List Categories | List All Articles | List Articles By Title
Organizing Your Taxes
Does this scene sound familiar? It's April 7. You haven't seen the top of your dining room table in two weeks because of the piles of paid bills, receipts, canceled checks, and unidentified cash register receipts covering it. Your head pounds and your stomach churns as the countdown to April 15 begins.
You might hate to pay taxes, think the system is unfair, dislike the forms, and even stage a mini-tax rebellion, but in the end the tax man cometh - with penalty if you're not careful! The key to your survival is taking an organized approach to this unavoidable task.
There are really two issues here. Number one, of course, is getting the information together for this year's tax return. Number two is developing a strategy, which will eliminate the panic you're feeling now next year - and now is the easiest time to do that too. Consider these tips:
? If you use a tax advisor, make an appointment to get together well before April 15. For the future, do it before the end of the tax year, and you may be able to save on your tax bill.
? Designate a specific, easily accessible place to keep all the information relevant to your tax return.
? Pay tax-deductible items by check or credit card whenever possible. If you have many tax-deductible items, get a separate credit card for those expenses.
Now, for this year:
Step 1: Collect all the records you can find: canceled checks, credit card receipts and statements, canceled checks, cash register receipts, calendars, and any articles or other information you may have collected with information about what you can deduct. (Use Post-it? Flags to highlight important information.) If you're not sure, discuss with your accounting the critical information to include with your tax return, including documents to support any wages or other income received as well as mortgage interest paid.
Step 2: Separate all the papers into appropriate categories. Put each one into a separate container - large envelope, plastic basket or shoebox. Labeling each category with a Post-it? Note will make it easier to adjust your category names if you change your mind as you proceed. Since you will probably need more than one sitting to complete your taxes, these labeled containers make it easier to clear your work area, if necessary, and to find your place when you are ready to continue.
Step 3: Take one category at a time and eliminate (or staple together) any duplicate receipts. If you need to correlate your expenses with your calendar in order to prove tax-deductible expenses, such as in the case of entertainment, put all receipts in chronological order to speed up the process. (Use a different color Post-it? Flag for each deductible category.)
Step 4: Now you are ready to begin entering the information on the tax forms, into your computer program, or to take the information to your accountant. (Many accountants will provide a worksheet of compiling information.)
Once you've finished filing your return, the next consideration is how long to keep the material you've collected. The simple answer is to keep whatever you need to persuade the IRS that everything on your return is accurate, and hang on to the evidence for as long as the IRS has the right to question your return. But I'm sure you wanted a more practical answer!
Ordinarily that's three years from the due date for the return, including extensions, to assess any additional tax. But a return can be audited for six years if the IRS suspects the taxpayer has neglected to report substantial income. If fraud is suspected, there is no time limit.
Your record keeping system doesn't have to be elaborate or sophisticated. What is more important is to have a system - and the discipline to keep it up to date.
Make sure to keep tax information separated by year. If you have a minimum amount of back-up material, one file folder may be sufficient. Staple together all information for each itemized deduction. Label it clearly with a Post-it? Note. Otherwise, use separate file folders or envelopes for each category. If you run a business and have a very large amount of material, use one storage box for each year. Make sure to label the outside of the box! Put all boxes together. As you put in this year's box, you can remove the box with information you no longer need to keep. Sorting your back-up materials will be easy to do right after you filed this year's return when the categories are fresh in your mind. If you are audited, it will be easy to provide documents to support your tax return.
In addition, consider these tax tips:
? If you write off the cost of a business car, keep the logbook in which you recorded your trips as well as evidence of the costs you incur.
? If you claim as a dependent someone who is not your child, keep a separate file for the evidence that shows you provide more than half of that person's support.
? Keep information that relates to the purchase of all homes at least six years after the sale of the last house. This includes your title, deed of purchase, and information about your home's purchase price, sales price, capital improvements and repairs.
© Barbara Hemphill is the author of Kiplinger's Taming the Paper Tiger at Work and Taming the Paper Tiger at Home and co-author of Love It or Lose It: Living Clutter-Free Forever. The mission of Hemphill Productivity Institute is to help individuals and organizations create and sustain a productive environment so they can accomplish their work and enjoy their lives. We do this by organizing space, information, and time. We can be reached at 800-427-0237 or at www.ProductiveEnvironment.com
Electronic Commerce Taxation and Pakistan
Assume a buyer in Pakistan downloads software from the Internet for a 30-day trial. If he likes the software, he submits his credit card information and receives an authorization code that allows him unrestricted use of the software.
