It’s not tax season yet, but by the time you finish feasting on turkey and calculating the damage from holiday spending, it’ll be time to gather receipts, fill out forms, and calculate deductions. Before Uncle Sam comes knocking like an unexpected visit for that surly, lazy cousin you tried to avoid all holiday season, check out what you can do today to prepare your 2009 taxes.
Homebuyers, gather your records. If you purchased your first home in 2009 or purchased a home after more than three years, you’re likely eligible for $8,000 homebuyer tax credit. To verify your home purchase when filing taxes, make sure you have on hand the U.S. Department of Housing and Urban Development Settlement Statement (HUD-1) which is typically issued to homebuyers at closing. If you don’t have a copy of the statement, contact your real estate agent or attorney for the documentation, says Genevia Gee Fulbright, vice president and certified public accountant at Fulbright & Fulbright, CPA, PA.
Divorcees, reassess your financial picture. Between alimony, child custody, and the emotional angst, divorces can get ugly. Aside from sorting out who gets what, there are also tax implications divorcees will need to consider. “This year, if you’re going to be filing as “single” or “head of household” you might need to change your withholdings,” says Fulbright. To do this you’ll also need to figure out who will claim the children, something that should have been settled in the divorce decree.
Because a divorce, and life after a divorce, can mean an entire new load of financial challenges, some may be forced to dip into retirement savings. If that is the case, that money you withdrew is now considered taxable income and can bump up your income bracket and your taxable income.
Start gathering receipts. If you’ve been lax in keeping track of receipts from charitable donations and medical expenditures – including co-pays from doctor’s visits and prescriptions– you’ll need to start doing so, pronto. For those who pay church tithes “ask for a print out of your year-to-date contributions,” says Fulbright.
If you’ve volunteered this year you can deduct mileage and other related expenses. “Summarize it on a monthly basis,” say Fulbright. For those of you who’ve forked out money for work i.e. training, and other materials as part of unreimbursed work-related expenses, those too are tax deductible.
Determine your contribution. For those who are self-employed and contribute to a Simplified Employee Pension plan (SEP) you’ll want to start calculating how much can contribute to the retirement plan for 2009. Though the cut off date for the contribution is April 15 –or your new deadline if you filed for an extension –it’s not too early to determine how much of your net profit — up to 20% — you can contribute to the fund. “You don’t want to be surprised having made more than you anticipated,” says Fulbright. “If you are self-employed and haven’t been making any contributions to your SEP you want to take a look at that so you’re not hit with penalties, but this is only for those with a SEP plan.
Freelancers, gather your forms. If you are a freelancer start reaching out to employers for your 1099-MISC form. Forgetting to report income can mean having to pay big bucks when the employer does. If you’ve moved, start notifying all your employers of your new address. If you haven’t moved, you should still consider reaching out to these companies to ensure you receive the proper tax form. Also, don’t forget to itemize your income and expenses related to your self-employment using a Schedule C if you’re going to fill out form 1040.
Renita Burns is the editorial assistant at BlackEnterprise.com.