Updated: Feb 13
Is it March already?!!! Every year about now, the flood of data starts coming in for us to prepare our client’s tax returns. We have some of the greatest clients in the world! For the most part, they are organized and prepared. I thought it might be helpful to go over some of the rules and concepts on how to document a few of the income and deductions claimed on your return.
Let’s start with Capital Gains and Losses. In order to compute the tax effect of a sale of a Capital Asset, we not only need the current sales information, but we also need the date originally purchased and what you paid. That means when you buy any Capital Asset, you should start a file and put the purchase documents in it. Then when you sell it, you will have all that information needed about the purchase handy and won’t have to go on a treasure hunt through piles of old documents trying to find it.
Anybody out there earning Tip Income? In today’s environment, more and more tip related services are paid by credit card with the customer conveniently entering the amount of the tip right on the purchase receipt. In these cases, everything is automatically reported by your employer. BUT, if you receive cash tips, you are supposed to report those to your employer as well. If you didn’t you aren’t off the hook. You must still report those tips on your personal return. You should at least keep some sort of extemporaneous record to document the tips you are reporting. We suggest writing your daily tips received on a wall calendar as one of the simplest methods. Then, that calendar becomes your record of tips earned. Just add it all up and report that amount. Of course, you can come up with your own system. The key is to write it down daily while you still remember what you got.
One regular occurrence for folks who use their vehicle for business purposes is needing to have a log of business related miles. Just like tip income above, one of the easiest methods is just to write down the miles each day on a wall calendar. Another is to record the business miles driven on a small tablet you keep in your car. Although it may or may not be enough to satisfy an IRS Agent, you could at least write down the business miles driven each time you fill your car up. The key is to be accurate. No just saying, “I drove 100% business miles this fill-up.” (Unless you actually did.)
Charity giving? The general rule is that whenever you give over $250 to a qualified charity they should give you a receipt. Keep those receipts. Write down all your misc. cash donations on your wall calendar. (We like wall calendars!) You know, when that tough looking kid knocks on your door looking for $20 for football uniforms, etc. The rules on Non Cash Charity Contributions require a receipt from the charity. Making a list of your estimated original cost and the estimated fair market value as you put items in the box or sack is the best way to get the tax deduction you should have. It is best to estimate the fair market value of the items as you put them in the box or sack.
No room left to talk about Healthcare. That is a whole article to itself! For now, at least make sure you document when you had applicable coverage. You will really need it for 2015. 2014 is still a work in progress with the IRS.
Did you hear? Prov 12:19 “Truthful lips will be established forever, but a lying tongue is only for a moment.”
Bullis is a Certified Public Accountant in Carson City. Contact him at 882-4459. On the web at BullisAndCo.com Also on Facebook.