Saving on Your Taxes With the Right Receipts

Want to save a fortune on your taxes? You don’t need tax shelters or municipal bonds or racehorses. All you need are records.

Tax experts say those who take the time to jot down all their deductible expenses and compile the appropriate receipts can save hundreds of dollars on their 1992 returns. Americans commonly pay too much tax because they don’t give themselves enough time to prepare, said John Hewitt, chief executive of Jackson Hewitt Tax Service in Virginia Beach, Va.

“Most people overpay their taxes because they don’t get ready,” Hewitt said. “We typically find at least one or two things that people didn’t keep records for, so they don’t take the deduction.”

Good records will also save on tax preparation fees, said Harvey Gettleson, tax partner at Ernst & Young in Century City. Gettleson maintains that a well-organized taxpayer can cut tax preparation fees in half.

And now, when tax forms and wage information are just starting to arrive in the mail, is the ideal time to get ready.

What do you need?

Statements from employers, banks, investment companies and the government of what you earned. You also need receipts, canceled checks and bank statements showing what you paid in deductible expenses. And you need a notebook to jot down additional deductible expenses that may be missed in your records.

The first step in preparing your tax records is to determine what they are, Hewitt noted. For most people, that should involve some introspection about what they’ve done during the year and what it cost.

For instance, you earned wages, right? What expenses did you have during the year that allowed you to earn those wages? Did you buy trade magazines? Take business associates out to dinner? Did you have unreimbursed mileage or travel expenses? Did you make long-distance phone calls or pay for work-related education or training?

What about child care? If both you and your spouse are working and need to hire somebody to watch your children, you’re usually entitled to a child care credit. However, you need your baby-sitter’s Social Security number or the employer identification number of the day care center. You’ll also need either canceled checks or receipts indicating how much you paid.

If you had to move during the year for work, you can deduct moving expenses--including the real estate agent’s commissions and closing costs on a new home, up to certain limits. However, your new job has to be at least 35 miles from your old job and you’ve got to stay with that employer at least 39 weeks to claim these expenses. (If you took the job and moved late in the year and consequently haven’t had time to meet the time requirement, you can still claim the expense. You’ll just have to amend your return later, if you quit before the 39 weeks are up.)

If you spent money looking for a job in 1992, those costs--including resume preparation, training and mileage--are probably deductible. Business and miscellaneous expenses are deductible to the extent that they exceed 2% of your adjusted gross income.

Once you exhaust all the deductible expenses related to the first income category, move on to the next.

Did you earn money on savings or investments? Chances are you spent money on them too.

Perhaps you paid an interest penalty because you pulled your savings out of the bank before its time. Or, as a new investor in mutual funds, you found it necessary to buy books, newspapers and magazines that helped you make investment choices. Clearly, if you’re a 30-year subscriber to the Los Angeles Times, you aren’t going to be able to justify writing off this year’s subscription because you read the market coverage. But you may be able to justify the cost of a new subscription to the Wall Street Journal or a mutual fund newsletter.

Finished with income items? Move on to expenses.

Medical expenses are deductible to the extent that they exceed 7.5% of your adjusted gross income.

Doubtless you remembered to claim major medical bills. But did you also remember to claim medical insurance premiums? You’re constantly driving your kids to the doctor? Some good might come of it. Medical mileage is deductible at a rate of 9 cents per mile. Even the Medicare tax you pay through employee payroll is deductible once you get above that 7.5% floor.

If you’re missing receipts, don’t despair. Since you’re doing this early, you have plenty of time to request duplicates. Most businesses, charities and doctor’s offices keep records. All you have to do is ask.

Once you’ve got everything together, pull out a notebook and start plotting down the information in an organized fashion.

Since tax returns--and tax preparation computer programs--put income first, you should too. Write down all your sources of income and the amounts, then staple the wage, interest and capital gains statements at the bottom of the page.

Do the same thing for your expenses. Put each major category on a separate page, delineating each expense. Total the expenses and staple on the receipts and other documentation.