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How to get organized for Tax Time

April 10th, 2009 3:08 PM

Well tax time is upon us and many people are scrambling to get their taxes finished or for some, started. I have compiled a few tax tips to help make 2009 tax year a lot less stressful. First, get organized, this means you may have to buy a couple of folders or organizers. Since Earth Day is Also coming up April 22, I researched some cheap office gear that is Earth friendly "GREEN" that may help.

I keep envelopes everywhere, in the car, at the office, so that when I have a potential tax related receipt, I put it in the envelope. At the end of the year I gather all the envelopes and compile. According to the Government Accounting Office, the average taxpayer overpays the IRS hundreds of dollars every year. You are leaving money on the table if you fail to organize throughout the year so that there is no oversight when filing time rolls around. I typically have three folders for yearly documents. One for income, expenses and deductions, and one for investments.

How long should I keep my records for tax purposes?

Keep your records a minimum of 3 years, many recommend a minimum of 7 years. You may not need them for tax purposes but they may be beneficial for insurance purposes. The IRS does recommend that you keep copies of your W-2 forms until you're eligible for retirement in case there's a discrepancy. Check with your tax professional for more information on record keeping.

What records should I keep?

General financial documents: You should keep pay stubs, W-2 forms, records of tips earned, receipts for big-dollar items such as the purchase or sale of an automobile or home, records of investments along with contributions to retirement accounts, bank and brokerage statements, and 1099 forms.
Receipts for deductible items: When making payments toward a deductible item by credit card, electronic funds transfer or check, you'll need to record the check number, dollar amount, payee's name and date of the transaction. If you make a payment in cash, you should get a signed and dated receipt showing the amount and reason for the payment.
Insurance and medical records: Hold on to papers regarding insurance claims and medical expenses along with dates and specifics as to what was paid for and when.
Theft or loss documentation: Theft loss should be documented, including value, the date the property was first noticed missing and proof that it was yours.
Gambling records: Gambling records should state the type of gambling activity, the amount won or lost, address or location of the establishment, names of others present with you and the date.
Charitable records: Charitable contributions of goods or services totaling more than $75 require a receipt. You can deduct a cash donation only if you have a cancelled check, a bank statement containing the name of the charity, date, and amount or written confirmation from the charity. Be sure to log out-of-pocket expenses for charitable work such as mileage, parking fees, tolls, and bus or taxi fares. Also record the name of the charity, the date of the expense and the amount.
Self-employment records: If you are self-employed or use your home for business, you'll need to keep a special set of records. Consult with a tax professional for additional information.

It's a good idea to keep your records in order by date and broken down by category. Organizing your receipts, pay stubs and various financial forms as the year goes along will make it easier to file your tax return. It's a good idea to use a folder, envelope or binder to keep all of your records for the tax year together and then store these yearly files away in boxes or on shelves for later reference. Much thanks goes out to H&R Block in their help with this information.

Posted by Darryl E Palmer on April 10th, 2009 3:08 PMPost a Comment (0)