Organizing Could Lead to Many Happy Returns

organizingIt’s rumored that the average lifespan of a New Year’s resolution lasts only two months – HA! Try two glasses of wine for some of us (ah-hem). However, for those of you that decided you were going to get organized this year, here is the hope that it may pay off - literally.

It’s no secret that organized tax records could yield a higher refund or a lower tax bill. Being able to find every receipt and keeping precise records ensures you have the proof needed to file your taxes accurately. Plus you need documentation to back your claims if you itemize and especially if you are ever audited. Organizing tax forms in a binder or folder will make it easy for you come tax time and, hopefully, will prevent you from missing any credits or deductions.

Here’s a rough outline of sections for your tax binder:

Receipts. If your receipts are abundant (currently fill a shoebox), you may want a separate folder using the months as dividers and a plastic pocket for each. If you can afford a receipt scanner, that’s the obvious choice. Examples of receipts you may want to keep are: energy saving appliances, work-related magazine subscriptions, office supplies, job-required uniforms, educational courses for work, etc.

Medical Records. With a Flexible Spending Account, this is almost a necessity. It’s so easy to keep everything together when a medical question arises. Having these in the tax binder makes preparation easy come tax time.

Mileage. Keep a mileage sheet for medical trips and any miles you drive for medical, business and even volunteering. For 2014, the rate is 56 cents per mile for business purposes; 23.5 cents per mile for medical or moving purposes; and 14 cents per mile while volunteering for charitable organizations. You can find a free printable for your mileage log here.

State tax forms. Personal property taxes go in this section along with any additional tax forms the state sends at the end of the year.

Federal forms. W-2s and 1099s, 1098s, all would go here, and any other tax forms that trickle in through the mail.

It is recommended that you keep tax documents for three years, and if you’re self-employed or have various sources of income keep them at least six years.

Having this binder will make your tax preparer jump for joy. And make your life during tax time a lot easier.

Disclaimer: Every effort has been taken to provide the most accurate and honest analysis of the tax information provided in this blog. Please use your discretion before making any decisions based on the information provided. This blog is not intended to be a substitute for seeking professional tax advice based on your individual needs.

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