By Esther Phahla, CPA, CTC, MST
Why, What, When, Where and How to Prepare …
Why? Well-organized tax records make it easier to prepare a tax return and they help provide answers if your tax return is selected for a tax examination, or to prepare a response if you receive an IRS or State notice. Devoting time to organize your tax-related documents makes it easier for you to prepare your tax return.
What? Individuals, keep records that support items of income or a deduction or a credit appearing on your tax return, such as receipts, canceled checks, mileage logs and other documents (W2s, Form 1099s), until the period of limitation expires for that tax return.
What? Small Business Owners, keep all your employment tax records, any records documenting gross receipts, proof of purchases, expenses and assets. Examples include cash register tapes, bank deposit slips, receipt books, purchase and sales invoices, credit card charges and sales slips, Forms 1099s, canceled checks, account statements, petty cash slips and real estate closing statements. Electronic records can include databases, saved files, e-mails, instant messages, faxes and voice messages.
When? Throughout the year, not just at tax filing time.
Where? You can have a manual system where you use folders kept in your home or office, or electronically if you are moving to a less paper system.
How? As you receive your tax related documents, such as W2s or Form 1099s, have a designated place for all of them. This will make preparing your tax return easier, and it may also remind you of relevant transactions. You are now ready to file your tax return before or by March 16, 2015 for Corporations (The normal deadline is March 15th, but this date falls on a Sunday, so the deadline is pushed to the next business day) or April 15, 2015 for Individuals and Partnerships.
If you are due a refund, what are you going to use it for? Are you Prepared to save it for your retirement or child’s college education? Or was it a “savings” for more shopping? If you receive a big refund every year it’s time to review your W-4 withholdings, because a big refund is not a savings account. You are missing out on some investments. You can also file an Extension should you not have all the required documents or if you are not Prepared by the due date. Remember, an Extension to file is not an extension to pay, if you owe.
Esther Phahla is a Certified Public Accountant and Certified Tax Coach in Temecula. She also holds a Masters of Science in Taxation. She is the Best Selling Co-Author of a Tax Planning book “Why Didn’t My CPA Tell Me That”. She can be reached at (951) 514-2652 or visit www.estherphahlacpa.com
