Tax Refunds & Advice

If you are like most Americans, you just finished filing your 2007 taxes sometime over the past four months. While you can breathe a sigh of relief, you need to keep in mind that it is never too early to prepare for next year. This holds especially true for those taxpayers who owed the IRS money this time around. By staying organized and starting early, you can do whatever it takes to avoid this next year.

Here are three things you can do to start preparing for next year’s tax season:

1. Save everything you think you may need. This includes pay stubs, receipts for deductions, and any forms that you receive from the IRS. If you are unsure of what you need, save everything. To stay organized, keep all of your paperwork in a box or filing cabinet.

2. Take the time to look for deductions, instead of hoping they come your way. Did you make any charitable contributions last year? If not, consider doing so this year. By actively seeking out deductions you will find that there are plenty of them to take advantage of.

3. If you are already behind, make sure that you do everything necessary to catch up. The year is still young, but if you wait much longer you will find yourself dazed and confused by December. Start catching up now if you are already behind the eight ball.

Although you may have just filed your 2007 income tax, now is the time to start thinking about next year. With an early start you can avoid a lot of the headaches and stress come early 2008.

The last thing you want to do when filing your taxes is draw attention to your return. Unfortunately, thousands of people do this every year with the deductions that they claim. While there are quite a few legitimate deductions that you can use to your advantage, there are many others that the IRS watches closely. If you wrongfully claim these deductions, you are throwing up a red flag and simply asking for an audit.

Do you work from home? If so, a home office deduction is within your rights. But with that being said, the space that you claim needs to be regularly and exclusively used for business purposes. In other words, if your home office is also in your bedroom which doubles as a laundry room, you would be best suited forgetting about this deduction.

Year in and year out, many taxpayers try to deduct 100 percent of their car related expenses because they claim that it is used for business purposes. While this may be true, you need to be careful about how much you claim for business use. For example, if you drive 20,000 miles per year but only 5,000 are for business, you can only deduct 25 percent as an expense.

If you are unsure of which tax deductions are legitimate and which ones you should avoid, you should definitely see a professional. The two tax deductions above, as well as many others, will throw up a red flag right away. In turn, your chances of being hit with an audit greatly increase. Is that something you want to deal with just because you think you can stretch the truth to save a few dollars?

Running a successful business takes a lot of time, patience, and organization. One area in which you must always stay organized is taxes. Just like individuals, you will have to file a year end return and for most businesses this is just the tip of the iceberg. If you do not stay organized, you will find it frustrating any time that you need to deal with your taxes, and worse yet, you may make a mistake that costs you big time.

Here are there tips for keeping your business related tax files organized:

1. Paper filing will always be an important part of the tax process. For instance, when you receive a business related receipt or form from the IRS, you need to file it in the appropriate place. For most, a filing cabinet will do the job just fine. Of course, as your business grows so will your filing system.

2. For those who are technologically advanced, staying organized with the help of a computer is also a definite possibility. You can use a program as simple as Microsoft Excel, or purchase an advanced software solution that is meant to keep you organized from day to day.

3. It is essential to organize your tax related paperwork as you receive it. In other words, do not be one of those people who throws all of their receipts and paperwork in one box and hopes to figure things out when the time comes. If you take just a few minutes to organize and file when necessary, you will save yourself a lot of time and stress in the long run.

If you own a business, use these three tips to keep your tax related files as organized as possible.