Six Tips To Avoid Tax Season Stress

4. Digital Mileage and Entertainment Logs

If someone uses a car for business purposes, they can write it off on taxes if they keep a detailed log with the date, mileage and purpose of the drive. It’s a lot easier to record all of this right after a trip than trying to figure it out at the end of the year, and there are several mobile apps to do it right from a smartphone. Some goes for business-related entertainment, like taking prospects out for a meal.

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3. Use Checking Accounts

Transactional accounts offer higher liquidity and make it easy for clients to keep track of ever dollar they spend or receive, especially if they are business owners. They may not have attractive interest rates, but they will make taxes easier with a running tally of daily revenue and expenses.

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6. Don't Forget Home Sweet Home

If a client purchased a home in the previous year, make sure they keep a copy of the settlement sheet as proof of the price paid for it in case they decide to sell and the gains are subject to tax. There should also be a log of money spent on home improvement and casualty losses as they can be deducted from taxes as well.

1. Maintain Good Records

While it should go without saying that anyone making itemized deduction needs to document transactions throughout the year, having good records is especially important if the IRS comes knocking. Helping clients maintain their records throughout the year can save a lot of time when it comes to filing, and a lot of stress during audits.

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2. Store Records Digitally

The IRS doesn’t mandate how those records are stored, and the digital age has made it unnecessary for clients to keep receipts or hardcopies of important documents. Make the process easier for everyone by encouraging clients to scan their receipts and invoices and store them in clearly labeled and organized files on the computer. With cloud technology, its now easier to store records so both client and advisor can view them easily. That said, it’s still wise to keep physical documents around, just in case.

5. Hold On To Old Tax Returns

While the IRS doesn’t have specific rules on this; they can go back in time as far as they want to conduct an audit if they suspect tax fraud. Gregory recommends retaining tax returns and supporting documents for six years, as even the most extreme fraud cases are difficult for the IRS to prove beyond that. Not only will this help prove that deductions are justifiable in case an audit happens, having older returns help prepare this year’s filing. “You can refer to them and remind yourself of the previously reported income and deductions availed,” Gregory said. “The odds of missing out on any item reduce drastically.”