Cents and Sensibility
Cents and Sensibility
With all the Palm Pilots, laptops, desktops and every other gadget in this high-tech world, do you know what you may find most useful as you get ready for filing your taxes? The humble manila folder. Tax time means time
to get organizedIt's true. As you get organized to do your taxes, you probably won't find anything as helpful as a manila folder -- or, to be more precise, three manila folders. You can label them "income," "deductions" and "medical deductions."
What should you put in these folders? Let's take a look.
>> Income folder -- This should contain all the records of your income from earnings and investments. Use this folder for your W-2 forms (wages) and your 1099 forms (interest and dividends). This is also the place for your year-end bank and brokerage statements, mutual fund reports and any other documents related to earnings from savings and investments.
If you've sold any stocks during the year, you'll also want to put your 1099-B forms in the income folder. However, these forms only indicate your sales price. To calculate your taxable gain or loss, and to determine whether short-term or long-term capital gains rates apply, you'll also need the paperwork or canceled checks showing when you bought the securities and how much you paid for them. If you have reinvesting, you will also need the amount paid to purchase these additional shares.
>> Deductions folder -- It's important to keep track of all your itemized deductions, because they can significantly affect the amount of tax you'll owe. Your biggest deduction will probably be your mortgage interest, so save your Form 1098, which contains this information. And save the receipts for your charitable contributions, personal property taxes, real estate tax payments and state income tax paid.
You may also incur unreimbursed business expenses. Keep tabs on everything else that's work-related such as tuition for classes, books, uniforms, professional journals, etc. If you're self-employed, all your office supplies and computer equipment will likely be deductible. If you work out of your home, you can deduct a percentage of your mortgage payments and utilities.
>> Medical expenses -- You can't deduct your medical bills unless they exceed 7.5 percent of your adjusted gross income. That may be a high threshold to cross, particularly since you can't deduct medical costs reimbursed to you by your health insurance provider. Nonetheless, it might be worth your effort to keep records of your various medical expenses.
Guy Steele is a financial planner and head
of the Pali Palms office of Edward Jones. Send
planning and investing questions to him at 970
N. Kalaheo Ave., Suite C-210, Kailua, HI, 96734,
or by email at: gsteele2@pixi.com