It’s hard to believe that 2011 is almost over. With less than a month-and-a-half left in the year, now is a good time to start getting your tax documents in order so that you won’t be pressed for time come tax-time. There are a few other things you may wish to do before the end of the year, and we’ll go over each one below.
If you are filing taxes as an individual, you should make sure you have all of your tax documentation from 2011. Ideally, you have already set up and been utilizing a 2011 file, but if not, get everything together now: pay stubs, documentation for charitable donations, receipts for medical expenses and/or flexible spending accounts, etc.
If you wish to include any more charitable donations on your 2011 taxes, you will need to make the contributions before January 1st. When donating this close to the end of the year, it is a good idea to have some sort of proof that you made the donation before the end of the year, since many charities may not cash a check or provide you with documentation until several weeks later. For instance, if you mail a check on December 27th, be sure to get proof of mailing because the check may not arrive until 2012. And remember, if you donate items (not cash) in excess of $500, you will need to fill out IRS Form 8283 and possibly get an appraisal for a high-value item.
If you have any flexible-spending accounts, you should check now to see how much remains in these accounts and try to empty them since you will most likely forfeit any remaining amount after December 31 (some plans have a grace period, so check for that too). IRS Publication 502 includes a list of reimbursable medical expenses, but remember that in most situations, over-the-counter medications are no longer included on that list. Additionally, you’ll want to check on your 401(k). If possible, you should contribute the maximum yearly amount ($16,500 per employee or $22,000 for those 50 and older) before December 31st.
Consider making a visit to a tax professional now, before the hectic tax season begins. He or she may have some valuable advice or recommendations that could save you on your 2011 taxes.
If you are filing taxes for a small business, you should also make sure you have all of your tax documentation from 2011. This will include a wider array of items than an individual will have, such as: receipts for business-related expenses, mileage reports, photos of your home office (if taking the deduction), receipts for business-related events you attended, equipment, etc. While you’re looking through your tax documents, if your receipts aren’t already organized, do so now! This will save you a lot of time and headache later on.
Did you use your personal vehicle for business purposes? If so, check now to make sure that you recorded the total mileage on or around January 1, 2011 and also be sure to record the total mileage on December 31, 2011. If you’ll be claiming mileage as a business-related expense, you’ll want extremely precise records to send to the IRS.
Be aware of new tax laws that may affect the amount you can deduct for certain items, such as business equipment (new or used). Now small businesses are allowed to deduct up to $500,000 (double the amount from 2010) on purchases of items such as computers, furniture, telephones, etc.
Even more important for small business owners than for individuals is a trip to your tax professional. With the IRS performing more and more audits every tax year, you’ll want to make sure all of your numbers are accurate. If you file your personal and business taxes separately, consider having the same accountant help you with both in order to prevent mistakes and maximize your benefits.
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