Year-end Planning

So you are thinking of doing your own return or get one for free from H&R or one of those; consider this:

Information you should gather about certain deductions and losses needed to prepare your individual tax return Form 1040 for 2011. We will just consider business use of auto and office-at-home deductions to keep it simple.

You should let your tax return preparer know whether the deduction or loss was:

1. Use of (owned, leased or rental) autos in business (as self employed or as employee).

   • Obtain the following for each car used for any non-personal purposes:

     • 2011 business mileage, broken down into pre-July 1 and post-June 30 mileage;

     • Average daily round trip commuting miles;

     • Total 2011 commuting miles, broken down into pre-July 1 and post-June 30 mileage;

     • Parking and tolls for business;

     • Car-use reimbursements received from your employer and whether they were included on W-2 Form;

     • If your employer provided you with a vehicle, is personal use during off-duty hours permitted?

   • For each category at (a), break down the amounts between self-employment, investment activity, rental activity, etc. With regard to self-employment and rental activities, break down the amounts between various businesses and rental properties, if there are more than one of these.

   • For each non-personal use car, provide the following (except where otherwise indicated, these amounts are totals for the year, without regard to whether they are for business, commuting, etc, usage): (i) Gasoline, oil, lubrication; (ii) Repairs and maintenance; (iii) Tires, supplies, etc.; (iv) Insurance; (v) Car washes; (vi) Tags and licenses; (vii) Other operating costs (identify); (viii) Month and year car first used for business; (ix) Total mileage during the year, broken down into pre-July 1 and post-June 30 mileage; (x) Regarding purchased cars: (A) Whether the car was used for non-commuting business purposes last year; (B) If (A) doesn't apply, and car was purchased in 2011 without a trade-in—purchase price, including sales tax, and date car was first used for business purposes; (C) If (A) doesn't apply, the car was purchased before 2011, but 2011 is the first year it was used for any non-commuting business purpose—date car was first used for business purposes and its estimated market value on that day; (xi) For leased or rented cars: (A) car costs; (B) If rented for more than 30 consecutive days—car's fair market value at beginning of lease period.

2. Office-at-home expenses of employees and self-employed persons. Obtain the following information for each activity for which you have an office-at-home:

   • For which employer(s) or self-employment(s) did you use this office? (If the same physical area is used as an office for more than one job or self-employment, show percentage of time it was used for each.)

   • Was the area used exclusively on a regular basis as his principal place of business for this particular business or to conduct administrative or management activities for this business?

   • Was it used exclusively on a regular basis for meeting and conducting business with customers, clients, etc.?

   • Was it a separate structure not attached to your dwelling unit that was used exclusively on a regular basis in your business?

   • Was it both (i) used on a regular basis to store inventory or product samples held for use in your trade or business of selling wholesale or retail products and (ii) the sole fixed location of your business?

   • Was it used on a regular basis in the business of providing day care?

   • If the office-at-home is for doing work as an employee (as opposed to self-employment) and you didn't answer “Yes” to either (e) or (f) above: Was your office-at-home used for the convenience of your employer?

   • Square footage in home used for business.

   • Total square footage in home.

   • Total amount (not business portion) spent on home in 2011 for: (i) Rent (if home is rented); (ii) Electricity; (iii) Fuel (gas, oil); (iv) Water and sewer; (v) Homeowner's, mortgage and/or renter's insurance; (vi) Repairs; (vii) Garbage; (viii) Maintenance (e.g., lawn care, snow removal); (ix) Condo, co-op fees; (x) Telephone other than standard monthly charge for first line into house; (xi) Other.

   • Repairs and maintenance done strictly on office-at-home (i.e., not on the rest of house).

   • Description and dollar amount of any improvements made to house in 2011.

   • If you rent your home and made any 2011 leasehold improvements, when does your lease terminate?

   • If you own your home and you didn't take an office-at-home deduction for this house before current year—(A) a copy of the settlement sheet for the purchase of the house; (B) details of any purchase costs that don't appear on settlement sheet; and (C) a description and dollar amounts of any major improvements made.

   • Consider whether you have enough information to deal with any office-at-home deduction carry-forward to 2011. If not, get that information.

And don’t forget … this is just for considering two deductions – business use of auto and office in home deduction. Still thinking of doing your own return and what you get for free? Good Luck.