Have you noticed all the news stories about taxes? Every year around January, when employers are passing out W-2s, the media starts running articles about taxes since it is on everyone’s mind. There is value in keeping up to date on what is going on with tax changes and reminders about deductions, but maximizing your tax deductions and refund is a year long process. Additionally, completing a tax return that gives you the most advantages must be a team effort between you and your accountant. One thing any accountant will tell you is that recordkeeping is a crucial component of getting the most out of your tax return.  

You don’t have to be a tax expert to know and utilize all the tax deductions and advantages available to you; that is what your accountant is for. However, your accountant will also not know all the deductions available to you if you can’t demonstrate through your records what you did this past year. The one thing you can do that will assist you both in completing your tax return is keep detailed records! 

Read this quote from a story in USA Today: A tax professional can also help you keep track of receipts and other documents that will help you claim those tax breaks. "Most people are cheating themselves out of potential deductions because they don't keep the records," says Cynthia Jeanguenat, an enrolled agent in Virginia Beach. "Small-business people are notorious for that." 

Don’t let a lack of detailed records cost you money. Whether you are an employee, small business owner, or both your records will allow you and your accountant to tailor your tax return so you get the most money back.  

Records need to be orderly, accurate, and complete. Save yourself and your accountant headaches by organizing expenses and other financial matters by categories, such as advertising, charity, education, capital income, child care, medical receipts, etc.  

What should you keep records of? It doesn’t hurt to keep records on your expenditures and income for one year. If organized properly and kept accurately this will not only assist your accountant in maximizing your deductions and accurately completing your tax return, but it will assist you in your household and business budgeting. The IRS suggests that one reason to keep records is so you can monitor the progress of your business. The same is true with your personal expenses. You can compare how much you actually spent versus what you had budgeted for. With a year’s worth of records you can forecast how much you actually need to budget each year for personal and business items like clothing, food, electricity, and a phone, for example.  

Tax return audits

Ever been audited by the IRS? If your adjusted gross income is less than $100,000.00 there is less than a 1% chance you will have a tax return audit. However, if you are selected for an audit there is only one thing the IRS will be interested in when you get audited. Your records. Your business card, your reputation, your past integrity, and even the accountant you used are all irrelevant. The IRS will want to see your records that back up what is on your tax return. Your tax return may be 100% true and accurate, but the IRS will still ask for records.  

How much will your tax return be this year? The average tax return for 2009 will be $3,036 according to the IRS. How close are you to the average? Review your records and talk to your accountant. What changes can you make to your recordkeeping this year that may put you even further ahead of the average tax refund for 2010? 

http://www.usatoday.com/money/perfi/columnist/block/2010-03-23-yourmoney23_ST_N.htm

http://www.irs.gov/taxstats/article/0,,id=207317,00.html

http://www.irs.gov/businesses/small/article/0,,id=98557,00.html