I had my taxes done today. The good news is that I'll get a refund of $2,753 from the federal government, and $91 from the state. I've owed NY State the last couple of years, and my federal refund has been less, so I'm happy about this.
This was an interesting year for taxes. I bought the condo, first of all. Also, I sold several stocks and mutual funds, so we had to figure out my cost basis and my long-term capital gains and losses. Here's a hint for you: one thing I've done for the last couple years is to keep a spreadsheet on my PDA listing every security I've bought, with the date, share price, number of shares, and any comission paid. If I sell them a few years later, it is much easier to refer to the list than having to go back through all my other records to pull together the needed info for my taxes.
Speaking of pulling together info, here's what I do:
W2 and 1099 forms-- that is easy. Whatever gets mailed or given to me on paper, I stash in a certain corner of my desk. Then I just run down my account lists in Quicken to make sure there aren't any additional ones I need to download from websites to cover all my various interest and dividends/capital gains from bank accounts and investments. I clip all these together with my tax return from last year.
Condo-- my lawyer gave me a lovely bound-up collection of all my closing documents, with colored tabs and everything. I marked the HUD settlement statement with a post-it as that is where the tax-related stuff is summarized. I also got a 1099 [oops! 1098, actually] from my mortgage lender, detailing the interest and points paid. Because my condo was newly established this past year, I actually haven't paid any property taxes yet-- the money is still in escrow for when all the abatements and things are settled. But next year I should have some kind of statement of property taxes paid as well. And I'll have a full year of mortgage interest to deduct.
Miscellaneous itemized deductions: I go through my Quicken category summary looking for things that fall into the following areas. Since I work in publishing, there are a lot of things that are not reimbursed by my company that do relate to promoting books I publish and generally networking in the industry in ways that develop my career and ultimately sell a book or two. Over the years, my accountant has taught me to look for things that might not occur to me, and really keep track of them. I save my receipts!
- Charitable donations: cash/check/credit card donations. (I also get receipts whenever I bring bags of stuff to the Salvation Army.) Tip for 2007: miscellaneous cash donations without receipts will no longer be allowed, so make sure you get a receipt if you buy any girl scout cookies...
- Parking/tolls/taxis for local business expenses, like if I visit a bookstore
- Meals/Entertainment-- with people in publishing industry, or who review books, buy books, etc. This can include meals in restaurants and groceries bought to entertain at home.
- Business equipment like printer cartridges, etc and supplies such as stationery and pens that I use for work-related stuff.
- Admissions for research: Movies can relate to books. Museum exhibits can relate to books. Plays can relate to books. All very much a part of an overall media awareness which is very important if you work in publishing. Cable TV would be a write-off too, if I had it.
- Business gifts-- a few bottles of wine given to colleagues
- Business phone-- until I got a Blackberry, I used my personal cellphone quite a lot for work but was not reimbursed for the monthly cost, so a portion of that is deductible
- Continuing education-- I've had dealings with a lot of foreign publishers, so French lessons are valid here, though my company does not reimburse them
- Internet access-- used quite a bit for work and overall media awareness
- Job search-- if I bought any stationery to print out my resume, etc, or traveled to look for a job, that is deductible
- Professional journals and books-- gotta keep up with what the competition is doing and keep track of book reviews etc.
- Software-- I bought a couple programs for my Palm that I use for work stuff
- Subscriptions-- magazines, newspapers: again very much related to book publishing
- And if I'd bought any major equipment such as a computer or a new PDA, that would be noted and deducted and/or put down as some kind of depreciation thing that I don't totally understand-- but hey, that is why I use an accountant.
Now here is the killer that will probably appall some readers: how much do I pay for all this advice and the ease of having my forms prepared and submitted for me? It's been creeping up over the years and this year the total was $480, including audit insurance, which may be a waste of money, but sort of adds to my comfort level. The first time I went, the extra refund my accountant got me more than covered her fee. But now that I've learned all these neat tricks, I wonder if I should just do it on my own and save that money. Next year will still be complicated because of the condo taxes, so I think I'll keep going. And who knows, maybe someday this site will actually get to the point where I need to set myself up as Madame X, Inc.! Or not... but setting up a business would definitely be something on which I'd want tax advice.
So we'll see. In the meantime, I justify the expense by knowing that my accountant is much better informed than I am about what I can deduct, and that a careless error isn't likely to get me audited. (Not that I'm careless about these things, but still...)
And why is my accountant so expensive? Can't you go to H&R Block for way less? Yes, you can get someone to do your tax forms for way less, but it won't be a CPA-- it will probably be someone with very minimal training, whose goal is to do as many returns as possible, as fast as possible. The person I go to has many years of experience, and in the years I've been seeing her, I've watched her business expand and thrive. She is the head of the company, and incredibly busy at this time of year, but she always takes the time to go over my information thoroughly, and I trust her advice. I could probably see one of her junior staff people for less, but I guess I prefer to maintain the relationship we've built up rather than trying to save a couple hundred bucks.
So what is next? I wait a few weeks for my refunds to be direct deposited. And I've been told I can add 4 exemptions to reduce my withholding, which I've been meaning to do for a while. And then I just have to keep saving my receipts and hope I do even better next year!