Hi, I’m Bette Hochberger, CPA, CGMA, and I will talk a little about how we get into tax planning. Honestly, the best way to start is to keep good records. That may sound like you’re not really doing anything, but you are. Because if you think about it, many times, people ask me, “Oh, how do I lower my taxes?” Well, are you taking all the expenses you can take and that you have spent money on? So again, we talked about tax evasion before. We’re not making up expenses; that’s not what we’re doing. We’re actually keeping track of things that we are spending already. 


So if you have a business, hopefully, you’re using a business credit card or a business bank account for all your purchases. If you’re not, or if you are a sole proprietor, or you’re worried about your personal taxes, and whether you can itemize it, you’ll still need to keep track of expenses. It’s really going to help you with preparing your tax return, and it’s going to help you see where you’re spending your money, and then you can identify what you can use to write off against your taxes. 

Now, another reason this is really helpful to keep track of these expenses and have good record-keeping is in the event the IRS comes. They say, “Hey, prove that this is real; prove you really spent money on it. This looks a little fishy to us,” or, maybe you’re just unlucky and got pulled for an audit. The IRS is going to look for documentation. So if you have that documentation, then it’s very easy to justify why you deducted it. The corollary to that is even if you spent the money and you don’t have the documentation, it was a legit expense. Still, if you didn’t keep a receipt, the IRS can come back and say, “Well, we don’t care. You don’t have a receipt, you can’t prove it, and we’re going to disallow it,” and now you’re paying more taxes.

Record-keeping is the first step to start your tax planning, tax savings, and avoiding headaches with the IRS down the line. Things that are really important to keep track of also are all of those 1099s and W2s and all those annoying tax documents that get sent your way, and those letters from the IRS, things like that. All super, super important. In the past few years, we had those child tax credits, stimulus payments, etc. There were so many letters the IRS sent or didn’t send people were trying to find them. It often impacted their taxes because they missed getting some of those stimulus payments, and the only way to make it up was to claim it on their tax return. So if you didn’t have those documents or you didn’t go and grab those documents from the IRS, from your IRS account, then you were missing out. You were missing out on a lot of dollars that other people got.

Other really important things; are our property records. If you’re buying and selling property, paying your property taxes, and things like that, super important to keep track of those records. You’re going to need them at some point. We discussed the expense side, but the income side is important too, believe it or not. If you’re in a business that gets 1099s, life’s easier because the people paying you will report it on the 1099s. But not everybody gets 1099s, and you’re going to have to show your income because you don’t want the IRS to audit you because when they do that, they look at your bank account. They say, “All these deposits, we’re going to count them all as income unless you can prove otherwise.” It’s great to keep all of these records.

It’s not just an annoying accountant thing; it’s to help with the annoying IRS things that come up along the way. Another pretty good one is health insurance. It can be expensive for so many people and affects your taxes in many ways. If you are an S corporation owner, you need to put your health insurance, if the situation applies to you, on your W2, and if you’re getting credits, premium credits, you need to keep those 1095s. There are so many documents related to health insurance, so you might as well keep everything. It can be a huge tax swing if you can take advantage of those deductions. 

In conclusion, good tax planning starts with good record-keeping! If the IRS comes along, this will definitely save you. As always, stay safe, and I’ll see you next time.