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by Kathy Paauw Organizing & Productivity Consultant Certified Personal & Professional Coach |
Paauwer
Tools is a Monthly Ezine |
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A
Taxing Situation
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"There
is a certain inevitability to a couple of things. This is the time of year when many Americans are scrambling to prepare income tax returns by that dreaded April 15th deadline. Whether you prepare your own tax returns or you gather information to hand over to your CPA, the task can be overwhelming -- finding receipts or looking for cancelled checks, trying to make sense of poorly kept records, laying your hands on the right IRS forms and schedules - the challenges seem endless! Although taxes are an inevitable part of our lives, with a little preparation and planning ahead, the stress associated with April 15th can be greatly diminished. Okay, it's too late to prevent the stress associated with your 2002 tax returns.but you can put some simple organizational systems in place NOW to reduce your stress next year at this time. By taking a little time up front to prepare, you can save many hours in the future. The key is to identify
NOW what you can do throughout the year to relieve the pressure of pulling
together a year's worth of data when you need it. Ask yourself how the
job can be simplified, and use your answers to this question to implement
changes today that will make next year less "taxing." I'll provide some
ideas to get you started. |
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Electronic
vs. Paper Record Keeping
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The first order of business is to determine whether or not you will use the computer to assist you in keeping your records. If you are a business owner, I strongly encourage you to consider using a software program if you are currently keeping your records by hand. I have used QuickBooks for years, and I have been very happy with it. (They also offer a personal finance/home version called Quicken.) If you keep records on paper, it will be helpful to set up folders or envelopes to hold receipts for each category or account you want to track expenses for. If you use a software program like QuickBooks, there's no need to keep these receipts separate, as QuickBooks will keep the information separate for you. I keep all of my receipts in one folder in chronological order. If I ever need to look up that receipt from last summer for something I purchased at Office Depot, I can do a "find" search in the software program by date, account name, vendor name, or description of item. When I find the exact date of purchase, I can go back to my chronologically-filed receipts and find it immediately. Regardless of how you keep records (paper or electronic), you'll need to track your business income and expenses by different accounts or types, as the IRS has different rules for various expenses, and some types of income are taxable while others are not. If you use software such as QuickBooks, you can email your database to your CPA or print out a report that breaks down the income and expenses into the appropriate categories for tax preparation. You
may want to consult with your accountant about what accounts you need
to create for tracking purposes. Here is a sample list of typical expense
accounts:
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Great
Tax-Saving Resources
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I'll share some strategies
and tools that will help you to maximize your ability to reduce your taxes.
To gain the maximum benefit, you'll need to start NOW so you can save
next year. As a small business owner, I have found a great series of tax cassettes that have taught me some valuable tax-saving strategies. Discover how to legally and ethically cut your taxes in half! Sandy Botkin, Attorney and CPA, is CEO and Principal Lecturer for the Tax Reduction Institute. His eight-cassette lecture series, titled Tax Strategies for Business Professionals, contains valuable information and is also very entertaining to listen to. He also has a series called Tax and Financial Strategies for Residential Real Estate and Tax Strategies for the Home Based Business. These cassettes more than paid for themselves in the first year. These tax cassettes taught me two things: (1) I am aware of a lot more legitimate deductions than I ever knew existed before; (2) I learned HOW to keep good records in case I am ever audited. If you don't keep proper records, even legitimate deductions can be struck down by the IRS. RECORD-KEEPING FORMS FOR TRACKING TAX DEDUCTIONS One of the things I learned from listening to the Sandy Botkin tax cassettes is that HOW you keep your records of deductible expenses is very important.especially if you get audited. I have created some forms for tracking deductible business and personal expenses. Click here to see these forms:
ADUST WITHHOLDING AMOUNT Does your withholding amount need to be adjusted up or down? Use the Withholding Calculator at www.irs.gov to find out. If you pay too little, you may be subjected to a penalty. If you pay too much, the IRS is collecting the interest on YOUR money until they refund it to you. REDUCE ERRORS & OMMISSIONS If you prepare your own tax returns, consider using tax preparation software. The built-in step-by-step process will catch every deduction and credit and does the calculating for you, so you avoid calculation errors. KEEP IT TOGETHER Create one file for collecting mortgage and interest statements, W-2's, and other tax-related forms as they arrive. By law, these must be sent to you by the end of January, so you should have all of them by now. If you don't, be sure to call the person or company who should have sent them to you. Now is the time to
organize your records so that next year at this time it will be a snap
to prepare your tax returns. I encourage you to carve out some time to
set up the systems that make the most sense (or is that cents!) for you. * * * * * * * * * * * * * * *
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I help individuals committed to moving their lives forward in powerful ways by decluttering their schedules, spaces, and minds. Our
web site has received the
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Table of Contents for Past Issues
Copyright © 2003 Kathy Paauw, All Rights Reserved. |
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