Now is the time to prepare for tax season 2008. From personal experience, I can tell you that tax preparer’s love to see you before tax season starts. We’re more relaxed and can legally help you pay the minimum taxes required by law. There are still a number of strategies you can employ to reduce your taxes but some of them will expire on December 31 so there’s no time to waste. 

Most tax preparers will provide you with a Tax Planner to help you gather all the information you need. This will also save you money because having all the information in one place and in a logical order saves the tax preparer time. There’s a shortage of good tax preparers and we usually give preference to those who schedule appointments and have their information in good order. 

1. Set Up A Filing System For All Your Receipts and Taxable Documents. If you use Quicken (Quicken Online is freee!) or Microsoft Money you can review and print reports showing all your taxable transactions. You can also enter the data into Excel. At this point in the year, don’t try to go back and record all your transactions, the only ones you care about are the ones that affect your taxes. Be sure to watch the mail for W-2s from all employers, 1098s from mortgage companies and 1099s from savings accounts, brokerage accounts and contract employers. Most of these are required to be mailed by January 31st. Make sure to collect all of them because duplicate copies are sent to the IRS and if you miss one (say for a closed account), the IRS will be contacting you and they’ll expect some additional interest or penalty fees. One of the first things I do when I start my 2008 tax preparation is make new folders for 2009. I keep the file in my computer so I can re-use it each year just by changing to the new year.  
2.  Review Your Wage Withholdings. If you received a large tax refund last year, reduce the number of dependents you claim so you’ll get more money in each paycheck. No point in giving the government your money for a year, particularly if you’re struggling financially or have a lot of credit card debt. You might also want to save the money at my favorite bank: INGDirect. If you owed money last year or are self-employed, you’ll want to make sure you increase your withholdings or pay estimated taxes so you don’t have to pay penalties and interest.  
3. Review Investment Accounts to Minimize Taxes. With most portfolios down this year, consider the tax ramifications of selling some of your stocks. You’ll definitely want to work with your stock broker and tax professional to get the maximum benefit out of this strategy.
    
4. Document Charitable Contributions. The IRS requires that all charitable contributions have receipts and documentation. So, if you take used household goods to the Salvation Army or a Church thrift store, list out everything that you are contributing and ask for a receipt. You’ll value each item yourself but you must have a list and a receipt. Charitable mileage for 2008 is calculated at 14 cents per mile.
    
5. Document Work-Related Expenses Especially If You Are Self-Employed. Equipment, supplies, travel expenses and business mileage (rates are 50.5 cents per mile for the first 6 months of the year and 58.5 cents per mile for the last half of the year), business gifts, health insurance, home office deduction, union dues, uniforms and required tools, educational expenses, and more may be deductible. You don’t have to decide, just document them and bring them to your tax preparer. 
    
6. Bunch Your Deductions. Sometimes you’ll have expenses but they aren’t enough to get over the minimum requirements. If you can pay for some of next year’s expenses this year, you might be able to deduct them. For example, Medical Expenses are useless unless they exceed 7.5% of your adjusted gross income and Miscellaneous Expenses (such as unreimbursed employee expenses) must be greater than 2%.This means that if your adjusted gross income is $50,000, your medical costs have to be more than $3,750 and your miscellaneous expenses over $1,000 before you get any reduction in your income/taxes and that’s every year. Let’s say that you have $3,500 of medical expenses in 2008 — that’s not enough to reduce your taxes. But, if you can have lab work done, purchase prescriptions, have your eyes checked and get new glasses, or have minor surgery done in 2008, anything over $3,750 will reduce your income and thus your taxes.This is a very simple example for illustration purposes only. Be sure to check with your tax professional about your personal tax situation.