Tom: Good morning, Mellody! You are joining us this morning with some reminders for our taxes.
Mellody: I am, Tom. I know it is not always a favorite topic, especially to kick off the week, but it really is important to start looking ahead to tax time. This past week, the IRS officially opened tax season by beginning to accept tax filings for 2015. So, while no one wants to think about it, it is time to start getting organized and get those filings in! It is important to prepare for your taxes as early as possible and for years past. You never know when the tax man might want to dig a little deeper! But I promise it is not all preparation! I also come with some tips that may save you some money.
Tom: Let’s kick it off with the paperwork stuff. What paperwork and documentation should we be assembling now?
Mellody: First things first: you need to make sure you have hard copies of all financial exchanges that impact your taxes. The most important of these are your W2 form, which documents your pay from your employer or 1099s, if you are self-employed. The most critical information for your income taxes will come from these documents. The next category of documents that you want to assemble are those that will allow you any deductions or tax breaks. Think receipts: the donations you made to Goodwill, the tuition bills, child care expenses, all of which are deductible. Record the expense and why it justifies the deduction. Store this information with or on the receipts. If the purchase was a business tax-deductible expense, the same rules apply.
Secondly, you need to make sure you have received your investment statements and retirement records, and keep them with your other tax documents. Your tax bill is calculated based upon a number of factors, and without the entire history of these records, the IRS could argue that the entire value of some investments can be treated as income gain. In terms of any portfolio, you are always better safe than sorry when it comes to the IRS.
Finally, assemble all of your important family documents – marriage licenses, custody agreements, and estate planning documents like wills and insurance policies, and contracts, and other legal documents. Property records, deeds and titles are also very important to keep.
Tom: Once we assemble them, how should we keep these records, and for how long?
Mellody: You should have the hard copies of these documents, and archive all of these documents electronically, ideally on a cloud-based platform. This way you will have access to all of them in the event that an emergency like a flood or an earthquake destroys your hard copies.
Money Mondays: What You Need To Know About The 2016 Tax Season was originally published on blackamericaweb.com