Hubbard Mendoza Income Tax
Individual & Small Business Tax Problems!

Record Keeping

Careful organization and tax planning throughout the year saves time and money. It is imperative to keep all records pertinent to your tax returns. All the earned income statements from W-2's and 1099s, self-employed income, rental income, partnerships, farms, stock sales and don't forget gambling income. Unearned income includes interest and dividends from banks, credit unions, insurance companies, capital gains, bonds, taxable social security benefits, and pension distributions.

Receipts for expenses are needed to take business deductions, rental property and farms. Mileage logs are needed if your vehicle is used for business. The beginning and ending miles, commuting miles and total miles must be documented. Medical bills include doctors, dentist, prescriptions, braces, hearing aids, etc. Usually any medical needs prescribed by your doctor are deductible, reduced by 7.5% of the adjusted gross income.

Starting January 2007, you will not be allowed to deduct charitable contributions of any amounts unless you have proof. What does this mean to you? Starting in 2007, each cash contribution you make must be substantiated with a bank record, receipt, letter, or other written communication from the donee organization that states the name of the donee, the date the contribution was made, and the amount of the contribution.

The responsibility to prove entries, deductions, and statements made on your tax returns is known as the burden of proof. You must be able to prove (substantiate) certain elements of expenses to deduct them. Generally, taxpayers meet their burden of proof by having the information and receipts (where needed) for expenses. You should keep adequate records to prove your expenses or have sufficient evidence that will support your own statement. You generally must have documentary evidence, such as receipts, canceled checks, or bills, to support your expenses. Additional evidence is required for travel entertainment, gifts, and auto expense. IRS will need evidence of the deductions taken when an audit is requested.