Tuesday, April 26, 2011

Take Five #5 Tax Preparation

You've filed your taxes, asked for an extention, paid what you owed or happily received your refund. It is done and over. Life is good. You can even put the aspirin back in the cabinet and not think about the Internal Revenue Service until next April, right? Au contraire. Now is the time to get prepared for next year. Starting now allows you approximately a year to prepare, depending on when you prefer to file your return. I like to get it over with as soon as possible and would rather not wait until April. Start now and you can thank me later.

Take Five is a regular post that makes the most of what little time you have. These are quick wins geared toward small projects, giving you more control over your finances, time and space.

**1** Get a Good Accountant. 'Aunt Edna does ours every year.' Or maybe you know a guy at work who knows a guy whose cousin does taxes on the side--And he's cheap. All of that is well and good. BUT if you get audited, I guarantee you, Aunt Edna isn't going with you to the IRS office. A certified accountant will hold your hand through the entire process and do much of the legwork for you. I have been there and done that and I was never more grateful than when the CPA said, 'Relax, Evangeline. This is what you paid me for.'

**2** Get a Tax Preparation Booklet. This will contain information regarding what documents you will need. Most of us know about mortgage interest deductions and child care costs. Only some of us will deduct ad valorem taxes and even fewer will calculate medical expenses to see if we qualify for that particular tax break. These booklets or similar information can be found in your accountant's office and online.

**3** Take Care of Your Receipts. This is so much easier than you realize. The only catch is doing it on a very regular basis. You will need that aspirin if you try sorting through a year's worth of receipts. You will need some sort of containment system. I use a three-prong pocket folder. I used my Tax Prep Booklet to get an idea of what receipts I needed to keep. As I paid the car tags, the receipts went in the folder. Every month I totalled my medical expenses and in early January, my pharmacist provided a print out of those expenses for the previous year. Some years I can use this deduction, some years I can't but it is always worth the minimal effort to find out.

**4** Review Your Status Periodicallly. Occasionally look over the folder, make sure it's organized (all work related receipts kept together, etc) and familiarize yourself with what you can and cannot use as a deduction. Your life rarely coincides with the tax year. If something changes, say, midyear it is best to know it right now instead of the day you do your filing.

It is pretty much a no-brainer: find an expert, organize your information and keep viligant. The problem we all have--yes, that's me--is making ourselves do the work. There is something about the IRS that can put a knot in the strongest of stomachs. It doesn't have to be that way. It is all in the prep work. I'm late in getting started on next year's prep and it's taken me all of an hour to get caught up. I didn't even do it all at once. I just took a few minutes here, a few minutes there and I'm caught up until I sort through my folder in early May. This is not the place to take short cuts. Take a few minutes periodically to get it right. The IRS will be happy and that will keep you happy.

Take Five is small actions that will make a big impact. Do a bit now and save a lot of time--and money--later.

No comments:

Post a Comment