06 Mar Top Tips for Taming Tax Day
Once again Tax Day has come and gone. For me it’s about 8 focused hours. I sit down to prep, our CPA Steve appears at our door, we work together for a couple hours, he leaves…we are done! We’ve had this routine for years. Steve always chuckles and tells me I’m his most organized clients. The secret – it’s not what I do that day, it’s the little things I do all year long. Here are my top tips for taming tax day:
- The Annual Check Register – I don’t know many people that keep check registers these days. Most everyone just counts on their on-line balance. But I still do. And I start a new register on January 1st each year. That way, when it’s tax time I have many answers all in one place, my auto-pays, donation checks I may have missed, household expenses, medical bills – most of the things I pay by check I need when I pay my taxes. On Tax Day I go through my register and it helps me to prepare my Medical, Donation and Household expense totals.
- Dedicated ONE Place for Tax Receipts – As you walk in the backdoor of my home I’ve created a command center. It is the designated spot for mail, and each family member has a cubby. There are also a couple of shelves for general use. On one of those shelves I have a 3 drawer bin. One of those drawers is labeled taxes. During the course of the year any and everything I need for taxes goes in that drawer. Goodwill receipts, on-line donation receipts, medical bill receipts, prescription receipts, and anything else relevant. On January 1st I empty it out and put it in an envelope for totaling on tax day.
- Pull Records on January 1 (or 2) – Each year I start my records fresh on January 1st. That way last year and this year are never comingled. I put all of the prior year’s records into a Bankers Box that gets stored under my desk. After Tax Day the box goes into storage in my basement. I most comfortable keeping 7 years of boxes (ask your tax advisor what’s best for you). Steve left last night at 7pm. My box went to the basement as he walked out the door. I pulled the box that was 8 years old and it will go off to my towns next free shredding day.
- Dedicate One Spot for Year End Tax Statements – Regardless of what it is, if we need it to do our taxes it goes in one spot. That way we have everything we need when we need it.
- Tell your Teenagers What a W-2 is – This is the 2nd year in a row that we couldn’t finish our taxes 100%. We were missing one thing. Last year it was our older son’s W-2. This year, our younger sons W-2. If we don’t tell them what it is and that they need to give it to us we don’t have it. Bummer.
(In New Jersey where I live the % deductible for medical is substantially less than the Federal %. Ask your tax preparer about your states limit. It is definitely worth it for me to track this. It may or may not be or you.)