Chaos and procrastination are two words commonly associated with tax season. And a few years ago, Sandra learned the costly definition these terms had in her life. In 2007, she left taxes to the last minute and was sent scrambling for paperwork and receipts. Between medical, vehicle, and education receipts, she had a number of eligible deductions but didn't have the paperwork to prove them. She calculated that she lost out on a minimum of $500 in tax deductions because she wasn't organized. That was enough to scare her straight. Now Sandra has a simple and efficient system to keep herself organized.
- Get a file organizer with three main folders
- Keep the file folder in a central location so you can easily file your documents
- Divide your folder into three main categories:
Folder #1 Income - This includes pay stubs, salary documents even interest on your savings account
Folder #2 Expenses - All documents relating to deductable expenses including medical, business, energy credit or charitable expenses
Folder #3 Investments - All investment documents or year-end statements for investments
- After you file, create electronic scans of all your documents and back them up onto a hard drive. That way, you wont have years of paperwork cluttering your life.
As an owner in two incorporated businesses, tax time brought more than its fair share of stress and anxiety to Katie's life. Filing both personal and corporate taxes was something that Katie was willing to outsource to an accountant, but she never felt confident they understood or appreciated her specific personal tax situation. Two years ago she made the decision to invest in a more expensive, but highly qualified, chartered accountant with an expertise in taxes. By reviewing her situation, financial goals, and income structure, he was able to make several recommendations that would save thousands. Katie recommends that anyone who feels they have a more complicated tax profile spend at least an hour meeting with a recommended tax expert and investigate additional strategies to save.Forgetting Charitable Activity
Who says good deeds go unnoticed? For Robyn, a regular volunteer and charitable giver, she made the mistake of assuming her philanthropic efforts were good for humanity but not necessarily her pocketbook. After becoming a smart cookie and doing a little tax research she realized she had missed out on hundreds of dollars of deductible expenses for all her charitable work. For instance, her volunteer work at the women's shelter meant that she was able to deduct the mileage receipt she had from her travel to volunteer. She also learned about the valuation guide offered at www.goodwill.org, which allowed her to get an accurate valuation of the clothes and home items she had donated. Robyn also keeps organized by keeping all her charitable receipts and activities in one central folder so they are easy to access at tax time.Tax file Delegation
Financial empowerment is an important term for Angela, who worked hard to gain financial control after her last relationship. In every other financial aspect of her life she was in control - except when it came to filing her taxes. The unfamiliarity of navigating the government tax system overwhelmed her, and for years she defaulted to having a savvy family member take on her taxes. Last year, after doing some research and learning about the ease and convenience of online tax software, she decided to take a stab at it herself. Being an organized person, she was pleasantly surprised at how easy and fast it was to enter in the required information. Her tax program even asked if she had any further expenses for a further deduction, things that included medical costs and energy savings. The pain-free tax filing experience was so positive for Angela that, this year, she is actually looking forward to tax season.Not Maximizing Tax Advantage Investments
As an admitted onetime financial disaster, Andrea now takes her savings and investments very seriously. As a self-employed person, she was working feverishly to save, but soon realized that focusing on her retirement and investing in a tax-advantaged account were some of the best ways to maximize her money. Now, she invests in a tax-advantaged retirement account, where she pays no annual tax bill. This helps increase the effects of compound interest. History has shown that, over the long term, investments held in a tax-advantaged account are likely to grow larger than those same investments held in a taxable account.