Michele Clark
Clark Hourly Financial Planning - Chesterfield, MO Advisor
17295 Chesterfield Airport Road, Suite 200
Chesterfield, MO 63005 USA
Work 636.375.1813
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Prepare For Your Tax Return: A Tax Document System

Tax time doesn’t have to be drudgery.  With a very simple system you can have the information that you need gathered together in one spot to make the process much easier this year and going forward.

The key is to have one year-round dedicated spot for incoming tax information and receipts.  Yes, that’s right, I said year-round.  I know that this is January and you are starting to get the annual onslaught of W-9s, 1099s, mortgage interest information, and other tax documents, and it is very important to establish one spot to collect all the those documents that come in.  That will be very helpful.   But that part of the tax return really isn’t the challenge is it?  It is tracking down the deduction information and the receipts that go with it.  If you are anything like me, you have a lot of donation receipts, I am soft hearted and I usually say yes at the grocery checkout lane when they ask me for a donation.  And I want to take all those little donations off of my taxes, I might be soft hearted, but I’m not soft headed!

If you don’t have a system, start with something simple like this:

1) Create your dedicated spot.  It can be a drawer, a decorative box, an accordion file, or a special section of your file cabinet.  You could even do this electronically by scanning and creating folders.  Just find a system that works for you.

2) Create one file for all the tax documents that come in between January 1st and March 15th, this is a temporary holding spot for those documents like W-9s and 1099s.

3) Create a file for each type of deduction which results in many receipts or statements for you, then one “catchall” file for deductions that do not have many reciepts.  For example, you might have a file for Healthcare, a file for Childcare, and a file for Donations, because there are many receipts for each of those.  But then in your “catchall” file you might put any receipts/statements for deductible expenses such as investment related expenses, tax preparation fees, unreimbursed business expenses, etc.

4) Create files for your bank statements, investment account statements, credit card statements, you can then refer back to these for deductible expenses at tax time.  These files can be with your tax documents or with your other household files; as long as you can easily get your hands on them at tax time.

Having a system like this has another benefit as well.  Do you have a Flexible Spending Account (FSA) or Health Spending Account (HSA) available to you at work?  Keeping a separate file of your healthcare expenses and throwing every single healthcare receipt into it throughout the year will let you know exactly how much you spend on healthcare in a year.  Having that information will allow you to maximize
the tax savings you have available to you through the Flexible Spending Account benefit through your employer.  The same goes for childcare expenses.

Having a system like this will allow you to keep more of your money in your pocket and out of Uncle Sam’s.

It can be very tempting to file your taxes on February 1st, keep in mind the types of investments that you own, because some investments can have K-1s or amended 1099s that come as late as mid-March.

It’s on your To-Do.  Let’s get it To-Done!

Just getting started?  Create your dedicated spot and set your files up. Put it in an easy to see and use spot so that tax time is easier this year and future years.

Ready to take it to the next level?  Make tax time even easier by making notes to yourself.  If you are paper based, throughout the year notate taxable events on receipts and statements.  Know that you charged a charitable donation to your credit card?  Jot a note and throw it into the donations folder so you know to look for it next year.  If you are software based, software such as Quicken and mint.com allow you to note transactions as tax related.

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