What can I do to reduce my taxes?
This is a very common question we get as financial advisors and tax preparers in my firm.
Simply put, get organized! I know you probably hate to hear such a finger-wagging statement, but really, what if the mere fact of organizing meant an extra $1,000 in your pocket? You may be asking, “How’s that?” or thinking, “I’m not an organized person.” Fortunately, you don’t need to be on par with Martha Stewart’s level of organization to seize your opportunity!
How to Organize Your Tax Information
Do you throw together your tax forms, documents, statements, and receipts at the last minute and in a disorganized fashion? You may not realize it but the disorganization may be increasing your tax burden because it’s causing you to forget about one deductible item or another. Or you may simply end up misstating an amount to the IRS and state taxing authority, which can cost you money, time, and stress later on.
Here are five tips to get your taxes organized:
- Grab three manila folders and label them “2017 Taxes.” Place one folder wherever you put your mail or pay bills, one at your workplace, and one at your partner’s workplace. Place any and all things you think may be related to your taxes into these folders.
- If you use personal checks, get the kind that have a carbon copy. Tear out and store the carbon copies you’ve written to anyone or anything you think may be a deductible expense, such as property taxes, charities, caregivers, and medical expenses.
- Create an online folder or email inbox folder labeled “2017 Taxes.” Place anything you receive via an online source that is related to your taxes over the year into that folder.
- Use Mint.com or Yodlee to track your deductible expenses.
- Track your miles using a mileage app like MileIQ.
At the end of the year, bring in or send this information to your tax preparer. This way, you’ll be less likely to miss anything. Sure, it’ll cost you a bit more to prepare your returns, but trust me, it’s quite often worth it!
Now Let’s Talk About That “Tax Organizer”
You know, the one you always ignore? Your tax professional doesn’t just send you one to look good. The tax organizer is a lengthy survey that tax preparers and accountants send to you every January. It’s basically a questionnaire that lets the preparer know what information they’ll need to complete the return. If you’ve followed Step 1 above, 90% of your problem is already solved. It takes 20 minutes to complete the organizer. We always suggest doing it.
Being organized does not mean you need to suddenly adopt an uber-organized personality. Just follow these simple steps, and you never know, but you could be thousands richer at the end of the tax season!