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Organizing Your Income Tax Returns

Whether you or a professional does your tax returns, these resources can help.

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When you work at home, organizing your income tax returns is a year-round task. This includes both independent contractors and telecommuting employees, particularly those that take a home office deduction on their tax returns. Even if your tax returns are prepared by a professional, it is up to you to bring the tax documentation (i.e. receipts, pay stubs, tax forms, etc.) to the professional.

Financial software can help in record keeping. However, there is still paperwork to keep. Knowing what you’ll need to prepare your tax returns, will make this job a lot easier, so take a look at some of the things that you'll need.

Keeping Track of Income for Your Tax Returns

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Self-employed consultants and freelancers receive 1099s from each client who have paid them $600 or more during the tax year. These should be mailed to you by January 31 (February 1, 2010 since January 31 is a Sunday). Open these right wasy so you have time in the event that you need to get a 1099 corrected. Employees, on the other hand, receive W2s, which also should come by the same date as 1099s.

When you have a business that derives from the sales of goods, like an arts and crafts business, calculating income is a more complicated than simply receiving a W2 or 1099. See this article on calculating gross income.

Paperwork to Keep for Tax Returns:

  • 1099s
  • W2
  • Invoices
  • Receipts for goods sold
  • Receipts for product, materials, supplies and other costs related to the cost of goods sold
  • Investment and bank account statements

Schedule C Business Expenses

If you are a sole proprietor, as many independent contractors are, you file a Schedule C with your personal income tax returns. This IRS form calculates the profit or loss from a sole proprietorship business. These expenses may be first calculated on another form then entered on the Schedule C. (For example, the home office deduction for sole proprietors is calculated on Form 8829.) Some expenses entered on this form would include office equipment, travel expenses, business-related meals, business-use vehicle expenses and supplies.

Paperwork to Keep for Tax Returns:

  • Receipts for equipment, supplies
  • Meals and travel receipts
  • Documentation for vehicle use
  • Credit card bills or loan statement detailing interest costs for your business
  • Mortgage interest

Tax Returns with Home Office Deductions

When taking a home office deduction on your tax returns, you'll need to save documentation relating to the expenses for your all of your home, not just your home office. Many home-related expenses, like utility costs, are partially deductible as indirect expenses. For questions about taking a home office deduction, check out this Home Office Deduction FAQ.

Paperwork to Keep for Tax Returns:

  • Mortgage interest statements
  • Rent receipts
  • Utilities bills
  • Records of home improvement costs
  • Property tax bills

Child Care Credit

If you paid for child care for children under 13 while you worked, you may qualify for a child care tax credit. (Types of child care include daycare, nanny, after-school and pre-school programs but not kindergarten or private school.) See instructions for Form 2441. You may also qualify for a child tax credit and earned income credit. However, the occasional teenage babysitter doesn't count because you don't have to pay employment taxes for him or her.

Paperwork to Keep for Tax Returns:


  • Social Security or Employer Identification Number (EIN) number for child care provider
  • Dependents' Social Security numbers
  • Records for payments to household employees and child care institutions
  • W-2s and W-3 for household employees, if paying the "nanny tax"

Other Taxes Paid

If you pay quarterly estimated taxes, keep records of all your payments as well as any other taxes you pay throughout the year.

Paperwork to Keep for Tax Returns:

  • Estimated taxes
  • Sales Tax
  • Property Tax
  • State Taxes
  • Foreign Taxes
  • Business Taxes


Disclaimer
I am not a tax attorney, CPA or tax preparation specialist. The information here is meant as a general guide. For specific questions about your own taxes, please refer to IRS publications or consult a tax specialist.

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