For most of us, the tax season is officially over. However if you’re like millions of other Americans who filed extensions because they weren’t able to finish by the April 15 deadline, you may still be knee-deep in paperwork.
With the flurry of activity around taxes that consumes us, now is the perfect time to think about how to organize financial paperwork and set up a system so 2011’s tax season is a breeze. Use your CPA’s tax organizer or last year’s tax return as your guide:
- Mortgage Statements. If you own property, have a separate file (virtual or real) for your loan statements reflecting payments including interest paid and principal balance. Many financial institutions have a running tally of how much mortgage interest you pay. This is an excellent source of information for your CPA or tax preparation professional to forecast your 2012 tax bill.
- Paycheck Stubs. Keep the information that accompanies your paystub. Again, this is great info for planning next year’s tax bill. Maybe you need to claim more deductions to increase cash flow, or decrease them to eliminate a hefty tax bill come next April.
- Business Income & Expenses. If you’re a contractor or self-employed, invest in a program that specifically tracks income and business-related expenses. Quicken and QuickBooks have most of the standard reports you need as well as the categories (e.g., auto repair vs. gas) already loaded. Be aware that some customization is usually required. Setting it up correctly will save you dividends – your time and unnecessary heartache – when its crunch time. If you need to file quarterly taxes, you’ll want easy-to-use reports needed to organize financial documentation.
- Charitable Contributions. Use a value guide when donating non-cash goods to your favorite charity. The Salvation Army updates their valuation guide regularly. In my practice, many of my clients ask me to research the charity for legitimacy. Check out http://charitywatch.org as it’s a great resource in learning about a specific charity and where monies are spent. You can also get a tax break if you volunteer. While you can’t deduct the value of your time, you can deduct a portion ($0.14/mi*) of your mileage.
Speaking of mileage, keep a log and tally it up monthly and file it in your new 2011 tax file. Come tax time, it’s already added up and documented. *Check with your tax professional for your specific situation.
- 2011 Tax File. If you have a file cabinet, create a tax file now so you have a place to stash receipts you’ll need for next year. If you’re short on storage space, most people only need as much space as an accordion file from an office supply store. They close securely and allow you to label different slots so you can easily review and retrieve important paperwork.
Need help to setting up and organizing financial paperwork or keeping track of business expenses? Then schedule a free 30-minute consultation with Fiscally Fit, Inc. Email me at Alison@fiscallyfit.us or call (650) 965-4090 for a no-cost, no-obligation appointment.
As a small business owner, I know that expense tracking – especially those related to mileage – can be tricky and time consuming. Wanting to have a better sense of the mileage I actually racked up, I tried an experiment last April after completing my taxes. Going in I didn’t think driving around in my trusty Prius to and from client meetings and running business-related errands would amount to much. Yet after using a simple mileage log for 60 days, I was stunned to discover I drove 450-500 miles each month. At 50 cents a mile, that was an extra $225 out of my pocket! If you’re an employee that’s on the road a lot (like a sale representative) where you use your personal vehicle on the job, it’s most likely a reimbursable expense. If your employer doesn’t cover the costs, your mileage (and other vehicle related expenses) may be a tax deduction. To make sure, talk to your tax preparer or CPA to confirm what’s allowed based upon your specific situation. When you’re a solopreneur or small business proprietor, you’ve got to wear many hats – often at the same time. Keeping track of business-related mileage isn’t sexy and a bit time consuming, but can add up to an appreciable expense you can deduct. Make a commitment for just one month using one of these methods:
- If pen and paper is more your style, I recommend picking up a mileage log from an office supply store or create your own on a spreadsheet. A client puts the log on her dashboard so she’s sure to see it every time she starts the car.
- For those addicted to their Smartphone (like me), there are several great apps that are free. But if you want a little more functionality (like one that syncs with your phone’s GPS) it may be worthwhile spending a little to make it easier and more fun in the process.
- For something in between, use your calendar (electronic or paper) to make mileage notes. By incorporating your expense tracking and mileage log into something you already use, you are more likely to stick with it.
By keeping a more accurate log of your mileage, it more than pays for itself especially if it lets you keep a little more green in your pocket. Need help in keeping track of your business expenses? Then schedule a free 30-minute consultation with Fiscally Fit, Inc. Email me at Alison@fiscallyfit.us or call (650) 965-4090 for a no-cost, no-obligation appointment.
Scientists have proven that having a pet can lower your blood pressure. Now pet owners may have reason to be even happier… Michigan Representative Thaddeus McCotter introduced the HAPPY (Humanity and Pets Partnered Through the Years) bill last year. It amends the Internal Revenue Code to allow a tax deduction up to $3,500 per year for pet-related expenses including visits to the veterinarian.
Beyond giving me financial relief associated with deducting the expenses for keeping my beloved cat Willo healthy, the bill is meant to stimulate our economy. As a daily money manager, that’s a bill I’d love to see. To check out how this proposed legislation is progressing through Congress, check out http://www.opencongress.org/bill/111-h3501/show.