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Organizing Your Tax Records

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Organizing Your Tax Records

April arrives and you’re scrambling through your paperwork to find your important tax documents. Did you throw away an invoice, or lose a receipt? The best way to stay away from this stressful situation is to organize your tax records now. Doing so will make preparing your tax returns much easier once filing season arrives.   It will also save you preparation fees if your tax documents arrive at our office organized and they are all there.

If you’re lost and confused about what is important and what is not, this article will provide exactly what you need to know to ensure you are heading in the right direction.


If you are an individual and want to organize your tax files there are several key steps you must take.  It is important that you identify what is important to keep a record of. Examples of important documents include

  • Bills
  • Credit card  statements
  • Receipts
  • Invoices
  • Mileage logs
  • Canceled, imaged or substitute checks or other proof of payments
  • And any other records supporting deductions or credits claimed.

These documents must be kept for at least three years.

Other important records you should keep for a minimum of three years include records relating to properties. Below lists just a few of the important ones:

  • Home Purchase or improvements
  • Stocks and other investments
  • Individual Retirement Account transactions
  • Rental property records

Small Business Owners

Small Business owners should keep all tax related documents for a minimum of four years. This includes documentation of:

  • All employment tax records
  • Records of gross receipts
  • Proof of purchases
  • Expenses and assets

In detail this includes:

  • Cash register tapes
  • Bank deposit slips
  • Receipt books,
  • Purchases
  • Sales invoices credit card charges
  • Sales slips
  • Form 1099-MISC
  • Canceled checks
  • Account statements
  • Petty cash slips
  • Real estate closing statements

Electronic records

  • Databases
  • Saved Files
  • e-mails
  • instant messages
  • faxes
  • voice messages

How to store these files?

There is no designated way to keep your files. By having a designated place for these documents and receipts it will not only help ease your tax filing process, but it allows you to have all your information on hand for personal use. In addition having organized files will make the process of an audit much easier to navigate through.

Reporting Miscellaneous Deductions

Instead of claiming the standard deduction this year on your taxes, you may be eligible for certain miscellaneous deductions. Itemizing your expenses and recording miscellaneous deductions are an often overlooked claim that will help you save money.

If your expenses qualify for the” miscellaneous deduction”  it can decrease your taxable income which in turn can decrease you tax payments for the year.  Listed below are the qualifications for claiming these expenses. Take a look to see where you can apply some of your expenses and save some money!

If you have expenses larger than 2% of your adjusted gross income they may be deductible if the expense incurred because one of the following scenarios:

  • You have incurred expenses for your job that you were not reimbursed for
  • Expenses from searching for a new job in the same profession
  • Certain work clothes and uniforms, work tools,
  • Union dues
  • Work-related travel and transportation that were not reimbursed by your employer.
  • Any fees you paid for tax preparation.
  • Expenses that you pay to:
    • Produce or collect taxable income,
    • Manage, conserve, or maintain property held to produce taxable income, or
    • Determine, contest, pay or claim a refund of any tax.
    • In addition keep an eye out for:
      • Certain investment fees and expenses
      • Some legal fees
      • Safe deposit box rental fees (on the condition that it is not used to store jewelry and other personal items)

These above deductions must be larger than 2% of your adjusted gross income to be deducted on your return, but added together they may be.  It is worth checking them out.

There are a few miscellaneous expenses that  you can use as deductions even if they are below the 2% limit.  These expenses can be applied to your tax return regardless of then being more or less than the 2% constraint.  The following expenses fall in this category:

  • Losses from income producing property.  Damage or theft of stocks, bonds, gold, silver, vacant lots, and works of art are expenses that are deductable.
  • Losses incurred from gambling losses up to the amount of gambling winnings.
  • Impairment-related work expenses of persons with disabilities.
  • Losses from Ponzi-type investment schemes.

Review your expenses and see if any of these apply to your situation.

Tax Credits for Postsecondary Education

American Opportunity Credit and the Lifetime Learning Credit

If you find yourself concerned the about cost of higher education there are two federal tax credits that may apply to you. These credits are called the American Opportunity Credit and the Lifetime Learning Credit.

The American Opportunity Credit and the Lifetime Learning Credit credits can be applied to any post-secondary student paying tuition and fees.  This includes:  you, your spouse and your dependents. Each student can claim only one of the listed credits per year.  For example if your daughter filed for the American Opportunity Credit, then she cannot claim the Lifetime Learning Credit. However, if your spouse is in graduate school or any post-secondary education, he/she has the ability to claim the Lifetime Learning Credit.

Below are important facts you should know if you are considering these credits:

  1. The American Opportunity Credit
  • The credit can be up to $2,500.
  • It is only available for students attending their first four years of higher education.
  • If you owe no taxes you may be able to receive up to $1,000 in refund (forty percent of the credit).
  • The student must be pursuing either an undergraduate degree or other recognized educational credential.
  • Any tuition, fees, course related books and equipment are qualified expense.
  • Taxpayers with an adjusted gross income of less than $80,000, or married couples filing jointly with an income of less than $160,000 can receive the full credit.
  1. Lifetime Learning Credit
  • The credit can be up to $2,000.
  • It is available for courses taken to acquire or improve job skills.
  • The credit will only reduce your tax amount but it will not grant a refund.
  • The student does not need to be degree seeking or earning any recognized education credential.
  • Tuition, fees, course related books, and equipment are qualified expense.
  • Taxpayers with an adjusted gross income of less than $60,000, or married couples filing jointly with an income of less than $120,000 can receive the full credit.

If you do not qualify for these education credits, an alternative option is qualifying for tuition and fee deduction. Tuition and fee deduction can reduce your income by $4,000. You may not claim tuition and fee deduction if you claim any of the above credits for the same year.