"Do I really have to keep *all* these receipts?"

This is a common question from people in business. Let's think practically here for a moment. Those receipts can be quite a bother. They seem to accumulate over night and take over your desk before you can sort through them! Right? Well the bigger trouble is, at year's end, they matter. You need to be able to prove your expenses if you're going to claim them on your tax return against the income you've received.

A sound piece of advice would be to find a way of contending with receipts as the year progresses, perhaps a filing system or system of envelopes by category would work. Remember, always date such envelopes with atleast the year on the outside, this will help keep things simple in the future. Maybe it could be just as simple as stapling them to the check stubs or taping it to your calender. A quick note on the receipt saying who/what it was for or to would also be a good idea, this may clear up any questions regarding it's relativity later.

Also, talk to your tax preparation professional to find out which receipts they need to complete your tax forms. As a preparer, they do not need to see every one, you wouldn't want to pay them that much to sit and go through all those receipts. But they will need some for back up in their records. Contributions is a more recent important receipt that will be needed by your tax professional due to changes in the recent tax laws.

Always keep in mind, an IRS agent will automatically delete any expense you can't prove so it is extremely important to keep your receipts and keep them in an orderly fashion for easy retrieval for this purpose. If you are ever audited by the IRS, your receipts are imperative. So be diligent and organized when it comes to receipts and work closely with your tax professional to save expense and time in the long run.

"Your donation is tax deductible"

Beware of ads claiming your donations are 'tax deductible'. Not everyone can itemize their deductions and itemizing is the ONLY way to claim donations of any kind. Keep in mind, if the value of the donation along with the other allowed deductions bump you up to a higher amount than your standard deduction, your higher amount will allow you to itemize where otherwise you might not be able to. I think they should change their ads to say, "Your donation could be tax deductible."

Standard Deductions vs. Itemized Deductions

When filing your personal income taxes, you have 2 options when claiming deductions: Standard Deduction OR Itemized Deductions. First, lets define 'deductions'. Deductions are allowable subtractions from your adjusted gross income that the IRS gives before applying your tax rate and determining how much tax you will owe.

Alot of factors determine which type of deduction plan you can take*. You can only claim donation amounts if you are able to Itemize your deductions. To determine if you can Itemize, using IRS 1040 form Schedule A, you would compile your totals for the various acceptable deductions according to the Schedule A instructions. When you arrive at a Total of Itemized deductions on line 29, compare this to the Standard Deduction according to your filing status (single, married filing joint, head of household etc.). If the Total of Itemized deductions is higher than the Standard deduction amount, congratulations, you can itemize!

But for those of us who don't have enough Itemized deductions to rise above the Standard, continue to contribute and give donations of all kinds! They still benefit the recipients, you just can't take if off of your taxes.