I think i'm going to attempt filing our taxes this year. DH and I both have a W-2 and DH also has a 1099. I know when we go somewhere to file and we claim deductions we have to show receipts and such. How does that work with TurboTax? Do we just keep the receipts in case they randomly audit us? What about claiming childcare costs? How do they really verify all that stuff? I can't add it in now and see what it prompts me to do because we don't have all the receipts tallied up. Anyone know?

By Kaye on Thursday, December 15, 2005 - 06:02 pm:

We file electronically. In general you keep all your receipts and they can audit you for up to three years back. If you get audited they do verify EVERYTHING. So if you are going to do fuzzy math, you might want to write down what it is based off of. We keep a copy of our returns and receipts in a file.

By Reds9298 on Thursday, December 15, 2005 - 06:08 pm:

Ditto Kaye. We keep everything for 3 years.
I also have a 1099 question, but I'll have to post it later!!

By Boxzgrl on Thursday, December 15, 2005 - 06:11 pm:

Okay thanks. I didn't know if it was to the extent where i'd have to mail in receipts and such or if I just keep them in case I get audited.

By Emily7 on Thursday, December 15, 2005 - 06:20 pm:

I thought they could audit you for up to 7 years...wouldn't you want to keep the receipts for that long?
Not sure if this would work for the IRS or not, but maybe you could scan the receipts into your computer & copy them to disc.

By Reds9298 on Thursday, December 15, 2005 - 08:15 pm:

I have a general 1099 question. I've never had to file that before, but do now with my part-time job. One of my write-offs is my cell phone. How do I do that? We have a tax person that files for us, but I like to go in prepared and 'in-the-know'. Do I just total my cell bill for the year?

By Ginny~moderator on Friday, December 16, 2005 - 12:21 am:

Definitely you need to have receipts, just in case. As I understand it, generally the IRS can audit you "just because" (they call it "random") for up to 3 years after the return is filed, but if fraud is involved they have 7 years. I know I got a letter from the IRS about my deceased brother's estate about 4 years after I filed the return. Whether a math error is fraud is a good question, but it would be very expensive to defend it if the IRS took you to court, so I'd use the 7 year figure to be safe. (Turbotax doesn't ask for receipts, but does have its own quirks). And definitely keep a paper trail. When it comes to deductions, especially charitable, I make a list of everything I am adding in and the basis for that amount (for example, if I give used books to the library, the amount I can use is what the library's "book store" charges for used books - the price paid between "a willing buyer and a willing seller" is the rule of thumb). Everything for a tax return goes into a file folder - W-2's, receipts, notes to myself, etc. and the tax instruction booklet, as the rules change every year, and I keep it for 7 years plus 1 to be safe.

You have a certain amount of leeway for "guess and gosh" (my family's phrase) - for example, you *know* you dropped at least $20 in Salvation Army buckets in December, etc., but by and large you need something on paper, and I suspect the IRS will want paper and not scanned documents, given the ease with which computerized stuff can be manipulated.

Deanna, for your cell phone, do you use it only for your part-time job? Does your employer require you to have a cell phone but does not reimburse? If you have it so that your employer can reach you, but the employer does not "require" a cell phone, I would bet you are out of luck. If it is a requirement, is there a basic monthly charge that you pay no matter how many minutes you use or don't use? If so, that's the amount I'd use. But, unless you are already itemizing it probably isn't worth it on your federal tax. I know it isn't for me, but in Pennsylvania you can deduct such expenses dollar for dollar on your state income tax return. But the IRS has gotten tougher and tougher on business expense deductions for things that can easily be used for non-business activity (they are really tough, for example, on "home office" deductions).

Also, the difference between a W-2 and a 1099 is that if the payer gives you a W-2, they have withheld payroll taxes (Social Security, income tax, etc.); if they give you a 1099 they have paid you monies from which no taxes have been deducted. Depending on the amount, you may have to begin filing quarterly returns and making quarterly payments. You may also have to pay self-employed Social Security & Medicare taxes.

By Reds9298 on Friday, December 16, 2005 - 08:03 am:

Thanks for the info Ginny. I'm an independent contractor for the state. My job is a traveling one, so my cell phone is something I use everytime I work. I will just use the flat fee for my minutes each month. I also already itemize.

Although I make very good $ for as little as I work, I can write off so much that I'm not even sure I will owe. That's in addition to the fact that dh and I get a large return since our incomes dropped drastically when I quit teaching. I am able to write off: computer, computer desk (one-time write offs); paper, ink, supplies, stamps, mileage, and cell. I keep all receipts and log all mileage. I've always been pretty particular about maintaining tax records. I've been doing this job for about a year, so I will see how it goes regarding filing quarterly. I knew that was a possibility, but a pain!

By Ginny~moderator on Friday, December 16, 2005 - 11:16 am:

Deanna, do please check with your accountant if you are using one. The advice I gave is a personal opinion and not to be considered authoritative. I will, however, ask my lawyer son, who is a specialist in tax law, about this specific question.

By Karen~moderator on Sunday, December 18, 2005 - 08:06 pm:

We've been using Turbo Tax for years. We save receipts, medical records, donation records, pretty much anything that has to do with the tax filing for 5 years.