Quarterly Organizing Article[Archives]
GETTING ORGANIZED FOR UNCLE SAM
There are only a few weeks until April 15th, so now is a good time to start organizing
information for your tax return. It’s
also a good time to get better organized so that next year’s tax return
preparation process will be significantly easier.
you do not already have the blank forms you will need, pick them up at either a
bank, a post office or call the IRS or log onto their web site (www.irs.gov).
figuring out your expenses for tax purposes, there are three key sources of data
you should review carefully: your
checkbooks and bank statements; your credit card summaries; and your cash
receipts and/or petty cash book.
you have a shoebox or paper bag full of receipts, purchase an expanding
accordion file. If you itemize your
deductions, label the pockets of the file according to the specific line items
that correspond to Schedule A of your 1040 Form (i.e., W-2's, 1099s, charitable
donations, medical expenses, etc.) If
you are a business owner, you may need to add additional categories (or have a
second expanding file) that correspond to Schedule C (the tax schedule for those
self-employed) such as advertising and promotion, travel, continuing education,
professional help (attorney, accountant) and supplies. Once you’ve labeled your file, sort your bag or box of receipts into
the appropriate pockets of your accordion file.
you’ve completed your tax return, make two copies and put one inside your
accordion file. Label the outside of the file with the tax year, put an
elastic band around the entire file and store it in an out-of-the-way location, such
as a high closet shelf, attic or basement. You
will only need to refer to this folder again in the event that you are audited. The second copy of your return can be filed in the “Taxes” folder in
your main household filing system.
Tax experts generally recommend saving supporting back up information for 3-7 years. I generally prefer to err on the side of caution, and keep documentation
for seven years. However, check with your accountant or financial advisor who
is familiar with your situation for guidance.
make the tax process easier for 2009, here are some tips to keep track of
deductible expenses throughout the year:
purchasing a financial software package, such as Quicken, which allows you to
categorize your income and expenditures (i.e., wages, medical, charitable
donations, etc.) Quicken is
extremely user-friendly, making it a good choice for someone just starting to
use technology to garner a better handle on her finances. At the end of the year, you can print out a report
which summarizes how much you spent in each category. Additionally, Quicken makes it extremely easy to balance your
checkbook, and have an accurate, up-to-date financial picture.
you buy your accordion file for 2008 Taxes, purchase a second one for 2009
Taxes. Throughout the year, as you
get receipts, place them in the appropriate pocket, so all you have to do is add
up each pocket at year end. The
same is true of income. You can put
your paycheck stubs in the W-2 pocket. When
your W-2 arrives, check it against your pay stubs; if it is correct, you can
then toss the pay stubs. Stubs from
dividend checks can be filed in the 1099 pocket.
one credit card solely for deductible expenses (i.e., business related travel,
charitable donations, etc.) to simplify your record keeping. Ideally, this credit card will be one that sends you an
annual summary of categorized expenditures.
soon as you are handed a receipt you believe is deductible, jot down the
category/reason on the back. This
is particularly helpful if you tend to save receipts in your wallet for a while
before you file them; frequently cash register receipts list only the date, and
not the name of the establishment.
you charge a meal that you plan to deduct, you need to document it as an
entertainment expense. On the back
of the credit card slip, write down with whom you dined and the nature of the
you donate clothing to a charity, make a list itemizing each item and its
condition. Most charities will
validate your list or give you an official receipt which you can attach to your
list. Get a copy of the IRS
guidelines detailing how to use donations as tax deductions.
keep track of deductible mileage (to and from volunteer or charitable work; to
and from doctors, hospitals, treatment centers; business travel; etc.), keep a
small notebook or auto log above the sun visor or in the glove compartment of
your car. Use a new page for each
month and total each month’s mileage at its end. Be sure to start a new book for the next calendar year.
than tackling your tax preparation all at once (which is enough to send anyone
running for the aspirin), break the job into manageable, tolerable chunks. For example, on night one, you might sort your receipts, on night two you
might add up half of the pockets (categories), on night three you can add up the
remaining pockets, and so on. As
mentioned earlier, be sure you have all of the necessary forms (midnight on
April 14th is not a useful time to realize you’re missing a key form), as well
as a calculator on hand before you begin. It’s
generally helpful to make or request an extra copy of each form in case you make
a mistake as you are filling out your return.
Here’s hoping there’s a refund check in your future!
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