ORGANIZED FOR LIFE
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Tax Time Tips If you’re scrambling to find your W2s, 1099s, receipts, and charitable donations, don’t panic! Creating a simple, easy to use filing system for tax papers can quickly help you sort out the mess.
Disclaimer: This article is in no way intended to instruct anyone as to what deductions they may be eligible to claim. I encourage you to refer to a tax professional or to the IRS website at www.irs.gov with any questions about your particular tax situation.
Can I save money by organizing my tax papers? Absolutely! I organized one client’s 2006 tax papers and got them an additional $900 refund beyond what they’d already received. And since most tax professionals charge according to how much time they spend on a return, you can save money by organizing your taxes before submitting them.
What does a tax professional need in order to prepare my return? Before submitting your papers, gather all of the documents together and add up your total income, contributions, medical expenses, etc. Give this information to your tax preparer along with all of the forms you’ve received. You will generally not need to submit individual documents proving income and expenses unless they’re requested.
How do I simplify my household taxes? You can make tax time much easier by organizing your tax papers into a simple accordion file or some hanging files in a box or drawer. Start by listing the types of papers you need to prepare your taxes. Let’s call these categories. I like to type up a label for the front of each hanging file or accordion file pocket that lists the types of information needed (bulleted in each category, below). Use this checklist to create your household tax filing system, and put one category of information in each hanging file or accordion pocket, with a clearly legible label:
q Income – Pay Stubs q Income – Forms · W2s · 1098s · 1099s q Donations · Receipts for cash and non-cash donations · Check duplicates or returned checks for cash donations · Letters or summaries from charities and churches q Real Estate · Mortgage interest statements · Tax assessments q Medical · Receipts for out-of-pocket health insurance expenses · Receipts for co-pays and expenses not covered by health insurance q Child Care · Receipts for payments made q Student Loans · Statements of loan interest paid q Receipts · For any other deductible expenses q Exemptions · Cost of support q Tax Correspondence · Letters from IRS or state revenue service q Old Tax Papers · Copies of returns and supporting documents for the past seven years · Copies of returns for each year past that to be kept indefinitely What do I do if I’ve gotten last year’s tax papers mixed up with this year’s papers? Prevent this by creating another filing system that’s exactly like the one you just created. Label one “EVEN YEAR TAXES” and one “ODD YEAR TAXES”. Put the 2007 papers in the odd year tax file, and 2008 in the even year file. Next year, clean out the 2007 papers and put them in a file marked “2007 Taxes”, and use the odd year file for 2009.
What do I do to be sure I’ve got all the forms and documents I need? You can refer to IRS publication #552, "Recordkeeping for Individuals" for this information. Also, if things haven’t changed much, compare what you’ve got to last year’s return. Using tax preparation software such as Tax Cut by H&R Block or TurboTax by Intuit will lead you through questions to ensure you have all the forms and papers you need, and get all of the deductions you’re entitled to. And consider this; using tax preparation software can cut your tax preparation time down to 25% of the time you would spend doing it on paper.
How can I get my tax refund faster? If you file your taxes electronically, your refund may be processed in just half the time it would take to process a paper return. You can get your refund even faster by having the IRS deposit your refund directly into your checking account.
How long do I have to keep tax papers? The IRS can audit you for no particular reason for up to three years from the date you file a return. If they suspect a discrepancy in your gross income of more than 25%, they can audit you for up to six years. To be safe, keep your supporting documents for seven years, and a copy of your return forever. If you need a copy of an old return, you can file a Form 4506 with the IRS to request one. For more information, see the IRS publication 552, "Recordkeeping for Individuals".
How do I simplify my business taxes? If you have business expenses, you qualify for myriad expense deductions. Use a pocket calendar or small notepad to track your daily expenses. You can enter them into a software program such as Excel to get running totals, or use Quicken or QuickBooks to download the data directly from your business checking/debit account and credit card. To find out how much, if any, of the following expenses you can deduct, check with your tax preparer or use tax preparation software such as TurboTax. Use this checklist to create your business tax filing system:
q Income · Self-employment income forms · Sales receipts · Deposit slips with check numbers recorded q Vehicle Expenses (Mileage) q Advertising Expense Receipts · Ads: print, internet/radio/TV, phone books, professional directories · Business cards, mailings, fliers q Legal & Professional Fees Receipts · Tax preparation, legal fees, accounting fees, consulting fees q Commissions & Fees Paid · To sales people or other service providers q Contract Labor Payments q Business Insurance q Vehicle And Equipment Lease Expenses q Business Property Lease Expenses q Office Expenses · Separate phone line or internet service · Long distance calls · Postage & shipping · Operating a website q Supply Expenses · Merchandise for resale · Materials used to produce or assemble goods for sale · Print cartridges & paper · Cleaning materials and supplies · Books, equipment, and supplies normally used up within a year q Tax & License Payments · State & local license fees q Travel Expenses · Air travel · Taxis, ca r rentals, mass transit · Hotels and overnight lodging q Meals & Entertainment · Meals while traveling overnight on business · Business meals with a client · Refreshments provided at an open house q Other Business Expenses · Training · Membership Dues · Conference Registration Fees · Photocopying Expenses q Self-Employment Taxes · Quarterly payment stubs, form 1099-misc
What if I work out of a home office? If you work out of your home office, you qualify for even more deductions. To find out how much, if any, of the following expenses you can deduct, check with your tax preparer or use tax preparation software such as Tax Cut or TurboTax. Use the following checklist of home office deductions to complete your tax filing system:
q Real Estate Taxes q Homeowners Insurance q Indirect Utilities · Electricity · Gas · Water & sewer · Trash removal q Repairs & Maintenance · Direct repairs (just to office) · Indirect repairs (to house) q Other Indirect Expenses · Security monitoring · Maid service · House decorating · Pest control q Other Direct Expenses · Office decorating What if I don’t get my return in on time? You can request an extension to file before October 15th, but you must file your estimated taxes by April 15th, and that payment must be at least 90% of the tax amount on your final return.
I hope this information has been helpful to you. If you’d like some help putting together a customized household or business filing system, call me at (804) 330-0997. I can help you design a flexible filing system that you can use for storing and retrieving important papers with confidence.
Blessings to you, and happy organizing!
Copyright 2008 by Cara Kinning, ORGANIZED FOR LIFE Please contact me for reprint permission.
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