400.
Remember, the goal on taxes should be to break even. We don’t believe anyone would choose to loan the IRS money interest free, but when you receive a big refund, that is exactly what you are doing!
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