Friday, February 28, 2014

I'm Alive...And I've Been Revived By Taxes!

     Yes, it's true I'm crazy. At this point you all are well aware of that. My undying love for doing my taxes every year is just another shining example of this fact. I do, I love it.

     All year I meticulously save my pertinent documents. You really should be doing this already! If you aren't, look around, there are many sites that can suggest what to save. I have my own list of documents that need to be saved. I have complied this list after having done my own taxes for the last 8 years and helping my mom do mine years prior to that. (See? It runs in the family.) I have a file cabinet dedicated to family records. I keep home insurance documents, current school information, pet licenses and information, and anything else pertaining to the household really...including tax information and previous tax returns. It's not an eyesore because I hide mine. If you're concerned you can always purchase a decorative one, or the file boxes that store nicely under beds. In January I place a new empty file right in the front of the drawer and leave it to collect everything needed throughout the year.

     So, what do I save? Is it overwhelming? Is it time-consuming? Alright, here goes. It is in no way time-consuming! In fact, it is the exact opposite. Come tax time you will be thanking yourself enormously for how much time you will have saved. I also find the organization and lack of build-up to make the whole thing supremely manageable and am never overwhelmed by it. Here's what I save.

     1. Right behind the empty tax folder I also place a new folder for all our earned pay stubs. THIS IS CRUCIAL! If you do nothing else, start doing this! If you earn tipped wages as well (service industry, etc.) I highly recommend saving your time print outs as well as maintaining a weekly tip log. Throw each into the folder, just in case. If you are really determined, wait until the stub, hours and tip log all match up, staple them together and file that way. This is an easy way to double check your employer too. Especially in the service industry, it is too easy for employees to be robbed little by little and never know it. I have had to calculate rough estimates for my own W-2s THREE times in my short tax-paying career. THREE. This may seem high, but think about it. Ever have a job where that W-2 just didn't seem right? Or a job that went belly-up and you never heard from again? Did you file an IRS claim (as legally I have to recommend you look into) and get sucked into an up-to 2 year dance battle? I have. If you have your stubs you have your W-2, never forget that!

     2. Every time I donate anything I get a receipt or write it down. Yes, every time. If clothing or household items are donated to somewhere like, The Salvation Army, ask them to give you a receipt. If you drop it in a drop box, write down the items you are donating (snap a quick pic to go one step further) and throw the list in the tax folder. It's important not to just write the amount. These items are calculated individually (i.e. 3 t-shirts, 1 baby dress, 1 ladies blouse, 1 tv, 3 kids boots) because their write-off value is pre-determined. Memberships to non-profit organizations (like Children's Museums, or auxiliaries), tele-thon donations, charitable auction prizes and many other items (even all those times you "rounded-up" with your Pampered Chef order for charity) are all charitable donations that can be written off. Save the proof.

     3. Receipts of any type of child care go in as well. Most day care facilities supply you with one without having to ask at the end of the year. If not, just ask and they'll have to. Also try to keep track of what you may have paid a babysitter or nanny, if one was needed for you to attend work or school (no, can't deduct the dinner date, sorry).

     4. Also include any receipts for purchases made specifically for work. Are you a teacher who had to buy supplies? Keep the receipts. Are you a bartender who needed to take a specific class required by your new corporate gig? Keep the receipt. Did you have to order new sneakers because you give walking tours? Save the receipt. It's easy. Do it when you purchase the item, make a quick note at the top if the receipt is unspecific as to what the item is, and don't think about it again until the end of the year.

     5. We also rent out a house we own so we need to keep all our business receipts too. Perhaps you run a small business from your home, or get paid for small odd jobs in your neighborhood. Save gas, tolls, expenses incurred because of the business (i.e. to uphold tenant lease contract, I had to repair the water heater). These will all count against any "profits" made in the business...which is good.

     6. At the end of the year all W-2s go directly into the folder, as well as any mortgage/student loan interest payment deductions and investment records like IRAs or 401Ks. These are all documents that typically show up at your door or inbox magically in January anyway. Now you'll know where to put them and know you have everything else you need.

     7. Also collect information like your social security number, home/renters insurance premiums, children's social security numbers and birth dates.

     8. THINK ABOUT IT. If you've done something big this year, save the proof. Have new baby birth certificates made promptly, keep receipts for new "green" updates like geothermal, and don't forget about that new-to-you car you bought, either, registration gets deducted.

     Remember that if you stay committed to doing this "in the moment" it will never become overwhelming. One receipt here and there will get added to the file and it'll never feel like work. By the end of the year you'll know exactly where everything is and you'll be itching for your W2s. No more waiting until April to file extensions for you!

     And if you're thinking to yourself, "I've got a tax person, I'm all set". Think again. He hates you, and your shoe box full of information he doesn't need. She sees hundreds of you a year. Be the one that stands out. Hand the file over the desk and watch them weep with glee...alright maybe a little over the top, but I feel like you know what I'm getting at.

     Hang tight, next post I'll give a quick run down of how I accomplish actually filing. Then comes the best part: spending the return.

"In this world nothing is certain but death and taxes." ~ Benjamin Franklin

Simple City Sam