Make Taxes Less Taxing
“People who complain about taxes can be divided into two classes: men and women.”
Have you been procrastinating about doing your taxes?
Now it’s GO time!
You’ve got a few weeks until you have to file your U.S. income taxes. If you are like millions of other people, each year you scramble frantically to gather financial statements, income records, cancelled checks, letters from charities, receipts and notes scribbled on scraps of paper.
Follow these tips to reduce the burden of preparing your taxes. Alas, I can’t do anything about the tax burden itself.
As with almost everything, planning makes the process easier. Once you have your paperwork for this year in order, take a little extra time to prepare for next year.
First, make a list of all the different types of information you need to compile:
- interest and dividends
- charitable donations
- deductible expenses
- information related to capital gains and losses
Next, go through all your papers and sort them into the appropriate categories. You can use a different manila folder for each category, large envelopes or even Zip-Lock bags. Be sure to label each one. If you use online banking and track your charges electronically, this can speed the process.
If you have been lax about keeping records throughout the year, you can find evidence of tax-related payments and contributions by reviewing your credit card statements and your checkbook register (or your bank statements and copies of cancelled checks if you don’t record the checks when you write them).
By now it should be clear that setting up some simple systems in the beginning of the year to track tax-related matters makes this process much easier. Even if the only thing you do is throw every tax-related paper into one envelope, it will make a difference. Some further organizing, such as grouping categories of expenses together will be even better.
Now that you have a sense of the categories that apply to your tax papers, create a new set of manila folders to use for this year and you will save yourself time and aggravation next year.
Keeping a running tally of each different type of tax item will save you the year-end hassle of adding up many individual amounts. Software programs like Quicken can make this process a lot easier. Even hand-written lists or simple Excel spreadsheets will work. Using a credit card which gives you a year-end summary also helps.
Following these steps will take much of the drudgery out of tax time and will ensure that you don’t overlook any possible deductions or get into trouble by understating your income. And if someone else prepares your taxes, he or she will probably thank you for years to come.
One of my new clients sent her tax paperwork to her accountant last week. He said, “I was ready to call the FBI – I was sure you were a victim of identity theft. Everything was so organized I figured that someone else had put that information together!”
GO Try It!
Set aside 30 minutes in the next few days to begin organizing your tax records. Notice the difference it makes to take control of your finances. Schedule additional sessions to keep making progress so that April 15 will just seem like an ordinary Tuesday.
Let me know how it goes! I love to hear about organizing successes … and I’m here to help with any difficulties. Feel free to reach out and schedule a consultation!