What's that saying about good intentions? Well, I'm going to paraphrase it a tad for taxes:
The road to tax hell is paved with unorganized filers.
Sure, that sounds a bit melodramatic. I have been watching the operatic stunts of World Cup players, so maybe their histrionics have affected me a bit.
But emphasis on tax organization is not as over-the-top as it initially sounds.
If you don't have critical tax information -- and substantiation -- at your fingertips, then you could easily miss out on tax breaks and end up paying the IRS much more than you should.
That's why the recommendation to get your tax filing material organized now is a great way to close out our Midyear Tax
Moves. In fact, organization is so crucial to taxes that three folks -- Marilyn, Paul and Kate -- suggested it.
Your organization system doesn't have to be elaborate. It can be on your computer via a self-created spreadsheet or one of the many prepared packages available.
Or, if you're old-fashioned, a paper-based filing system is fine.
The key is to pick one and stick with it.
I am a big fan of accordion folders. They have enough slots for various items -- receipts, for both business expenses and personal deductible items (medical costs, charitable gifts); reminder notes (what are the requirements of the American Opportunity Credit?); draft forms; income statements (1099s from contracting jobs or investments and/or your workplace W-2); etc. -- but all the info is in one handy place.
If you do your taxes yourself, the accordion folder is easy to carry to your desk when you're ready to work on your 1040 next year. Or if you opt for outside help, it's just as handy to deliver it to your accountant.
But the first step is to set up your system.
Even if you've been diligent about keeping all the relevant tax material but just threw it into a box, consider sorting those documents and putting them into your filing system now.
By breaking out the information into the appropriate tax filing categories, your annual Form 1040 tasks will go much more quickly and, I hope, produce a better financial result for you instead of for Uncle Sam.
And as you continue to put material into your filing system, you'll be alerted to what holes exist in the documentation.
Discovering this means you can plug the gaps as they arise instead of scrambling to find the data when you're already facing the April 15 deadline.
One more tax tip remains: Thanks again, Marilyn, Paul and Kate for wrapping up the first annual Midyear Tax Moves feature with the important reminder to get our tax documents in order ASAP.
And thanks to everyone who contributed
to this feature.
Remember, the key to saving on your taxes is to staying on top of the moves you need to make now and year round!
- Midyear Tax Moves 2010
- Time for tax recordkeeping
- Tackling tax recordkeeping
- Tax record keeping song and dance
- Attention, not luck, will prevent an audit
- Just past midyear tax moves
- 2009 Year-end Money Moves: Details
- Act now or miss out on these end-of-year tax and money moves!
- Five tax moves for Cinco de Mayo
- Tax promises to keep
- 2006 cleanup, 2007 prep
- Don't overlook these tax breaks
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