It’s rumored that the average lifespan of a New Year’s resolution is two months – HA! Try two glasses of wine for some of us. Anyhow, for those of you who resolved to get organized this year, here is the hope that it will pay off. Better yet, here is a tip to help it pay off at tax time: Create a tax binder.
It’s no secret that organized tax records may help you 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. Organizing documents in a binder or folder will make it easy for you and your tax preparer come tax time. Hopefully it 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, it’s a necessity to keep track of your medical and dental expenses. It’s easy to keep everything together when a medical question arises. Having your medical records and expenses 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 was 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. For 2015, the rates are 57.5 cents per mile for business; 23 cents per mile for medical or moving; and 14 cents per mile for volunteering for charity. 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.
You should keep tax documents for at least 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.