Prosper Newsletter: March 2008 > Financial

You understand that the following information is educational in nature and is not intended to be legal, accounting, or tax advice. You are responsible for your own financial decisions and should consult your own legal, accounting, and tax advisors before making your financial decisions.

Deducting Taxes

Overlooking deductions? Keep these tips in mind.

When one prepares their taxes, there is a general rule: take as many valid deductions as possible. The following are typical deductions that are often overlooked. As a note of caution: do not stretch your deductions, and always be prepared to prove (with documentation) that your deductions are valid. Also, if you are ever audited or have questions, it is always better to see a professional accountant who understands the IRS than to go it alone. Always consult a tax professional regarding your specific situation.

Medical expenses can be deducted from your taxes if you spend more than 7.5% of your income on those expenses. Expenses include your insurance premiums, medications, and mileage to and from appointments. If you have a year where you, a spouse, or a dependent is quite sick, medical expenses can add up quickly.

Charitable donations are easy to overlook. As you donate, keep a list of what you donate, to whom, and when. You can donate cash or material items (you can deduct the market value of in-kind services or objects). Obtain as many receipts as possible when you donate. In fact, if you make large contributions, most viable charities will provide you with sufficient paperwork to prove that you donated to them. You can only claim charitable donations as deductions if you contribute to valid organizations. You cannot deduct donations given to individuals (you can't deduct the $500 you gave Joe to help him get through school).

Speaking of school, there are several types of educational expenses that you can deduct. Such expenses apply to those who are saving for school, those who are in school, and those who are paying off school loans. You can also deduct costs incurred from academic and professional research. Check the IRS Website for further details.

Amazingly enough, job hunting expenses are deductible. Such expenses include the cost of resumes and cover letters, fees paid to employment agencies, mileage to and from interviews, travel expenses, meals that you pay for during your job search (the IRS lets you deduct 50% of these expenses), and costs for career or job placement counseling. So the next time you are job hunting, keep a list and keep the receipts!

Another big possible deduction is a home office if you are self-employed. Most office supplies, office furniture and equipment, office space, travel expenses (including hotels and meals), and Internet and telephone costs can be deducted. Just remember to separate your home office from your home.

You can also deduct the cost of uniforms or protective clothing, and their upkeep, which are unique to your job. However, those that serve in the military cannot deduct the cost of their uniforms.

There are many other deductions that you may be able to use to reduce your taxes. Check with the IRS for any questions and make sure that you have valid documentation for all deductions that you declare.

Our good friends the IRS

Tax time is fast approaching, and for the fortunate few that receive a refund, it is a joyous time of the year—a time to determine how your money will be spent or invested. For others, the thought of tax time strikes fear. A fear that grows with each passing day until judgment day arrives on April 15^th. Here are a couple of helpful tips for dealing with tax time.

File your taxes in a timely manner. Excuses for not filing on time are as vast as the Grand Canyon. Two of the more popular ones are not having the required paperwork to complete the return and not having the money to write out that dreaded check. File on time, even if you do not have the money! If you do not file on time and owe tax, you may owe an additional penalty for failure to file unless you can show reasonable cause. Knowing the IRS, their definition of reasonable cause might be limited to death—so make sure you file. The combined penalty is 5% (4.5% late filing plus a 0.5% late payment fee) for each month or part of a month that your return is late, up to 25%!

Get organized. It might be a little late to gather documentation for 2007, but it is not too late for the current tax year. Start a file folder system for your taxes. Each folder should be labeled and the appropriate documentation should be stored upon its receipt. At a minimum, you should have a separate folder for income, investment statements, household expenditures, mortgage payments, insurance, tax documentation, and other liabilities.

If you do owe money and cannot make the full payment, one option is filing Form 9465. This famous form is also known as the installment agreement or the payment agreement plan. This option will allow you to make payments on the money you owe. However, this does not come without cost. You will still be subject to all the penalties and interest of the remaining balance.

Decide today to save money by getting organized and meet that April 15th deadline!

---

*Please see the Elective Class Catalog in your Success Center for dates, times, and class details.

---

HOME | PARTNERS | PRODUCTS | TESTIMONIALS | SUCCESS CENTER | ABOUT US | CONTACT | SITE MAP | PRIVACY POLICY | CAREERS