Tax Planners and Tax Organizers

So you are still trying to find that document that your accountant or your tax preparer needs to make sure that you don’t get taxed an astronomical amount on your return, but you just can’t unearth the dastardly piece of paper.  Yes, now you are blaming the piece of paper, but you know jolly good and well where the finger should be pointed – but let’s not play the blame game, let’s figure out how to get it resolved.

This is the umpteenth year that you have said I will get my tax record gathering together, and every year it gets down to the wire and you still haven’t gotten it together.  You could have built a really expensive structurally sound bridge in the same time span, if you had the know-how and resources of course, but you haven’t built a bridge and you haven’t got a working tax record collection process in place.   So is it the knowhow, or the resources that are preventing you from accomplishing that task? 

Why does it matter?  Well the year you forget that you actually took some money from your IRAor 401K because of that ugly issue that threatened to pull you under financially, whether it was just an over exuberant spending pattern, or it was that medical bill that you chose to address this way, is the year that you may have to take some more bitter pills.   If you forget to declare that money you took out, that distribution, it means you are underreporting your income because those funds are considered income.  It starts like that, you forget this one document that you never had the year before, and soon it could snowball.

So here are a couple ways to fix this.   Create your own record gathering solution or purchase one.

Create your own record gathering solution: You can do something as simple as create some folders for your various tax categories, e.g. income, investments, medical expenses, charitable contributions, mortgage interest & property taxes, education expenses, interest and dividends which include bank account interest, dividends from your brokerage accounts, student loan interest etc.   You can delineate as much as you want or as little as you want – just do it the way your brain prefers things, so for some of you, you will have very detailed categories and for some only a few broad categories.   I am a detailed category person myself it helps trigger items that I may have forgotten.    For folks new to the work world who may only have a few tax paying years under the belt – start making a list, a “trigger list” of the documents that you receive and the companies that you receive them from.  Over time your list will grow as you start having other life events, like having children, owning a home, student loans, tuition payments, sale of assets and investments, etc.   Some things will also fall off your list as you no longer are in that phase of life.   By the way, the problem with the shoebox method, is that you don’t know what you don’t have, it’s cheaper, but is it really?

Purchase a record gathering solution:  This could be as simple as a multi-tab expandable folder that does the same job as described above, or you could purchase something like what I use the Captio Tax Case – this is a very nice portfolio that allows you to keep track of your documents, it even has a slot where you can stuff incoming documents if you don’t have the time right away to file them in the appropriate pocket.   You don't have to purchase this particular one, there are many other solutions similar to this one, if you search the web for tax planners and organizers.  

When you get into the habit of using a tool and not just dumping your documents, which is in effect treating your financial life with less respect, you may notice that your anxiety level decreases, you can find your documents, you can get them to your accountant earlier this year than you did last, you could probably realize that a particular document is missing earlier – a lot of documents are now distributed online, and sometimes you may forget to make that stop to pull them.  Yep, until your accountant calls and says “what about that large contribution you made to XYZ last year, did you do that again this year?” which could net your more money on your return, you may not remember that you did, and the same goes for the income side, you may even forget that you worked for ABC for 4 months.   Yep, that is income.    Believe me, you do not want to realize that you forgot to mention that 401K or IRA distribution to your accountant, by getting a notice from the IRS, 3 years later, yep… pass the acid indigestion medicine… this isn’t going to look or feel good.   Take my word. 

So go build that record gathering bridge.  It’s not rocket science.  The cost you spend to set it up will be well worth it.  Folks who keep good records tend to get better refunds, so you can save some money in the process, or at a minimum not leave some on the table. 
Please share with our readers how you keep your records, or why you have started to do so.


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