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Step 1
Start off with making a federal income tax deduction file. This can be as simple as using a file jacket, pocket folder, or manila envelope. Write on the front of the folder "Federal Income Tax deductions for (Current Year)".
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Step 2
Keep this file in a place that is easily accessible to you. Maybe in your home office, computer desk, or in a drawer. Make sure that you always put it back in the same location. If it is easily accessible to you, then you will be more likely to keep it up to date. Everyone hates to have to dig around to find something and you may lose interest in keeping track of your income tax deductions and find yourself in a mess for tax season.
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Step 3
Put all documents and receipts that are tax related into your folder. Use the back of the receipts to jot down any notes that will help you remember what the receipt is for. An example would be, a receipt for a business lunch with a client. Write that on the back so you don't forget. Don't forget to file any charitable donation receipts in your income tax deduction file as well.
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Step 4
It is also wise to keep a yearly calendar in your income tax deduction file. Update it daily if needed. This will help you to keep all of your business trip dates in one place. Jot down things on the calendar such as mileage, or dates you made major work related purchases.
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Step 5
Using as many income tax deductions as you possibly can, could significantly lower your taxable income. This could place you into a lower tax bracket, making you responsible to pay a smaller amount of federal income tax. If you keep track of your federal income tax deductions all year long, when the time comes to file your taxes, it will be a breeze.