Navigating The Internet Sales Tax Laws
QUESTION: I have been contacted by my local city government to say that my business is scheduled to be audited to determine if I owe any sales tax from items purchased on the Internet. Can they really make me pay this tax? I thought you could buy things online tax free? -- Katie R.
Rental Property Tax Deductions
Own residential rental properties? This article discusses how income from those properties impacts your taxes.What Constitutes Revenue?Generally, rental income is defined as any revenue you receive from the occupancy or use of residential property.
Failure To Pay Employment Taxes - Penalties
As an employer, you must pay employment taxes if you have employees. Fail to pay and the IRS will rain all over your parade.
Surprising Truths About Tax Preparers
Choosing the right tax preparer for your business is a decision best not left until April. A former tax preparer and small business mastermind offers insights into the secret world of tax preparers.
Uncle Sam is Ready...Are You? Organizing Tips for Tax Time
Anyone who is closely related to an accountant knows that there are not four, but five seasons in a year: Spring, Summer, Fall, Winter, and 'Tax Season.' During the other seasons, we accumulate leaves, snow, and mosquito bites.
Where to Find Tax Breaks for Your Home Based Business
April 15th looms in front of most people every year like a big, full moon full influencing a tax based frenzy, but knowing where to find tax breaks for your home based business can make that frenzy a little less frantic and more beneficial to you and your home based business. Finding tax breaks for your home based business is not overly difficult, but make sure you discuss tax breaks for your home based business with the person doing your taxes.
Another Tax Loophole
Just image, you are a small manufacturing company, business has been good, but yesterday you received a call from a customer who wants 50,000 widgets in 45 days. The customer is a large account and if you turn the business down, he may never call you again.
Highlights of IRS List of 2005 Tax Scams
Each year, the IRS lists various scams taxpayers get caught up in. The top 2005 scams include several that manipulate laws governing charitable groups, abuse credit counseling services or rely on refuted arguments to claim tax exemptions.
Truly Bizarre Taxes: The Tax on Illegal Drugs
One can never underestimate the enthusiasm that politicians have for trying to hunt up tax revenues. The creativity of some politicians can lead to bizarre taxes and unfortunate results.
Tax Audits: What Signs Make You More Likely to be Audited by the IRS?
It's a major fear for most Americans: A notice from the Internal Revenue Service (IRS) summoning you for an audit.What is it about these three letters that strikes a cord of fear in Americans' hearts? Learning the signs that could put your tax return at the top of the list for an audit, and avoiding them if possible, may put your mind at ease.
Some Folks Pay A Lot Less Tax Than Others On Very Same Income-Did You Pay Too Much Tax In 2004?
Someone once remarked, "Next to being shot at and missed, nothing is quite so satisfying as an income tax refund." There's no question that saving money in taxes is high on everybody's list of financial priorities, especially small-business owners.
Marriage or Divorce - Check Your Social Security Number
Newlyweds and the recently divorced should make sure that names on their tax returns match those registered with the Social Security Administration (SSA). A mismatch between a name on the tax return and a Social Security number (SSN) could unexpectedly increase a tax bill or reduce the size of any refund.
Estate Taxes - It Pays to Plan Ahead
Estate taxes. It's not enough to simply know they exist, and to know strategies to minimize them.
How To Get An Instant Pay Raise
As a gentleman was leaving my class recently, he wanted me to clarify something I had said. He was making sure that he should take his four or five thousand dollar tax refund and pay off debt.
Six Urban Myths About Taxation
Six Urban Myths - Taxation"I am proud to be paying taxes? I could be just as proud for half the money." - Arthur Godfrey Temporary Taxation in Canada In 1917, the Income War Tax Act (7-8 George V, Chap.
Identity Theft - Impacting Your Taxes?
If your identity is stolen, your finances can quickly become a nightmare. A less obvious problem is the effect identity theft can have on your taxes.
Small Business Tax Issues for Self-Employed Individuals
The United States is a nation of entrepreneurs. There are literally tens of millions of self-employed individuals that enjoy pursuing their dream business.
Paying Workers - What Can You Write-Off?
As your business grows, you are going to need help. This help comes in the form of employees and independent contractors.
Reducing Taxes Through Dividend-Salary Mix Calculations
Should I take wages or dividends from my privately owned corporation? What is the best way of taking money out of my company? In other words, what will result in the least amount of income taxes?A Canadian accountant will perform a dividend-salary mix calculation to determine the best way of withdrawing money from the corporation.Even though Canadian income tax laws are different from other jurisdictions, some of the same principles of tax planning will still apply.
home | site map
All articles are copyright to their owners.
Note: this website lists articles, We do not Write Articles !