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The Earlier, The Better
Janus

January  2010


 
When we open our calendars to January, it marks more than the start of 2010. It also means the official start of tax season. In reality, however, many people won't start thinking about their tax returns until April, when the deadline looms large.

This can be a mistake, says Peter Michaelson, CPA, a partner in the Eisner LLP's Tax Advisory Services practice in New York City. In fact, according to Michaelson, organization throughout the year is key to smooth tax preparation.

"Keep items such as deductible receipts, bank statements, W-2 forms, cancelled checks and your last pay stub of the year in file folders so they're at your fingertips when you need them," he suggests. "Though it's now common to handle finances online, paper is still important."

Even if you haven't been preparing for April 15 the entire year, there are ways to get on the right path today. The checklist below identifies documents and figures you'll want on hand as you prepare for tax filing over the next few months. In addition, Michaelson recommends the following:

Obtain proper charitable gift substantiation. Tax law changes in 2008 affected the rules regarding charitable gifts. You must now have a written receipt or acknowledgment from the charitable organization to document all cash gifts greater than $250. "A cancelled check is no longer sufficient substantiation," Michaelson explains.

Your old clothing and other household items (like furniture and appliances) must be "in good used condition or better" to be deductible. Tax prep software programs can help you value these items.

Locate the closing statement from a home purchase. The Stimulus Plan enacted last year included a First-Time Homebuyer Tax Credit of up to $8,000. If you intend to take advantage of this credit, be sure you have a closing statement from your attorney or lender that shows the purchase price and closing costs.

Ask for monthly capital gain and loss schedules. Investment losses may be used to offset taxable investment gains and/or a portion of ordinary taxable income, a tax planning strategy known as tax loss harvesting. To utilize this strategy most effectively, Michaelson suggests asking your broker for monthly schedules.

"This way, you'll have your cost basis every month, which gives you an understanding of your position throughout the year and helps you make decisions about taking capital gains or losses at the end of the year."

To learn more about Janus or other mutual fund companies, visit Fund Companies.  For particular fund information, visit Fund Selector.

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