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What Do You Need To Save for Tax Time?


In January, you expect to get in your mailbox most of the papers you need to document income, interest and withheld taxes that you have to report. Investment-related 1099s often come in February. Some W-2s come via the postal service, while others are announced via email, telling you that documents are available online and may be landing in your inbox soon.

Important 1099s from banks and such other financial institutions as mortgage providers are often posted to your online account. You may want to create an email tax folder for messages relating to tax information.

It's a good idea to track paperless records as they come. After all, online statements often contain key backup records for such potential deductions as charitable donations, health care outlays, and gambling winnings and losses, as well as property tax expenditures and tax credits for electric and electric-drive motor vehicles.

Take a few extra minutes each month to jot down tax-related information from line items on statements, such as expense title, check numbers, payee names, dollar amounts and the dates incurred. If you create a spreadsheet dedicated to tax records, you'll snag online documents and information that will be available for only a limited time.

What other deductions can you track throughout the year?

  • Keep a mileage log in your car. Jot down the miles when you use your vehicle for volunteering, work, and business or medical appointments, and record parking fees, bus and taxi fares, and tolls to help you qualify for a deduction. Mileage isn't always deductible, but keep a log in case it is in your situation.
  • Hold on to cash receipts that document your transportation, charitable work and other tax-deductible activities. This includes paperwork that arrives in the mail or receipts needed to prepare a return. Even when you're not sure, it's better to have too much information than not enough.
  • Think about life events you underwent in the past year such as marriage, the death of a spouse, a divorce, alimony payments, and adoption and child custody agreements.
    • A newborn brings joy to your life and potential tax advantages. Have the Social Security card, child care receipts and contributions to savings plans close at hand.
    • If you bought a home, paperwork to keep includes your closing documents, home improvement invoices, receipts and proof of payment as well as your annual mortgage statement.
      • Did you pay real estate taxes or points when you closed that don't appear on your year-end mortgage interest statement? Gather these documents also.
      • Did you make home improvements? Wheelchair ramps recommended by a doctor may be deductible as medical expenses if you itemize.
      • Energy efficiency improvements can reduce your tax liability, too.
  • Last year's state refund is considered income for tax purposes if you itemize deductions.
  • Keep quarterly estimated tax payment receipts. If you make installments to your tax bill during the year, the IRS and your state send you a record of what you paid.

Keep your filing history because your tax returns are needed — for mortgages, applying for student loans and checking the status of your refund. Generally, you'll need to save tax returns for three years after the filing date in case of an audit. In fact, the IRS can audit you for as many years back as they want if the agency suspects fraud, so keeping tax returns and supporting documents for at least seven to 10 years is a good rule of thumb.

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Davis & Graves CPA, LLP
Davis & Graves CPA, LLP
700 N Main Ave
Gresham, OR 97030
Office (503) 665-0173
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Our firm provides the information in this e-newsletter for general guidance only, and does not constitute the provision of legal advice, tax advice, accounting services, investment advice, or professional consulting of any kind. The information provided herein should not be used as a substitute for consultation with professional tax, accounting, legal, or other competent advisers. Before making any decision or taking any action, you should consult a professional adviser who has been provided with all pertinent facts relevant to your particular situation. Tax articles in this e-newsletter are not intended to be used, and cannot be used by any taxpayer, for the purpose of avoiding accuracy-related penalties that may be imposed on the taxpayer. The information is provided "as is," with no assurance or guarantee of completeness, accuracy, or timeliness of the information, and without warranty of any kind, express or implied, including but not limited to warranties of performance, merchantability, and fitness for a particular purpose.
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