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Some Transactions Deserve Special Treatment
Passage of the Tax Reform Act of 1997 is cause to look closer at your tax returns It’s a good idea to invest a little extra time if you have had the following transactions: Sales of stock and other property: All sales of stocks, bonds, securities, real estate and any other types of property need to be reported on your return, even if you had no profit or loss. List each sale and have the purchase and sale documents available for each transaction. The purchase date, sale date, cost and selling price must all be noted on your return. Make sure this information is contained on the documents you bring to your appointment. It’s best to bring all the year-end paperwork from your investments. « Back
Gifted or inherited property: If you sell property that was given to you, we need to determine when and for how much the original owner purchased it. If you sell property you inherited, you need to know the date of the decedent’s death and the property’s value at that time. You may be able to find this information on estate tax returns or in probate documents. « Back
Reinvested dividends: You may have sold stock or a mutual fund in which you participated in a dividend reinvestment program. If so, you will need to have records of each stock purchase made with the reinvested dividends. « Back
Sale of home or property: If you sold any property including your main home, a second home or rental property, record the amounts you spent on improvements to the property during the years you owned the property. Improvements include things like adding a room, renovating the bathroom or kitchen, etc. Jobs such as painting are not usually considered improvements for this purpose. We need the escrow papers from the original purchase and the subsequent sales of the property. Property sales are usually reported to the government on Form 1099-S. Bring copies of these documents to your appointment. « Back
Car expenses: When you have used one or more automobiles for business, list the expenses of each separately. The government requires that you provide your total mileage, business miles and commuting miles for each car on your return, so be prepared to have them available. If you were reimbursed for mileage through an employer, know whether the reimbursement is included on your W-2. « Back
Charitable donations - New Record Keeping Requirements: Clothing and Household Items: Starting August 18, 2006 no charitable deduction can be claimed for donations of clothing or household items unless the items are in good used condition or better. There is an exception to this rule for items valued over $500 if an appraisal is attached to the tax return. Cash Contributions: Cash contributions include those paid by cash, check, credit card or payroll deduction. They also include your out-of-pocket expenses when donating your services. Starting January 1, 2007, no charitable contribution deduction is allowed unless you have a written communication from the charity or bank records as documentation. This applies to all donations regardless of the amount. For contributions of less than $250 a cancelled check or receipt is sufficient. For contributions of $250 or more, you must have a written acknowledgment of your contribution from the qualified organization. The acknowledgment must state whether the organization gave you any goods or services as a result of your contribution. Charitable donations from IRA accounts: New laws allow people age 70 1/2 and older to make distributions from their IRA's directly to a qualified charity in 2006 and 2007, allowing them to avoid the income tax bill on their required minimum distributions (although the money can't de deducted as a charitable contribution too). The maximum contribution amount is $100,000. Learn more.. « Back
Estimated tax payments: An estimated tax payment is one area that generates a lot of correspondence from the government. If you paid estimated taxes for 2007, find the exact amounts and dates. The checks were probably paid between April 15, 2007 and January 15, 2008. Bring in copies of the checks you used to pay the estimates. « Back
Other general suggestions to consider for your appointment include… Review your 2006 tax return. Compare the sources of income and deduction on that return to your income and deduction for the current year. For instance, a dividend from ABC stock on your prior years return may remind you that you sold ABC this year and need to report the sale. If you were a client of HGi Financial Services last year, you will find all your prior years income and deduction information on the HGi Personal Tax Organizer. This valuable tool makes checking last year’s income and deductions a snap. It is an important part of HGi’s services to you, our client. If you receive a HGi Personal Tax Organizer and a questionnaire, make certain you fill out every section that applies to you. It is important to read all explanations and follow instructions carefully to be sure you don’t miss important data. HGi Personal Tax Organizers are designed to remind you of transactions you may miss otherwise. Keep your annual income statements separate from your other documents and bring them to your tax appointment. These documents include W-2s from employers, 1099s from banks, stockbrokers, etc., and K-1s from partnerships, S-corporations and trusts. Also, be sure to bring all the information and/or instructions included with your annual statement. These may seem like junk, but they usually include information we need. « Back
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