June 5, 2015

The best tax advice is to get an earlier start on filing income tax returns. Putting off completing your tax returns until April only increases the stress and anxiety of confronting all of the rules and regulations of the IRS. The strain of filing this year’s returns should serve as an incentive to make next year go a little smoother. To make that happen, incorporate a few organizational techniques, and aim for a goal to file your return by February next year.

mileageEspecially if you use your car frequently for business, you’ll find that the miles add up quickly.  Many taxpayers can legitimately claim the mileage deduction for their personal vehicles. However, the IRS wants a mileage diary at audit time. Many tax practitioners, afraid of accuracy penalties, are reluctant to include estimated mileage numbers on their customers’ tax returns.

The solution? Buy a small expense diary that will fit in an easy-to-reach cubby-hole near your dashboard. Attach a pen to the notebook. As soon as you buy the expense booklet, write down the mileage from the odometer, next to the date. Put the booklet and envelope in the glove box of your car.  You should also purchase a manila folder to keep by your computer.  Whether you prepare your own taxes or leave the task to a tax professional, the presence of the manila folder can remind you to either print out copies of mortgage statements or other transactions. If you receive statements or bills by mail, put them in the folder.  If there is a particular place where you empty your pockets or purse, make sure a second envelope or folder for receipts is nearby.

Your manila folder and glove compartment envelope can be used for any receipt, including prescription and over-the counter drugs or doctor receipts. Did you make a tuition payment online for your child’s college tuition? Print out a receipt right away, and stash it in the folder.

ReceiptsIf you occasionally make a purchase for your rental property, keep an envelope in the glove box to keep receipts. You can use the same envelope for gas receipts. Even though gas purchases are not deductible, gas receipts can provide substantiating evidence for mileage deduction claims. Did you take clothes or other donations to your church, or the Salvation Army?  Put the receipt you should have received in the envelope along with your gas receipts and receipts for rental purchases.  Maintaining receipts is essential in case the IRS questions your deductions.

Whenever you use the car for a deductible trip, copy down the odometer reader at the beginning and again when you return home. To cement the habit of keeping track of your mileage, copy the odometer reading every time you get in the car. Your log should include the date, the beginning odometer reading, the purpose of the trip, including names of people you’re meeting with if your trip is business related, and the ending mileage.

Once your system is in place, maintenance requires only a few seconds a day.  Writing down your mileage will become second nature. You’ll be surprised by how quickly your receipts add up as the year progresses.  And you’ll be able to look forward to a more lucrative and less stressful tax season next year!