FINANCIALLY $PEAKING: Ten Timely Tax Tips
As we begin the New Year, here is a list of ten timely tips that may be of help in preparing your 2000 tax return. Be sure to check with your tax advisor if you have any questions.
1. In order to qualify for the earned income tax credit, you must have valid Social Security numbers for each person for whom you claim a personal exemption. This includes yourself, your spouse, and each dependent.
2. When making a charitable contribution of $250 or more at one time to a qualified charitable organization, you must receive written acknowledgment from the organization before you file your income tax return and claim the deduction. Separate contributions of less than $250 to the same charitable organization do not require written acknowledgment, but still require a receipt, such as a canceled check.
3. Qualified tuition payments you make, with a student loan or a credit card, qualify for education credits in the year the tuition is paid, not the year the loan is paid.
4. Make sure both you and your spouse (if filing a joint return) sign the return before mailing it to the IRS. This is one of the most common errors taxpayers make when filing their tax returns.
5. If you were married this year and changed your name, make sure the name and Social Security number you have on file with the Social Security Administration matches what you report on your income tax return. If it doesn't, the IRS will reject your return and delay processing.
6. If you want to receive your refund faster, have it deposited directly into your savings or checking account - doing this also ensures your check won't get lost in the mail.
7. If you are eligible for the child care credit, make sure you have your care giver's taxpayer identification number. It is required to be included on your tax return. If the care giver is an individual, you will need his or her Social Security number. If you take your child to a day care center, you will need their employer identification number.
8. Don't miss out on deducting unreimbursed employee business expenses - they are allowed as a miscellaneous itemized deduction provided they exceed two percent of your adjusted gross income when combined with all your other miscellaneous expenses. This fact in itself causes most taxpayers to miss out on the deduction. However, if you carefully track all your expenses, you may meet the two percent floor. In addition to this requirement, the expenses must be ordinary and necessary business expenses. An expense is ordinary if it is common and accepted in your type of business. An expense is necessary if it is appropriate and helpful to your business.
The most common types of deductible employee business expenses are professional dues and subscriptions, safety equipment required by your employer, and business travel. You may also take deductions for the cost of uniforms and other special work clothes that are not suitable for everyday wear, including the cost of cleaning the clothing. Consult your accountant for more commonly overlooked employee business expenses.
9. If your tax situation has not changed significantly from last year, you can use your 1999 income tax return as a guide for organizing your information. By looking over last year's return, you will be reminded of what investments you have, if any were sold, and which statements to bring along with you. If investments were sold during the year, the broker will issue you a 1099-B reporting the sale date and the sales proceeds. You will have to provide your tax preparer with the cost of the investment so the proper gain or loss can be determined.
10. Lastly, preparing for your tax appointment ahead of time saves you and your preparer valuable time. Get organized early!
With our best wishes to you all for a happy New Year!
For more information, click on the Author Biography at the top of this page.