Keeping good tax records doesn’t have to be complicated.
I’m all about making things as simple as possible.
If you don’t have a current system in place, or don’t like the system you are using to track your tax-deductible expenses then take a closer look at this idea.
CREATE A KEY FOR PERSONAL TAX-DEDUCTIBLE EXPENSES
Give each tax-deductible category a number.
This will be your KEY.
The good news is that once you create the Key, it will pretty much last a lifetime with maybe a few additions and subtractions every once in a while.
EXAMPLE OF PERSONAL TAX-DEDUCTIBLE EXPENSES KEY
1 – Retirement plan contributions.
2 – Charitable contributions
3 – Medical
4 – Mileage
5 – Real Estate taxes
6 – Home mortgage interest
7 – Accountant’s Fees
8 – Moving
9 – Gambling Losses
10 – Energy saving home improvements
11 – Education
12 – Investment losses from previous years
13 – Not sure, ask accountant
If you are having a hard time creating a KEY use last year’s taxes to help you identify categories.
You could get ideas by doing an online search for “personal tax-deductions” or ask your accountant for suggestions.
THE TAX-DEDUCTIBLE EXPENSES KEY PROCESS
Here’s what the process for using your tax-deductible expenses key might look like.
- A piece of paper comes into your life that may be tax-deductible.
- Write the category number in the upper right hand side of the paper using RED Ink.
- File that piece of paper in an expandable folder or box labeled “Tax Deductions for Year 20XX.”
- When the year is over, quickly sort your papers by number.
- Give the sorted papers to your accountant.
- Or, add up the totals for each category if you are preparing your own taxes.
CREATE A KEY FOR BUSINESS TAX-DEDUCTIBLE EXPENSES
If you are self-employed you will have a lot more numbers (categories) because of all the additional expenses you can deduct.
EXAMPLE OF SELF-EMPLOYED TAX-DEDUCTIBLE EXPENSES KEY
14 – Home office
15 – Office supplies
16 – Furniture
17 – Advertising
18 – Travel, meals, entertainment, gifts
19 – Insurance premiums
20 – Telephone/Internet
Similar to your personal tax-deductions… if you are having a hard time creating a KEY, use last year’s taxes to help you identify categories.
You could get ideas by doing an online search for “business tax deductions” or ask your accountant for suggestions.
The process works exactly the same.
WHAT ARE YOUR TAX TIPS?
Share your tips. How do you organize your tax papers?