Tax Tip - Starting the Year off Right
Editor's Note: This article is part of our 2014 Tax Tips series. Robert Flach is an expert with more than 40 years of experience as a tax professional and also blogs as The Wandering Tax Pro.
NEW YORK (MainStreet) If you want to make 2014 "less taxing" it is important to start the year off right.
Set up a good system for maintaining tax records and receipts. You must keep good, contemporaneous records of all your income and deductions in the manner prescribed by the IRS and the Tax Code.
Some deductions require special recordkeeping or additional information.
You must have a hard-copy receipt for every dollar you contribute to a church or charity, regardless of the amount. Whenever possible give a check. If you give cash you must get a written receipt from the charity. You cannot deduct the $1 you give to the Salvation Army Santa unless he gives you a receipt!
If you give $250 or more in one gift you must get a written receipt or acknowledgement from the charity at the time the donation is made. This receipt or acknowledgement must show the name and address of the organization, the date and amount of the contribution, and must include the statement "No goods or services were provided by the organization in return for the contribution."
When you donate clothes, books, food, household items, or furniture, make a detailed list of the individual items that includes the condition (such as good, excellent or new) and, of course, get a receipt. If you put a bag full of clothes in the Goodwill bin make a list of what is in the bag.
Do you use your car for business? Maintain a travel diary listing the date, location, business purpose or client visited, and miles driven. Also keep track of the total miles driven for the year by recording the odometer reading at the beginning of each year.
For business meals and entertainment record the cost, date, name and business affiliation of each person involved, where the meal or entertainment took place, and the business purpose of the meeting.
Are you a frequent visitor to the track or casinos? Keep an accurate diary or similar record of your gambling winnings and losses. You must have receipts, tickets, statements or other records. If you play the lottery, keep your losing tickets. If you play the ponies, keep the daily track programs and your losing tickets. For more detailed advice on recordkeeping for gambling winnings and losses see my article "Not Keeping Track Turns Gambling Winners Into Tax Losers."
Written by Robert D. Flach for MainStreet