Bay Business Group Blog

Did you spend hours pulling together your tax records in preparation for filing your 2012 tax return? It doesn’t have to be that way. Avoid the problem next year by taking a few simple steps now.

* First, decide what records you need to keep for the current year. Generally speaking, you’ll need records of income items and deductible expenses. Use your 2012 tax return as a guide.

* You’ll also need to keep some items for longer periods. For example, you may need purchase records for your house and other investments years later to calculate your capital gains.

* Set up a filing place for each category. Use folders or plastic pouches for paper records, such as charitable receipts, property tax payments, and mortgage reports.

* If you manage your banking and finances online, open up a series of folders on your hard drive. Save copies of electronic statements or transaction receipts in the relevant folder. Remember to make regular data backups.

* Then stay current with your records as you go through the year. It’s easier to spend a few minutes each month than to have to spend hours reconstructing everything at the end of twelve months.

* At the end of each month, highlight income and deduction items in your check register. Use one color for charitable contributions, another for work expenses, and so on. You can do this whether you keep your register on paper or on a computer. Make sure any associated receipts are filed away correctly.

* At year-end, you should know exactly what falls into each category and where the records are.

Remember, the better your recordkeeping, the better your chances of maximizing tax breaks. If you have questions about the records you need to keep, give us a call.

David Bradsher, CPA is a Washington DC / Northern Virginia area CPA who works with small business owners and non profit leaders on a monthly basis to provide them with guidance and advice on how to grow their organizations, minimize their tax liabilities and increase their bottom line.

The “Taxpayer Relief Act” signed on January 2, 2013, permanently sets the estate and gift tax exemption at $5,000,000 and the top tax rate at 40%. The exemption amount is adjusted annually for inflation, which puts the 2012 exemption at $5,120,000 and the 2013 exemption at $5,250,000. The annual gift tax exclusion for 2013 is set at $14,000 per recipient.

Now that the rules have been made “permanent,” take the time to review your estate plan to make sure it still accomplishes your wishes.

With the higher exemption amount, fewer estates will be subject to tax, and perhaps yours falls short of the tax threshold. But regardless of the size of one’s estate, everyone needs the following basic documents – updated for the current rules and your particular circumstances:

* A will that specifies who is to inherit your assets and who is to be the guardian of any minor children you have.

* A power of attorney naming someone to handle your financial affairs if you become disabled or seriously ill.

* A health care directive (living will) stating your wishes should you become terminally ill or permanently unconscious.

* A financial inventory listing such things as bank accounts, income sources, insurance policies, and other assets.

Your estate plan review should include checking your exposure to state inheritance taxes and an update, if needed, to beneficiary designations on such things as IRAs and insurance policies.

For help in getting your estate plan in order, please contact us and your attorney.

David Bradsher, CPA is a Washington DC / Northern Virginia area CPA who works with small business owners and non profit leaders on a monthly basis to provide them with guidance and advice on how to grow their organizations, minimize their tax liabilities and increase their bottom line.