The April 15th Checklist

The April 15th Checklist

April 15th may be months away, but now is the time to start gathering all the records you need for tax time.

Here’s a checklist of what you’ll need:

Major forms such as the W-2 from your employer, income from interest and dividends or securities sales reported on Forms 1099, and home mortgage interest (Form 1098) should be mailed to you by January 31. If you moved during the year, make sure employers and financial institutions all have your new address. When these forms start arriving, give them a quick check to make sure that your name, social security number, and dollar amounts are correct. If you find an error, notify the issuer at once, (if possible before February 28) so corrected information can be reported to the IRS.

Those slips of paper you’ve saved all year should be reviewed now -- receipts for charitable deductions (both cash and non-cash), receipts for unreimbursed employee business expenses, records from stocks or bonds sold in 2002, and so on. Charitable contributions can be tricky; it is easy to undervalue/overvalue contributions you made. If you pay a qualified organization more than fair market value for the right to attend a charity event, you can deduct only the amount that is more than the value of the benefit you receive. For instance, if you bought a ticket to a benefit showing of a new movie, and movie tickets in your area are $10 per person but you paid $50 for the benefit ticket, you have made a $40 contribution.

If you sold stocks or bonds, know when you bought them and how much you paid. If you did not save the “buy order” from the original purchase, request the information from your broker. Most brokerage houses report purchases on the annual summary statement you receive, so check past year summaries. If you sold mutual funds but your mutual fund company doesn’t provide the “average cost basis” of shares you sold, scour those annual summary reports or request a “history” of the account to determine your cost basis. If you reinvested stock or mutual fund dividends, include that information.

If you sold your primary residence in 2002, and you lived there for two of the last 5 years, and the gain on the sale was $250,000 or less ($500,000 for married filing jointly), you no longer report the sale on your return. If you meet the exclusion rules, keep copies of the settlement sheets from the purchase and the sale of the house you sold with your tax records. If the house sold for less than the exclusion you are allowed, you can safely discard paperwork such as improvements made while you owned the property.

You can still fund IRA accounts. Even though December 31 is the deadline for most tax saving opportunities, you still have up until April 15 to fund any individual retirement accounts (IRAs). If you file early enough and have a refund, you can use your refund to fund the IRA by the April 15 deadline. Be sure to check with your tax advisor to see if you qualify for an IRA contribution.

Start thinking about next year, especially if this year was a problem. Organize your monthly brokerage account statements in a 3-ring binder and hang on to those “buy orders” and annual statements. If you owe money at tax time this year, adjust your withholding allowances or your estimated payments so that you have enough taxes withheld from your paycheck. Start funding retirement accounts now instead of waiting until next April 15. By organizing now you will save yourself a lot of anxiety next year.

Before you use these tax tips, check with your tax or accounting professional as to which tax rulings apply to your individual situation.

This information is provided strictly as a public service, and should not be construed as individual accounting or tax planning advice.